US District Court for District of Massachusetts holds that where insurer pays for repairs to damaged vehicle it is not responsible for post-repair diminishment in market value

There are a category of insurance issues that I classify as "cocktail party issues."  If it comes out in a social setting that I'm an insurance coverage geek, there a few questions that come up over and over again from people who are making conversation/seeking free advice.

One of those questions is about damages to a car after an accident.  Specifically, can the owner recover from the insurer for the diminished value of the car after it is repaired?  Everyone who has ever negotiated to trade in their car at a dealership knows that the dealership will use the fact that the car was in an accident -- even if it was (more or less) fully repaired -- as an excuse to offer less for it.
 In Martins v. Vermont Mutual Ins. Co., __ F.Supp.3d __, 2019 WL 3818293 (D. Mass.), the United States District Court for the District of Massachusetts has held that under the standard Massachusetts Automobile policy, a vehicle owner cannot recover from the other driver's insurer for both the cost of repairs and the diminution of market value. 

Part 4 of the 2008 Standard Massachusetts Auto Policy (the version still in effect) provides that an insurer will "pay damages to someone else whose auto . . . is damaged in an accident.  The damages we will pay are the amounts that person is legally entitled to collect for property damage through a court judgment or settlement." 

The United States District Court is bound to follow the rulings of the Massachusetts Supreme Judicial Court in interpreting Massachusetts insurance policies.  In Given v. Commerce Insurance Co., 440 Mass. 207 (2003), the SJC held that collision coverage (Part 7 of the standard policy, which insures the policyholder's own vehicle) does not require insurer to pay for diminished value.  Part 7 states that the insurer will pay for cost of repair or diminution in value, but not both. 

The US District Court noted that Part 4 of the policy is not identical to Part 7 and therefore requires its own analysis.  Under Part 4 the precise issue was whether a plaintiff would be "legally entitled to collect" diminished value from the at-fault drive.  The court turned to cases discussing damages to real property, which hold that the measure of damages is either the cost of repairs or the diminished market value, whichever is less.  The court held that the same measure of damages applies to property damage to vehicles. 

The plaintiff has filed an appeal.  Stay tuned.