In McGilloway v. Safety Ins. Co., SJC-13053 (October 19, 2021), the Massachusetts Supreme Judicial Court decided that car insurers are required “to pay claims for ‘inherent diminished value’ (IDV) to vehicles that are damaged and subsequently repaired, provided that the claimant establishes both (1) that his or her vehicle suffered IDV, and (2) the amount of IDV damages owed to him or her.” IDV “equals the difference between the resale market value of a motor vehicle immediately before a collision and the vehicle's market value after a collision and subsequent repairs.” In other words, the mere fact that your car was repaired (even if it was repaired back to its pre-accident condition) can diminish the value of your car. The insurance company of the at-fault driver is responsible for paying you for your repair costs as well as – in some cases – the loss in resale value of your car.
There are a few important things to note about this decision. One is that compensation for inherent diminished value is only available in third party claims. (Third party claims are claims made against another driver – usually the at-fault driver. First party claims, by contrast, are claims made by you against your own insurance company.) The standard Massachusetts car insurance policy has 12 parts – some parts are there to insure you for damage you cause, while other parts are there to insure you regardless of fault. This case looked at whether you can recover IDV under Part 4, commonly called “Property Damage.” This Part covers you in case you negligently damage someone else’s property (e.g., a car). A separate part of a car insurance policy (Part 7) covers you for damage to your own car (i.e. first party claims) in the event that you are at fault or if the at-fault driver has no insurance.
The second important thing to note is that you cannot automatically recover IDV if another driver causes damage to your car that is subsequently repaired. You must first show that your vehicle suffered IDV and then offer evidence of the amount of the IDV. If you cannot establish these criteria, you will not be entitled to IDV, although you can still use Part 4 of the insurance policy to pay for the repairs to your car.
Because IDV is a matter of opinion, and can likely only be given by a person with particular expertise in valuing or appraising cars, you would want to assess the costs and the potential returns of including such a claim in a lawsuit. On one hand, if you have a rare, antique car, the cost of hiring an expert to assess the IDV would likely be worth it because the returns (meaning the loss in resale value) could be significant. On the other hand, if you have a modern, mass-produced vehicle that has no particularly noteworthy features, the costs of hiring an expert to assess the IDV may not be worth the return.
If you have questions about this recent insurance policy interpretation by the Massachusetts Supreme Judicial Court, please feel free to reach out to me! The consultation is free!
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