Boston Globe Coverage of NELF Amicus Advocacy in Insurance Coverage Case

Should insurers compensate car owners for lost value after an accident? The state’s highest court will soon decide.

By Sean P. Murphy Globe Staff, Updated June 3, 2024


For the second time in three years, the state Supreme Judicial Court will soon decide a question with huge financial consequences for automobile owners whose motor vehicles lose value because they were in a crash.

Both SJC cases focus on “intangible loss,” which happens when your damaged vehicle is fully repaired but its resale value plummets nonetheless, which in the insurance industry is called “inherent diminished value,” or IDV.

IDV was not recognized in Massachusetts until 2021, when the SJC ruled motor vehicle owners are entitled to be “made whole and compensated for what [they have] lost” in cases where the owner of the damaged vehicle is not at fault.

“The law attempts to put the ‘consumer’ in a position as nearly as possible equivalent to his (or her) position” before the crash, the SJC wrote in 2021.

That ruling was based on the standard automobile policy, which is an official document approved by the Insurance Commissioner and which all insurers use, with approved modifications, when selling insurance to consumers. That document, which dates back to 2008, was silent on the question of intangible property damage.

The case now going to the SJC calls for an interpretation of a new revised version of the standard automobile policy, one that explicitly excludes coverage for “any decreased value of intangible loss.”

The question the SJC must answer is whether the language in the revised standard policy shuts the door on IDV only three years after the same court opened it. The new SJC case is different from the previous one because the facts — the language of the standard policy — are different. State law authorizes the Insurance Commissioner to add “conditions, exclusions, and limitations” to the standard policy.

The current case arises from a car crash in which Jeffrey Cubberly was deemed to be not at fault. Repairs to Cubberly’s Ford Focus were paid for by the at-fault driver’s insurer, Commerce Insurance, under the revised standard policy.

Commerce, however, declined to cover IDV, even though Cubberly’s vehicle “is now worth less in the resale market than a comparable vehicle that has not suffered such damage from a collision,” according to a brief submitted to the SJC by his attorney, Kevin J. McCullough of Salem.

Given the choice between a vehicle that’s been in a crash and one that hasn’t, buyers want the unscathed one because there’s less chance of something going wrong. The difference in value is usually a couple thousand dollars, according to Carfax, a web-based service that supplies vehicle history reports on used cars and trucks, including on crashes (rating them from minor to severe).

Its data show a repaired vehicle after a severe crash loses about $2,000 in value on average, while the average loss for all vehicles in crashes is about $500, as of 2021.

After being denied compensation for IDV, Cubberly sued Commerce, claiming he was wrongly denied compensation for a real but intangible loss.

Last year, Judge Helene Kazanjian of Suffolk Superior Court dismissed Cubberly’s complaint, saying the language in the revised standard policy clearly and unambiguously limits compensation to loss of tangible property while expressly excluding intangible property.

In his brief, McCullough called IDV “a recognized property damage” and said the SJC faces “the exact same question” as it did in the earlier IDV case “only in light of the additional language added to the [revised standard policy].”

In an amicus brief filed with the SJC, the New England Legal Foundation, a free market advocacy group, said exclusion of IDV would be a win for both insurers and consumers.

 “Insurance companies need the predictability that [the revised standard policy] provides to keep premium costs aligned with risk,” said Dan Winslow, NELF president. “We are hopeful our advocacy is a win-win for both insurance companies as well as consumers who benefit from lower premiums.”

Deirdre Cummings, consumer program director for the Massachusetts Public Interest Research Group, disagreed, saying consumers would benefit if the SJC allows IDV.

“When consumers can demonstrate the value of their car has been diminished as a result of an accident, then insurance companies should pay for that loss,” she said.

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