Insurers which are liable to pay for repairs to a customer’s vehicle after a crash must also reimburse their clients for that implied diminished value of their vehicles after repairs are created, the Massachusetts Supreme Judicial Court has ruled.
In a unanimous ruling issued on Oct. 19, the state’s highest court found that because Part 4 from the Standard Massachusetts Automobile Policy “doesn't limit recovery to only repair or replacement costs, such recovery must compensate a claimant for any lack of value the claimant incurred as a result of a collision, offset by the increase in value that may occur from repairs to the vehicle.
“In short, if your third-party claimant’s vehicle suffers IDV even after it is fully repaired, then under part 4 from the standard policy, the insurer may be liable to the claimant for IDV damages to ensure that she or he may be ‘made whole’ once more,” the justices wrote inside a 17-page ruling. “The law attempts to place the plaintiff ready as as possible equivalent to his [or her] position prior to the tort.”
The additional payment is meant to compensate owners for a loss in value, because vehicles which have been damaged in accidents sometimes sell for below-market amounts, despite proper repairs happen to be made.
Previously, Part 4 had not been interpreted as covering IDV. Part 4 states, entirely, “Under this part, we'll pay damages to a person else whose auto or any other rentals are damaged in an accident. The damages we'll pay would be the amounts that individual is legally entitled to collect for damage to property through a court judgment or settlement. We'll only pay if you, or a household member, is legally accountable for the accident. We will also pay if someone else using your auto with your consent is legally accountable for the accident. Damages include any applicable sales tax and the costs resulting from the loss of utilisation of the damaged property.”
“The plaintiffs reason that they are eligible for collect IDV damages in the defendants under part 4 from the standard policy because IDV damages are included included in ‘the amounts [the claimant] is legally entitled to collect for property damage via a court judgment or settlement,'” the ruling states. “We agree with the plaintiffs.”
However, the justices stopped lacking ruling that IDV could be assumed in every case whenever a vehicle continues to be damaged and repaired. “Rather, and as other jurisdictions have held, individualized proof is needed to demonstrate that confirmed automobile has sustained some type of diminution in value due to a collision or vehicular accident, even after repairs are made. Specifically, a plaintiff must establish that his or her vehicle has suffered IDV damages, and also the amount of IDV damages at issue,” the ruling states.
Billy Walkowiak, founder and CEO of Collision Safety Consultants, a nationwide company that advises consumers on DV appraisals, said his company had stopped dealing with cases in Massachusetts due to the state’s lack of legislation or case law recognizing the customer’s to be reimbursed for IDV.
Walkowiak, a North Carolina and Sc Superior Court-certified DV expert witness, asserted, in his experience, every claim for IDV in Massachusetts continues to be rejected, because insurers realize that their state has not recognized the authority to reimbursement.
He noted that simply two states, Georgia and New york, have laws establishing the customer’s to be reimbursed for IDV. In fact, in Georgia, the right is extended to first-party claims — those not caused by a 3rd party.
In other states, he added, the authority to be reimbursed continues to be established through litigation. “Everybody differs, and every one is worded different,” Walkowiak said.
The SJC decision stems from a civil suit introduced Superior Court by Jarrett McGilloway, whose vehicle have been involved in an accident caused by a parking area employee. The at-fault driver’s insurer, Safety Insurance Company, agreed that its insured was liable, and paid for the repairs to McGilloway’s vehicle.
However, Safety refused to pay McGilloway’s claim for his vehicle’s IDV. McGilloway sued over the refusal on June 30, 2022. His suit was later was consolidated with similar suits through two other consumers.
In an order addressing both plaintiffs’ and defendants’ motions for summary judgment, a Suffolk Superior Court judge denied McGilloway’s claim, citing state regulations.
“By regulation, an appraiser must document all physical damage the result of a collision, but is not required to do anything whatsoever to check the value of the vehicle prior to the collision using its value once it is fully repaired,” Judge Kenneth W. Salinger wrote.
“Similarly, by regulation a damaged vehicle is really a total loss if the salvage worth of the damaged vehicle as well as the total cost to completely repair the vehicle exceeds the actual cash value of the vehicle immediately prior to the collision, without taking into account any IDV that could remain following the vehicle is fully repaired,” Salinger wrote.
That decision was overturned by the SJC. “Contrary to the defendants’ assertions, our case law does not foreclose the plaintiffs from recovering IDV damages as third-party claimants under part 4 of the standard policy,” the high court ruled.
“In discerning the meaning of the contract provisions, we're guided by ‘what an objectively reasonable insured, reading the relevant policy language, would be prepared to be covered,'” the justices wrote, referencing case law.
In oral arguments before the high court, a representative for Commerce argued that a decision in favor of the plaintiffs would “cause a seismic transfer of the insurance coverage marketplace,” which in turn would “economically destabilize the insurance coverage marketplace.”
Commerce’s lawyer also argued that IDV damages are “very difficult, otherwise impossible” to calculate. However, the SJC noted that Safety “admits that IDV might be suffered in some cases” and “concedes that IDV might be quantifiable.” Actually, several states recognize and allow recovery of IDV damages, the justices noted.
The case now dates back to Superior Court, where McGilloway and also the two other plaintiffs will have prove that their vehicles have suffered IDV damages, and establish the amount at issue.
IDV will be one of the subjects covered in the SCRS Repairer Driven Education session “Be Memorable: Uncover Hidden Value for the Customer, within their Claim,” in the SEMA Display on Tuesday, Nov. 2. The session will be provided by John Walczuk, president at ZB Claim Services, Inc., and Allen Lipp, president at Automotive Consulting Professionals.