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By: R. Victoria Fuller & Ryan Giggi
In McGilloway v. Safety Ins. Co., the Supreme Judicial Court followed other jurisdictions in holding that part 4 of the standard Massachusetts automobile insurance policy provides coverage for third-party claims for the inherent diminished value (“IDV”) of a car that has been damaged and subsequently repaired. The Court held that such claims must be paid where (1) the claimant establishes that the vehicle suffered IDV; and (2) the amount of IDV damages owed.
The Court noted that it had previously recognized, in other contexts, that the term “property damage” could include intangible damage such as the diminution in value of tangible property. The Court further reasoned that part 4 of the standard policy did not limit recover to merely repair or replacement cost and, therefore, “such recovery must compensate a claimant for any loss 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.”
McGilloway does not appear to impose an affirmative duty upon auto insurers to adjust third-party claims for IDV. That said, when a third-party claimant presents an auto insurer with individualized proof supporting the existence, and amount, of IDV, Massachusetts insurers must now consider that information and pay IDV where it has been sufficiently established.