According to NELF's brief, the IDV represents the difference in the vehicle's market value immediately before the accident and the post-collision value after repairs to the vehicle have been completed. Both Cubberley and Seaver sought recovery of the IDV for their vehicles. Commerce denied both claims, asserting that it did not owe IDV damages to either Cubberley or Seaver because the IDV damages had not been proven. 

The policy at issue in both cases stated Commerce would cover physical damage to the property of another arising from the insured's ownership, maintenance, or use of the insured auto. Though the policy stated Commerce would pay "the amount the owner of the property is legally entitled to collect through a court judgment or settlement for the damaged property," it expressly precluded payment for "any decreased value or intangible loss claimed to result from the property damage unless otherwise required by law" (emphasis added). Commerce filed a motion to dismiss the plaintiff's claims because the IDV damages fell squarely within the exclusion for decreased value or intangible loss. 

Cubberley and Seaver claimed they were entitled to IDV damages from Commerce based on McGilloway v. Safety Insurance Company, 174 N.E.3d 1191 (Mass. 2021), a case decided shortly before the ruling in Cubberley. The policy at issue in McGilloway was based on the 2008 version of the Massachusetts Standard Auto Policy. In that case, the Supreme Judicial Court had found that property damage may include "intangible damage such as the diminution in value of tangible property." Therefore, asserted the plaintiffs, they could pursue payment for their IDV damages. 

Unfortunately for the plaintiffs, the 2016 revision to the Massachusetts Standard Auto Policy removed the broad language used in McGilloway and replaced it with provisions that provided payment only for physical damage to tangible property and excluded damages for intangible losses. The superior court judge also pointed to another decision of the Supreme Judicial Court, Given v. Commerce Ins. Co., 796 N.E.2d 1275 (Mass. 2003), where the justices had concluded that Massachusetts law permitted insurers to exclude IDV damages from the scope of their policies. 

The plaintiffs also argued that the second paragraph of ALM GL ch. 90, §34O obligated insurance companies to cover "all sums the insured shall become legally obligated to pay as damages because of injury to or destruction of property." The trial judge disagreed, stating that another part of the same statute permitted insurers to exclude certain types of coverage. 

Commerce's motion to dismiss the claim was granted. The plaintiffs appealed and filed an application to send the appeal straight to the Supreme Judicial Court of Massachusetts, which was accepted. 

NELF's Support of Commerce

In its amicus brief, NELF argued Commerce was within its rights to deny third-party IDV coverage to the plaintiffs because the exclusion of IDV damages in the 2016 Massachusetts Standard Liability Policy was in accordance with Massachusetts law.

First of all, said NELF, the Commerce policy drew clear lines between tangible and intangible damages. In the Given case from the Supreme Judicial Court, the insured had the option to either repair her vehicle and recover the cost of those repairs, or she could receive the diminished value of her vehicle without the repairs. No matter which option she chose, the justice said she could not recover any more than what it would cost to repair her vehicle.

 Even though damages may be repaired, said the court, the alleged stigma associated with driving a post-collision vehicle was not something that could be fixed by a mechanic. Reputational harm was a separate and distinct matter from physical auto damage. As the superior court judge had pointed out, the plaintiffs' reliance on the McGilloway decision was misplaced because the policy in McGilloway had been written under an earlier, broader version of the Massachusetts Standard Auto Policy. That earlier version had covered all types of property damage, whereas the version under scrutiny in Cubberley had replaced that language with a more restrictive clause that limited the policy's scope to physical damage only. 

Also, the Supreme Judicial Court in Given had found the exclusion of third-party IDV coverage from an auto policy was allowed by state law. No statute or administrative provision in Massachusetts law addressed the inclusion or exclusion of IDV damages, which meant the insurance commissioner had the discretion to decide how the issue should be addressed. The justices reasoned that, since the commissioner had approved the 2016 version of the Massachusetts Standard Auto Policy, and that version included a provision excluding IDV damages, an auto policy could exclude coverage for IDV damages. 

Finally, NELF asserted ALM GL ch. 90, §34O did not actually support the plaintiffs' claims for coverage. The paragraph cited by the plaintiffs stated that "Every policy of property damage liability insurance shall provide that the insurer will pay on behalf of the insured all sums the insured shall become legally obligated to pay as damages because of injury to or destruction of property . . . caused by accident and arising out of the ownership . . . of the insured motor vehicle" (italics original). According to the plaintiffs, the statute was incorporated into the 2016 standard policy form because it excluded coverage for intangible losses "unless otherwise required by law" (italics original). However, NELF pointed out that the plaintiff's interpretation took the second paragraph out of context. The definition of "property damage liability insurance" found in the first paragraph of ALM GL ch. 90, §34O said the insurance could include "conditions, exclusions, and limitations" that are approved by the commissioner. As NELF put it, the whole of ALM GL ch. 90, §34O meant that "the insurer's duty to indemnify the insured is subject to the commissioner's approved exclusions" (italics omitted). 

Editor's Note: When a vehicle is damaged in an accident, insureds often claim that even after a vehicle is repaired, it is no longer worth what it was, therefore they should be compensated for that lost value. The overall goal of insurance is to make the injured party whole. Insurers find an insured, or an third-party injured by the insured, has been "made whole" once the damaged vehicle is fully repaired and restored to its pre-collision condition. Plaintiffs, like Mr. Cubberley and Mr. Seaver in this case, may claim that a lack of compensation for the diminished value of a repaired auto means they have not been "made whole." However, as the Cubberley case showed and NELF argued in its brief, Massachusetts case law allowed insurers to exclude coverage for intangible damages without violating Massachusetts law or public policy. Earlier cases from the Supreme Judicial Court had explicitly found that insurers were not required to cover damages for an auto's diminished value by either state law or the insurance division. An affirmation of the Superior Court's verdict in this case would reinforce the principle that insurers may exclude coverage for the diminished value of an auto without running afoul of the insurance division or Massachusetts law.