The Undoing of the McGilloway Decision
by Sean Preston, Coverall Law
In October 2021, the Supreme Judicial Court (“S.J.C.”) brought a wave of hope and victory for car owners in Massachusetts with the ruling of McGilloway v. Safety Insurance Company.
For the first time, the ruling recognized the right to claim Inherent Diminished Value (IDV) for vehicles post-accident. It applied to third-party losses, meaning another driver was at fault. This pivotal acknowledgment paved the way for fairer compensation, allowing vehicle owners to recover the lost market value of their vehicles due to someone else’s negligence. But the victory was short-lived and quickly faded away.
Background: A Landmark Shift with McGilloway
The McGilloway ruling was groundbreaking, marking a significant shift in auto insurance practices in Massachusetts. It underscored that when another driver is at fault, the affected vehicle’s owner should receive compensation – not just for the repairs but also for the vehicle’s diminished value post-repair. This decision heralded a new era, promising a more balanced and just approach to insurance claims, ensuring that vehicle owners were better protected against the financial repercussions of accidents they didn’t cause. But insurers quickly found ways to avoid the issue; in fact, they’d laid the groundwork years before.
Here, we’re always going through the other party’s insurance, because we want third-party payment of IDV, but the point I intended was that you have to sue the actual driver to get at their policy – because the insurers may straight out refuse.
Evading McGilloway
In researching Coverall Law’s “forever forms,” we found three instances in the wake of the S.J.C. decision where insurers strategically avoided the McGilloway decision. The S.J.C. is the highest court in Massachusetts, responsible for interpreting and overseeing Massachusetts law in Massachusetts courts. But parallel to Massachusetts courts are United States Federal Courts, each created by their respective constitutions. Forum shopping is a strategic legal maneuver where a party chooses a court and venue thought to be more favorable for their case. Insurers, while not the creators of this tactic, have adeptly utilized it following the McGilloway decision.
Post-McGilloway, there have been notable instances where insurers, aiming to avoid the implications of this state ruling, moved their cases to Federal Court. Analyzing three such cases reveals a pattern of strategic relocation from Massachusetts jurisdiction to federal, circumventing state-specific precedents that favor vehicle owners.
Legal and Ethical Implications
This strategic court selection raises significant legal and ethical questions. It not only challenges the authority and autonomy of state courts; it also impacts the fairness of legal outcomes. By choosing forums they perceive as more favorable, insurers can undermine the precedent set by Massachusetts’ highest court, potentially leaving vehicle owners at a disadvantage and skewing justice. Through these actions, insurers demonstrate a keen understanding and manipulation of legal frameworks, prioritizing their interests at the expense of equitable justice for vehicle owners in Massachusetts. But the groundwork for the insurers to make this play happened years before when the 2008 AIB Standard Massachusetts Insurance Policy was updated to the 2016 version. The approved wording is controlled by the Commissioner of Insurance. The 2016 standard insurance form for all auto policies provided several new restrictions on payments, which were largely targeting towing companies but also aimed at the same IDV issue McGilloway brought. The 2016 language added the following:
“The amount we will pay does not include compensation for physical damage to, or towing or recovery of, your auto or other auto used by you or a household member with the consent of the owner, or any decreased value or intangible loss claimed to result from the property damage unless otherwise required by law” (emphasis added).
While the S.J.C. in McGilloway cited Massachusetts law as far back as 1811, the Commissioner saw fit to allow insurers to carve out this requirement, presumably saving the legality of the move through the final words: “unless otherwise required by law.”
Spoiler Alert: It Is Required by Law!
As of September 2023, Massachusetts court decisions began to deviate from the McGilloway precedent. Insurers leveraged the federal decisions and modifications in the 2008 to 2016 Standard Massachusetts Auto Insurance Policy to influence these outcomes, emphasizing the updated language to sidestep state-level rulings allowing IDV claims.
This maneuvering by insurers paints a grim picture of legal and insurance frameworks manipulated to prioritize corporate interests over consumer rights. The ability of insurers to forum shop, influence and exploit policy language nuances has tilted the balance away from the equitable treatment vehicle owners expected post-McGilloway, highlighting a concerning trend in legal strategies that prioritize insurer profit over fair compensation.
While the McGilloway decision once symbolized a significant step toward justice for vehicle owners, recent developments underscore a challenging reality. The ongoing legal and policy shifts necessitate continued advocacy and potential legal reforms to ensure that the rights of vehicle owners in Massachusetts are protected and that the promise of fair compensation is not undermined by strategic legal interpretations or policy wordings.
So what should someone do if they believe they may be entitled to IDV? It’s not enough to make the claim against the insurer…you have to nail down liability against the at-fault driver and collect by reaching through that driver’s insurance policy. It’s an unfair and nuanced procedure which vehicle owners shouldn’t have to do. They simply got swept up in the insurance companies’ attempt to strike back against towing companies.
Want more? Check out the April 2024 issue of New England Automotive Report!