Massachusetts High Court Rules Auto Insurers Must Pay For Inherent Diminished Value

Massachusetts High Court Rules Auto Insurers Must Pay For Inherent Diminished Value (click to read the Claims Journal article)

To be clear–this decision relates to third-party inherent diminished value (IDV) claims, not first-party ones.

The actual decision is here.

The “Part 4” policy language at issue was: 

Under this Part, we will pay damages to someone else whose auto or other property is damaged in an accident. The damages we will pay are the amounts that person is legally entitled to collect for property damage through a court judgment or settlement. We will pay only if you or a household member is legally responsible for the accident. We will also pay if someone else using your auto with your consent is legally responsible for the accident. Damages include any applicable sales tax and the costs resulting from the loss of use of the damaged property. 

And the court held: 

We conclude that part 4 of the standard policy requires the defendants, as automobile insurers, to pay claims for 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. 

New York courts are somewhat split on whether IDV is recoverable by 3rd-party claimants. Like in MA, it depends on several things. The general rule in NY is that “[t]he measure of damages for injury to property resulting from negligence is the difference in market value immediately before and immediately after the accident, or the reasonable cost of repairs necessary to restore it to its former condition, whichever is lesser”.

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