The Superior Court of Massachusetts dismissed a lawsuit against an insurer, finding that the insurer was not required to include the cost of a vehicle’s title, registration, and inspection in the vehicle’s actual cash value. The case is Konsevick v. Plymouth Rock Assurance Corp., 2021 Mass. Super. LEXIS 20 (Mass. Super. Ct. 2021).
Background
The plaintiffs, Rebecca Konsevick and Colleen Bartini, each owned a private passenger vehicle that was insured by a Massachusetts Standard Automobile Policy issued by Plymouth Rock Assurance Corporation.
In 2018 and 2019, the vehicles were involved in an automobile accident, prompting both owners to file a claim with Plymouth Rock. Plymouth, with the option to pay the actual cash value of the vehicles or pay to repair or replace them, elected to pay the ACV. Plymouth paid the ACV amount as determined by a third-party vendor. The plaintiffs alleged that since the third-party vendor did not consider the costs of titling, registering, and inspecting the vehicles, the ACV determination violates the Standard Policy.
The Standard Policy
The Standard Policy in Massachusetts is an insurance contract prescribed by statute, with standard language controlled by the Division of Insurance. The policy’s collision and comprehensive coverage provisions state that the insurer will pay the cost to repair an auto or any of its parts up to the actual cash value of the auto or any of its parts at the time of the collision or loss. The most the insurer will pay is either the actual cash value of the auto or the cost to repair the auto, whichever is less. The policy states actual cash value may include an adjustment for depreciation and betterment and for the physical condition of the auto.
ACV is not defined in the policy, but in Massachusetts Administrative Code 211 CMR §133.05, four factors are listed to determine a vehicle’s ACV. These include the retail book value for a motor vehicle of like kind and quality, before the damage incurred; the price paid for the vehicle plus the value of added improvements to the vehicle at the time of the accident, minus depreciation; the decrease in value of the vehicle due to prior damage; and the actual cost of purchase of an available motor vehicle of like kind and quality, before the damage sustained.
Court’s Analysis
The plaintiffs asserted claims for declaratory relief, breach of contract, and violations of the Massachusetts Administrative Code. The plaintiffs argued that the title, registration, and inspection costs should have been included in the insurer’s ACV calculation and not including them constitutes an unfair and deceptive trade practice. Plymouth Rock countered that the policy did not require the consideration of those costs and made a motion to dismiss the suit.
The plaintiffs argued that the ACV value should be interpreted under the broad evidence rule, with the goal of putting them back at their pre-loss position. They assert that having to pay for new title, registration, and inspection costs would not put them back at their pre-loss position. The broad evidence rule states that in determining ACV a “trier of facts may consider any evidence logically tending to the formation of a correct estimate of the value of the property at the time of loss.”
The court rejects the necessity of the broad evidence rule since the calculation of ACV is specified in the policy. The broad evidence rule has only been used previously by Massachusetts courts to determine the value of property when the insurance policy did not specify a standard for determining ACV.
The court then considered whether the term “value” of an automobile could include the value of regulatory costs associated with the automobile. Using Black’s Law Dictionary (11th ed. 2019), “value” was defined as “the amount of...money that something commands in exchange”. A vehicle’s value does not include the regulatory costs. When a vehicle is purchased, the purchaser must pay the title, registration, and inspection costs in addition to the cost of the vehicle. This shows that the regulatory costs are a cost of ownership and not a part of the value of the vehicle.
Finally, the court looked at statute 211 CMR §133.05, which lists four factors to determine a vehicle’s ACV. The defendants pointed to the factor that states, “the actual cost of purchase of an available motor vehicle of like kind and quality but for damage sustained.” They argued that regulatory fees are actual costs of purchase since you cannot legally operate a vehicle in the state without paying them.
The court disagreed, determining that the actual cost of purchase is solely the amount paid in exchange to the seller. The regulatory fees are not part of the vehicle’s value and are not paid to the seller, but to the state. Further, the statute refers to the actual “cost”, not costs, solidifying that only the purchase price is considered. The court found that the plaintiffs failed to make a viable claim and approved the defendant’s motion to dismiss.
Editor’s Note: The court concluded that neither the Standard Policy nor the statute on actual cash value required Plymouth Rock to include title, registration, or inspection costs in determining ACV. They determined that the “value” of a vehicle did not include regulatory costs, and that the “actual cost” referenced in the statute refers to the cost paid to the seller. Interestingly, the court mentioned that since the wording of the standard policy is controlled by the Commissioner of Insurance, ambiguities would not be construed against the insurer. Typically, insurers draft the policy, so ambiguities are held against them. However, in this case, the court found no ambiguities and awarded in favor of the insurer.
Of interest is that under the standard ISO PP 00 01 Personal Auto Policy, the loss settlement provisions include payment of sales tax for the damaged or stolen property.
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