An attorney representing a client for damages related to a car accident has a multitude of claims and issues to resolve. These range from personal injury protection, bodily injury, property damage, potential uninsured motorist and “diminished value” claims. Until this year, there was still a question of whether one could pursue a third-party claim against an at-fault party for the diminished value of their car due to the stigma of it being in an accident. This is no longer the case. In the recent United States District Court of Massachusetts decision, Martins v. Vt. Mut. Ins. Co. (2019), the court ruled that inherent diminution of value claims by third parties are not covered by the standard Massachusetts automobile insurance policy. Therefore, Massachusetts attorneys now need to be wary of pursuing such a “diminished value” claim because no clear cause of action exists.
Unlike many other states, the Supreme Judicial Court of Massachusetts has long held that inherent diminished value in first-party automobile claims is not covered by the standard Massachusetts automobile policy. Further, the Massachusetts Division of Insurance, in an advisory opinion dated April 26, 2002, expressly stated that the Massachusetts standard policy for automobiles did not cover “diminution of value” or “inherent diminished value.” As such, pursuing a first-party claim against your client’s insurer for diminished value has long been a futile endeavor.
In coming to the conclusion that third-party claims are also not valid, the court in Martins examined some key principles of Massachusetts law. Most importantly, the court concluded that the law of Massachusetts does not permit recovery of damage in a tort action for the inherent diminished value of personal property. Further, the court also found it persuasive that the Massachusetts commissioner of insurance had never taken the position that inherent diminished value damages were recoverable. Lastly, the court held that it would create an “anomaly in Massachusetts insurance coverage … if a third party could recover damages for inherent diminution in value — but the insured himself could not.”
Even if diminished value claims were not expressly forbidden, this decision reflects the other issues with such claims. Specifically, if a claimant’s motor vehicle is already fully repaired through their property damage claim, then they have already legally been fully compensated. Moreover, it is arguable that a diminished value claimant has not truly suffered damage when they bring their claim because — unless they have already sold their vehicle for a loss — no damage has been suffered and they lack standing. Additionally, measuring the diminished value from a motor vehicle solely being in an accident is difficult and often leads to a battle of the experts. For these reasons, the current trend of many states, including Massachusetts, is to not allow for the recovery of diminished value. Therefore, be careful before spending the money and resources to hire an expert and bring a diminished value claim, as the current state of Massachusetts law does not allow for such a cause of action.
Joseph Nett is an associate attorney with Brand & Tapply LLC. He specializes in insurance coverage and insurance fraud.