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SJC rules insurers must compensate for ‘inherent loss of value’ after an auto accident

The unanimous decision by the state’s highest court means owners might be able to recover money beyond the cost of repairs.

A ruling by the Massachusetts Supreme Judicial Court means auto owners who can show their car is worth less after an auto accident, even after it's been repaired, are entitled to compensation from their insurer.Charles Krupa/Associated Press

In a victory for consumers, the state’s highest court ruled Tuesday that automobile insurers that are liable for the cost of repairs to a vehicle damaged in a crash must also pay for any diminished market value resulting from the accident.

The ruling by the Massachusetts Supreme Judicial Court means consumers now may be able to recover money from insurers beyond the cost of fully repairing their vehicle.

That additional payment is intended to compensate owners for a loss in value because cars and trucks that have been involved in accidents sometimes fetch less money when they are resold.

Citing the language from a previously decided case, the SJC wrote, “The law attempts to put the consumer in a position as nearly as possible equivalent to his (or her) position” before the crash.


A consumer is “entitled” to be “made whole and compensated for what he has lost,” the SJC wrote.

The ruling stemmed from a claim by Jarrett McGilloway, whose car was damaged in a crash in which he was not at fault. Repairs to McGilloway’s vehicle were paid for by the at-fault driver’s insurer, Safety Insurance.

But Safety denied payment for McGilloway’s claim for what is known in the insurance industry as “inherent diminished value,” or IDV, which is the amount by which the market value of the repaired vehicle is diminished because it was involved in an accident.

In 2017, McGilloway filed a lawsuit in Superior Court, which was consolidated with two similar suits brought by other consumers. It also added as a defendant Commerce Insurance, which is now part of MAPFRE insurance.

The Superior Court judge who heard the case rejected the claims made by McGilloway and the others, which led to the case being appealed to the SJC.

On Tuesday, the SJC released a 17-page ruling that for the first time interpreted the standard automobile policy in the state as covering inherent diminished value.


In its unanimous decision, the court articulated two conditions consumers must meet before they can collect for so-called IDV: “individualized” proof that their vehicle suffered diminished value and by the amount which it was diminished.

Each consumer “has the burden of proof on these issues,” the SJC said.

For McGilloway and the two other plaintiffs in the lawsuit, the case will now shift back to Superior Court to determine whether those conditions can be met.

During oral arguments before the SJC, a lawyer for Commerce argued against recognition of IDV, saying it would “cause a seismic shift in the insurance marketplace,” and “economically destabilize” it.

But the SJC noted that, in the Superior Court proceedings, Safety admitted “that IDV may be suffered in some cases” and “concedes that IDV may be quantifiable.”

The SJC, in an opinion written by Associate Justice Serge Georges Jr., also noted that other states have allowed for IDV damages in auto insurance cases.

The SJC said it based its ruling on the “plain meaning” of the language of the standard auto insurance policy, which says damages owed to consumers are “the amounts that person is legally entitled to collect for property damage through a court judgment or settlement.”

Because the standard policy “does not limit recovery to merely repair or replacement cost, such recovery must compensate a claimant for any loss of value the claimant incurred as a result of a collision,” the SJC wrote.


“This is good news for consumers,” said Deirdre Cummings, consumer program director for the Massachusetts Public Interest Research Group. “When consumers can demonstrate the value of their car has been diminished as a result of an accident, then absolutely insurance companies should pay for that loss.”

Christopher Stark, executive director of the Massachusetts Insurance Federation, a lobbying group, said that the industry disagrees with the SJC ruling, but noted that the court conditioned recovery on proof of actual damages — what he called a “very fair burden” on consumers.

He said the industry was engaged in a full analysis of the decision.

Got a problem? Send your consumer issue to sean.murphy@globe.com. Follow him on Twitter @spmurphyboston.