On Oct. 19, 2021, the Massachusetts Supreme Judicial Court (SJC) released its decision in the case of Jarrett McGilloway & another vs. Safety Insurance Company et al. The ruling is a victory for consumers whose motor vehicles were damaged and repaired following a collision where another party was at fault.
When a vehicle is damaged in a motor vehicle collision, it suffers a loss in value (and resale value), even after that vehicle is fully repaired. This concept of loss in value is known as diminished value, or inherent diminished value (IDV). Although IDV damage has been a well-known term in the automobile industry for years, impacting hundreds of thousands of car owners, it was not a recognized or recoverable damage here in Massachusetts — at least not until the recent victory at the SJC by attorney Kevin J. McCullough, a founding partner at the law firms of Mazow/McCullough PC and Forrest, Mazow, McCullough, Yasi & Yasi.
The fight in McGilloway focused on, among other issues, whether or not IDV damages are recognized here in Massachusetts, and whether or not those IDV damages were covered under Part 4 of the 2008 edition of the Standard Massachusetts Automobile Insurance Policy.
After working its way through the Suffolk Superior Court, the case was heard at oral argument at the SJC on May 5, 2021. In a resounding, unanimous (all seven justices agreed) decision, the SJC held that IDV is a recognized damage and covered under Part 4 of the 2008 edition of the Standard Massachusetts Automobile Policy.
One of the defendants, Commerce Insurance, argued that by allowing consumers to pursue IDV damages, the court would “cause a seismic shift in the insurance marketplace” and “economically destabilize the insurance marketplace”. McGilloway. The SJC rejected that argument. Commerce also maintained that IDV damages would be almost impossible to calculate:
At oral argument, counsel for Commerce also argued that IDV damages are “very difficult, if not impossible” to calculate with regard to vehicles. However, as the motion judge noted, Safety “admits that IDV may be suffered in some cases” and “concedes” that IDV may be quantifiable.” Moreover, as discussed supra, numerous other States recognize and permit recovery of IDV damages. Accordingly, we are not persuaded by Commerce’s arguments here. McGilloway.
As stated in the SJC’s decision, for years, other states have recognized IDV damages in the context of automobile property damage. See, e.g., American Serv. Ctr. Assocs. v. Helton, 867 A.2d 235, 243 (D.C. 2005) (claim for property damage to motor vehicle caused by collision with another vehicle; "when a plaintiff can prove that the value of an injured chattel after repair is less than the chattel's worth before the injury, recovery may be had for both the reasonable cost of repair and the residual diminution in value after repair, provided that the award does not exceed the gross diminution in value"); State Farm Mut. Auto. Ins. Co. v. Mabry, 274 Ga. 498, 508-509 (2001) (insurer required to pay claimant IDV damages under insurance policy where vehicle suffered IDV following repair); Papenheim v. Lovell, 530 N.W.2d 668, 672 (Iowa 1995).
Although the legal issue was recently addressed by the SJC in the McGilloway case, for years, Massachusetts consumers have been disappointed when finding out the value or resale value of their vehicle(s) following a collision and repair of the applicable damages. In fact, an entire industry has developed from the concept that damaged and repaired vehicles suffer a loss in value, including CARFAX and other similar companies tracking the history of a motor vehicle. In the past, most consumers were unaware of this damage and loss in value until after it was too late to try to recover the damage. Further, for the consumers who were actually mindful of the concept and knew that their respective vehicles had decreased in value post-collision and repair, the motor vehicles insurance companies in Massachusetts were refusing to pay those claims and/or for IDV damages.
The SJC decision is consistent with the long-standing legal principle that an injured party is entitled to be made whole. The “made whole doctrine” recognizes that a tort victim has a fundamental right to be made whole, and fully compensated for all damages.
So how does a car accident victim pursue a claim for IDV damages? First, the victim should obtain a copy of any police reports, vehicle damage appraisals, and photographs showing the damage that was caused. Additionally, they will need to show the vehicle’s loss of value. IDV damages are readily determinable through a utilization of an appraisal report and the National Automobile Dealers Association (NADA) guidebook. One method of calculating IDV damages is by subtracting the NADA rough trade-in value from the NADA clean retail value. After the individual gathers all of that information, they can then send a demand to the third-party insurer for settlement of the IDV claim.
McGilloway is an extremely significant decision here in Massachusetts because the law now allows car accident victims a chance, and the ability, to recover the loss in market value of their vehicle following a collision and repair, which is a tremendous win for Massachusetts consumers.
Robert J. Hartigan has been litigating personal injury matters since being admitted to the Massachusetts bar in 2016. He is a graduate of Suffolk University Law School and is a partner at Mazow & McCullough PC in Salem, where his practice focuses on serious personal injury matters and consumer class action litigation. Hartigan represents individuals and their families in a variety of cases involving motor vehicle collisions, premises liability and wrongful death.