In a carefully watched resolution affecting Massachusetts auto insurers, policyholders, and third-party claimants, the Supreme Judicial Court docket has dominated that the 2016 Massachusetts Normal Car Insurance coverage Coverage doesn’t present property injury protection for inherent diminished worth (IDV) claims made by third events.
As outlined by the Supreme Judicial Court docket, IDV damages arising out of property injury characterize “the distinction between the market worth of a motorcar instantly earlier than a collision and the automobile’s market worth after a collision and subsequent repairs,” even when these repairs totally restore the automobile to its pre-accident situation.
The Supreme Judicial Court docket resolution, issued on January 30, 2025, in Cubberley v. The Commerce Insurance coverage Firm resolved two authorized points. The primary is whether or not the 2016 coverage’s express exclusion of “decreased worth or intangible loss” barred IDV claims regardless of the coverage’s “until in any other case required by legislation” exception. The second is whether or not third-party claimants may straight sue insurers for IDV damages with out first acquiring judgments towards the insureds who precipitated the tangible property injury loss to their autos.
The Cubberley Court docket dominated insurers don’t have any obligations to IDV claims beneath the 2016 Car Insurers Bureau coverage kind, which differs materially from the 2008 coverage kind that the Court docket beforehand interpreted in McGilloway v. Security Insurance coverage Firm supplied protection for IDV claims. See Company Checklists’ article of October 26, 2021, “Supreme Court Rules Auto Policies Cover Vehicles’ Post-Repair Losses of Value.”
The Court docket additionally dominated that third-party claimants couldn’t straight sue a legal responsibility insurer for any damages attributable to its insureds, together with IDV damages, until the claimant had recovered a judgment towards the insured for the insured damages.
The importance of this difficulty to the Massachusetts insurance coverage market is mirrored by the three amicus briefs filed within the case – from the American Property Casualty Insurance coverage Affiliation and Massachusetts Insurance coverage Federation collectively, the New England Authorized Basis, and the Massachusetts Academy of Trial Attorneys. Every group acknowledged that the Court docket’s interpretation of the 2016 coverage language would have substantial implications for claims dealing with vehicle property injury claims, protection disputes, and private legal responsibility for insureds.
Information of the Cubberley Case’s IDV Claims
The Cubberley case attraction arose from two separate accidents involving Commerce-insured drivers. In March 2018, Philip Seaver’s 2017 Honda Civic was broken in an accident with Commerce’s insured, Anthony Fallica. The next yr, in March 2019, Jeffrey Cubberley’s Ford Focus was broken in an accident with one other Commerce insured, Cindy Maclean. In each instances, Commerce accepted legal responsibility for its insureds and paid for the complete price of repairs to revive the autos to their pre-accident bodily situation.
Nevertheless, each Seaver and Cubberley claimed their autos suffered inherently diminished worth past the bodily injury that Commerce paid to restore. They argued their autos have been price much less within the resale market just because that they had been in accidents, though they have been totally repaired.
When Commerce denied their IDV claims, they filed a category motion lawsuit looking for to characterize all equally located third-party claimants whose IDV claims Commerce had denied beneath the 2016 coverage.
The case’s procedural path displays its significance to Massachusetts auto insurance coverage legislation. Initially filed in Superior Court docket, it was transferred to the Enterprise Litigation Session in Boston after which stayed pending the SJC’s resolution within the McGilloway case then pending earlier than the Supreme Judicial Court docket. After the McGilloway resolution dominated that the 2008 coverage’s property injury settlement lined IDV claims, the keep was lifted. Commerce then moved to dismiss, arguing that the plaintiffs lacked standing to sue straight with out first acquiring judgments towards the insureds and that the 2016 coverage’s express exclusion barred protection for IDV claims.
After the Enterprise Litigation Session agreed with Commerce’s place and dismissed the Cubberley swimsuit, the Supreme Judicial Court docket accepted the Cubberley plaintiffs’ appeals for direct appellate overview, bypassing the Appeals Court docket.
The Court docket’s Evaluation of The 2016 Coverage Language
The Supreme Judicial Court docket’s evaluation targeted on the variations between the 2016 coverage language and the 2008 coverage language beforehand interpreted in McGilloway. The Court docket emphasised that whereas McGilloway had discovered protection for IDV claims beneath the 2008 coverage, that call was “narrowly tethered to the particular language within the 2008 commonplace coverage.”
The important thing variations in Half 4. Property Harm of the 2016 coverage that drove the Court docket’s evaluation have been:
First, the 2016 coverage explicitly limits protection to “injury or destruction of the tangible property of others.” In distinction, the 2008 coverage broadly lined “property injury” with out the “tangible property” limitation. The Court docket discovered this distinction vital as a result of, as established in McGilloway, IDV damages characterize an intangible loss in market worth quite than bodily injury to tangible property.
Second, and most critically, the 2016 coverage incorporates an express exclusion stating that “The quantity we pays doesn’t embody compensation for… any decreased worth or intangible loss claimed to outcome from the property injury until in any other case required by legislation.” No comparable exclusionary language appeared within the 2008 coverage.
The plaintiffs primarily argued that protection existed, regardless of this exclusionary language, due to the “until in any other case required by legislation” exception. They contended that each the McGilloway resolution and G.L. c. 90, § 34O (the obligatory property injury insurance coverage statute) created authorized necessities for IDV protection that triggered this exception.
