Thursday, 21 October 2021 16:54

MA High Court Rules Auto Insurers Must Pay for Inherent Diminished Value

Written by Jim Sams, Claims Journal


...the law catching up to technology.”


Powers said the Restatement of Torts, a treatise published by the American Law Institute that documents trends in common law, has recognized the right for claimants to be compensated for inherent diminished value since the 1930s.


Insurers had reason to believe they would win the battle. In 2003, the Supreme Court ruled in Given v. Commerce that a first-party claimant was not entitled to compensation for inherent diminished value.


The Supreme Court’s opinion, however, says the Given decision concerned a first-party claimant who sought coverage under the sixth edition of Part 7 of the standard Massachusetts Insurance policy. The standard policy has been changed since then, and anyway the claimants in the consolidated cases against Commerce and Safety sought compensation under Part 4 of the 2008 standard policy.


Part 7 of the sixth edition required a claimant to choose either to repair the damage or to receive compensation for the difference between the value of the vehicle before the crash and the value after. Part 4 of the 2008 edition permits a third-party claimant to recover “the amounts [the claimant] is legally entitled to collect for property damage through a court judgment or settlement,” according to the opinion.


The opinion says Safety admitted inherent diminished value may be suffered in some cases and the amount of damage may be quantifiable.


“Moreover…numerous other states recognize and permit recovery of IDV damages,” the court said.


The opinion does not state whether it applies to first-party claims and Powers said he was not ready to offer an opinion on whether it should.


The ruling wasn’t a total loss for the insurer. The court found Commerce’s denial of diminished value claims did not violate consumer protection laws because its reasoning was based on its understanding of the meaning of the policy.


The New England Legal Foundation focused on that part of the court’s opinion when asked to comment Oct. 19.


“The court ruled correctly in denying the plaintiffs’ consumer protection claims because it found that the insurers acted in reasonable good faith when denying the claims for inherent diminished value,” staff attorney John Pagliaro said in an email. “We are pleased if we helped to persuade the court that the insurers had credible, good faith arguments for taking that position.”


We thank Claims Journal for reprint permission.


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