McGilloway v. Safety Insurance Company

The Supreme Judicial Court released an opinion on October 19, 2021, in McGilloway v. Safety Insurance Company, SJC-13053, holding that automobile insurance carriers are required to compensate third parties for claims of inherent diminished value to a motor vehicle. In McGilloway, the Plaintiffs argued that they were legally entitled to collect for property damage through a court judgment or settlement. The Defendants maintained that even if diminished value damages were recoverable, they were not covered under the standard policy because the regulations were silent as to how insurers should treat diminished value damages. The Court agreed with the Plaintiffs because the term “property damage” can “include intangible damage such as the diminution in value of tangible property.” Id. at 8. The Court held that the plain language of the policy did not limit recovery for property damage to repair or replacement costs, so the loss in any value the claimant incurred as a result of the collision is recoverable – offsetting any increase in value to the property that was caused by repairs. More plainly, if the vehicle was repaired completely, a third party may still recover and diminished value to the vehicle.
Defendants raised the serious concern of calculating the diminished value of a motor vehicle. The Court noted that individualized proof is required to demonstrate that a given automobile has sustained some form of diminution in value due to a collision or vehicular accident, even after repairs are made. A claimant must establish (1) that his or her vehicle has suffered IDV damages, and (2) the amount of diminished value damages at issue. The Court made no comment on how a claimant would determine the amount of the diminished value.
The Court also noted that the last time it reviewed this issue was under a first party claimant under a different edition of the standard party in Given v. Commerce Ins. Co., 440 Mass 207 (2003). This ruling remains undisturbed by the Court’s decision in McGilloway.