United States: Massachusetts highest court finds Massachusetts standard auto policy covers third party claims for diminished intrinsic value of repaired vehicles
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In McGilloway v. Safety Ins. Co., the Supreme Judicial Court followed other jurisdictions in ruling that Part 4 of the Massachusetts Standard Auto Insurance Policy covers third party claims for the Inherent Impaired Value (“IDV”) of a car that has been damaged then repaired. The Court ruled that such claims must be paid when (1) the claimant establishes that the vehicle has suffered an IDV; and (2) the amount of IDV damages due.
The Court noted that it had previously recognized, in other contexts, that the term “material damage” could include non-material damage such as the decrease in the value of tangible property. The Court further held that Part 4 of the Standard Policy did not limit recovery to the mere cost of repair or replacement and, therefore, “such recovery shall compensate a claimant for any loss of value suffered by the claimant to the result of a collision, offset by the increase in value that may result from repairs to the vehicle. “
Mcgilloway does not appear to impose a positive obligation on auto insurers to adjust third party claims for IDV. That said, when a third-party claimant presents an auto insurer with individualized evidence justifying the existence and amount of the IDV, insurers in Massachusetts must now take that information into account and pay the IDV when it has been sufficiently paid. established.
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