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Mass. judge denies third-party claimant class actions seeking diminished value payments

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Insurance | Legal
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Class action certification has been denied for a Massachusetts lawsuit that alleges two insurers refuse to pay third-party claimants for the diminished resale value of their vehicles that are repaired post-collision.

The suit combines two cases, one against Safety Insurance Co. on behalf of at least 26,000 claimants, and the other against The Commerce Insurance Co. on behalf of at least 70,000 claimants.

Both complaints allege breach of contract, unfair insurance business practices, and violation of the state’s consumer protections law.

The plaintiffs say the insurers breached their policy contracts by failing to pay the diminution in value damages and did so purposefully while admitting liability for the collisions laid out in the complaints. The suit against Safety states that it’s the carrier’s business practice to use “a method to evaluate and quantify diminution in value damages that are less than the actual diminution in value damages.”

Class certification was requested on March 4, 2022 to include all individual third-party claimants who:

    • Suffered a property damage loss by a Safety policyholder or insured vehicle driver, excluding vehicle leasees;
    • Safety determined its insured was legally liable for property damage loss to the claimant’s vehicle;
    • Safety has already paid the third-party property damage claims;
    • The claimant’s vehicle was structurally damaged from a collision and/or the cost to repair the vehicle was more than $500; and
    • Safety has not paid the claimant inherent diminished value (IDV) damages associated with the loss.

The suits seek an unspecified amount in damages to the claimants, stipends to the class representatives, an order permanently enjoining the carriers from continuing the unlawful practice alleged in the complaints, and a jury trial.

In his June 20 order, Justice of the Superior Court Kenneth W. Salinger pointed to a Massachusetts Supreme Judicial Court decision that upheld the 2008 state insurance policy requirement of IDV payment so claimants are “made whole.” But that doesn’t necessarily mean IDV will be paid for every damaged vehicle because the claimant has to provide proof of IDV and a monetary amount of IDV.

Salinger ruled that, while the putative class meets most certification standards, it doesn’t meet the statutory requirement of similar injuries under Massachusetts consumer protection law.

“The Court finds that individualized proof, analysis, and findings would be required to determine whether any putative class member’s vehicle suffered some amount of IDV and, if so, how much.

“It credits the sworn testimony by Commerce’s valuation expert, Philip Ibrahim, that if a vehicle is involved in a collision, suffers damage, and then is fully repaired, determining whether the vehicle’s resale market value is less than it would have been immediately before the collision requires detailed and individualized analysis of many factors.”

Those factors include the nature and severity of the damage, quality of repairs, prior accident history, manner of sale after repairs, general class of vehicles, and buyer market segment.

“The Court also credits Ibrahim’s testimony that many vehicles that are damaged in a collision and then are fully repaired do not suffer any IDV but instead are worth just as much and sometimes even more after being repaired than they were worth before the collision… liability cannot be determined on a class-wide basis and instead would have to be decided individually for the tens of thousands or hundreds of thousands of members of each proposed class.”

It’s not clear from court filings if individuals of the proposed classes will pursue litigation.


Featured image credit: Nattakorn Maneerat/iStock

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