The Court docket rejected each arguments. Relating to McGilloway, the Court docket emphasised that its prior resolution merely interpreted particular coverage language and didn’t create a common authorized requirement for IDV protection “regardless of the coverage language.” As for the statute, the Court docket famous that G.L. c. 90, § 34O expressly authorizes the Commissioner of Insurance coverage to approve “situations, exclusions, and limitations” in auto insurance policies. Because the Commissioner permitted the 2016 coverage with its IDV exclusion, the statute couldn’t be learn to require protection that the coverage explicitly excludes.
The Court docket additionally rejected the plaintiffs’ argument that the Commissioner exceeded his authority in approving the IDV exclusion. The Court docket discovered the exclusion aligned with the Commissioner’s statutory energy to approve coverage exclusions and didn’t battle with G.L. c. 90, § 34O’s primary mandate that insurers cowl property injury legal responsibility. The Court docket famous that the statute’s $5,000 minimal protection requirement itself demonstrates that insurers needn’t cowl all sums an insured would possibly owe.
The Standing Requirement: A Separate Foundation for Dismissal
Though the Court docket’s interpretation of the 2016 coverage language resolved the protection difficulty, it additionally addressed what it referred to as a “threshold difficulty” – whether or not third-party claimants have the authorized proper or “standing” to sue an insurer straight with out first acquiring judgments towards the insureds who precipitated their damages.
The Court docket’s standing evaluation centered on two statutes: G.L. c. 175, § 112 and § 113. Collectively, these statutes set up what the Court docket referred to as a “two-step process” that third-party claimants should comply with:
1. First, receive a ultimate judgment towards the insured tortfeasor
2. Then, if vital, pursue the insurer to achieve and apply the insurance coverage coverage to fulfill that judgment
The Court docket emphasised that this process just isn’t merely procedural formality however a authorized prerequisite for third-party claimants to have standing to sue a tortfeasor’s insurer for damages. Quoting from an earlier resolution, the Court docket reiterated that “acquiring a judgment is a vital predicate for sustaining a explanation for motion towards” an insurer.
Neither Cubberley nor Seaver had obtained judgments towards Commerce’s insureds earlier than suing Commerce straight. The Court docket rejected their argument that Commerce’s fee of restore prices constituted an admission of legal responsibility that made acquiring judgments pointless. Because the Court docket defined, “an insurer’s fee to a 3rd celebration primarily based on the insured’s potential legal responsibility ‘just isn’t the identical factor as conceding legal responsibility’ or admitting the scope of legal responsibility.”
The Court docket famous that whereas Massachusetts legislation does enable direct actions towards insurers in some circumstances – significantly beneath G.L. c. 93A and c. 176D for unfair claims settlement practices — these statutory exceptions don’t override the authorized requirement {that a} claimant scale back their declare to a judgment requirement earlier than looking for to achieve and apply the insurance coverage coverage to fulfill their declare for damages towards the coverage’s insured.
Requiring a claimant to fulfill this situation precedent of acquiring a judgment towards the insured serves a number of sensible functions within the Court docket’s opinion: (1) It prevents untimely litigation over insurance coverage protection earlier than the claimant establishes the insured’s legal responsibility, (2) It protects insurers from having to defend a number of fits over the identical accident, (3) It ensures that the insured’s legal responsibility defenses are totally thought-about earlier than insurance coverage protection is decided, and (4) It maintains the basic nature of legal responsibility insurance coverage as an indemnity contract for the insured quite than a direct profit to 3rd events.
Third-party Property Harm Claimants Nonetheless Have The Proper To Accumulate IDV Damages
The Cubberley resolution solely determined that the 2016 commonplace auto coverage’s property injury provision didn’t present protection for inherent diminished worth claims.
The choice affirmed, as acknowledged in McGilloway that third-party property injury claimants can get well for provable IDV damages to their autos. Nevertheless, the Cubberley adjustments from whom the third-party claimant could get well:
- If the driving force inflicting the IDV injury is insured by an insurer utilizing the 2008 auto coverage kind, the insurer is answerable for any provable IDV damages.
- If the driving force inflicting the IDV injury is insured by an insurer utilizing the 2016 auto coverage kind, the insured is personally answerable for paying any provable IDV damages.
Whether or not it’s the insurer or the insured who might need potential legal responsibility for IDV damages, the Court docket emphasised that IDV damages should not mechanically “inherent” when a automobile is broken and repaired. As acknowledged in each McGilloway and reaffirmed in Cubberley, a third-party claimant should show “with individualized proof” each that:
- The automobile has really suffered IDV damages
- The precise quantity of IDV damages at difficulty
A Touch upon Brokers Advising Shoppers Considering In search of IDV Damages From an Uninsured Driver
An insurance coverage company advising certainly one of their insureds contemplating pursuing an IDV declare towards a driver who has no IDV protection would possibly recommend they rigorously weigh the cost-benefit of suing an uninsured driver for IDV damages.
As a matter of authorized proof, a third-party claimant looking for to get well for IDV damages, even with 100% legal responsibility, will want professional testimony in any court docket proceedings to show each the existence and quantity of any IDV injury to their automobile as required by the Supreme Judicial Court docket.
The prices of an professional in an IDV lawsuit should not recoverable bills and, when paid, can probably scale back any IDV damages if the court docket awards IDV damages in any respect to zero.
Owen Gallagher
Insurance coverage Protection Authorized Professional/Co-Founder & Writer of Company Checklists
Over the course of my authorized profession, I’ve argued a variety of instances within the Massachusetts Supreme Judicial Court docket in addition to helped brokers, insurance coverage corporations, and lawmakers alike with the complexities and idiosyncrasies of insurance coverage legislation within the Commonwealth.
Join with me straight, by calling me at 617-598-3801.
