Massachusetts Court Reminds Auto Insurers of Importance of Retail Book Value

By | January 20, 2017

A Massachusetts appeals court used a recent case to warn auto insurers that it is important to take retail book value into consideration early in the settlement process.

While the court ruled in favor of defendant Massachusetts Homeland Insurance Company in a lawsuit alleging it engaged in unfair or deceptive claim settlement practices, it stated in its ruling: “We note, however, that insurers would be well-advised to consider the retail book value of a vehicle early in the settlement process, and not to depend on insureds to bring such information to their attention.”

The decision comes after plaintiff Anthony G. Morgan damaged his 2005 Chevrolet Colorado in an accident on January 9, 2011. Homeland, his auto insurer, determined the vehicle was a total loss. Because of this, Homeland was required to offer Morgan an amount for the actual cash value of the vehicle.

When determining the actual cash value of a total loss vehicle, insurers are required to consider four factors, including its retail book value. In this case, Homeland determined the actual cash value of the plaintiff’s vehicle was $11,891.

Insurers would be well-advised to consider the retail book value of a vehicle early in the settlement process...

In deciding the value, Homeland used a software program generated by a third party, Certified Collateral Corporation (CCC), which maintains a database of vehicles for sale from dealers and private parties in various markets, the lawsuit explained.

Using the vehicle’s identification number and Morgan’s zip code, CCC compiled a list from its database of twelve comparable vehicles available for sale in the local market. Three of the vehicles were listed for sale at local dealerships that CCC had physically inspected, and nine were listed for sale on Autotrader, a publicly accessible online database of vehicles for sale from dealers and private parties, according to the lawsuit. CCC then adjusted those values for the condition of the plaintiff’s vehicle, and, using a weighted average formula, arrived at the actual cash value.

However, Morgan believed his vehicle was worth more than $14,000 and cited a report by the National Automobile Dealers Association (NADA) that showed a clean retail value of $14,500, the lawsuit said. NADA maintains a publicly accessible online database of used car values in each region of the country.

After receiving Morgan’s demand letter and the NADA report, Homeland increased its valuation of the vehicle, which resulted in a settlement offer of $14,003.12. Morgan then accepted a check for that amount.

Although the claim was settled within two months of the accident with Morgan’s acceptance of Homeland’s offer, he claimed Homeland violated regulatory requirements by not taking into account the retail book value of his vehicle in settling the claim. Morgan brought a civil action against the insurance company after the original settlement and filed a motion for class certification.

A motion judge of the Superior Court initially denied class certification, and after a jury-waived trial on Morgan’s claim, a trial judge found that while Homeland had violated its regulatory requirements, Morgan was not injured by the violation.

Morgan then appealed that decision in Anthony G. Morgan vs. Massachusetts Homeland Insurance Company, arguing the judges should not have denied his motion for class certification and were incorrect in deciding he was not injured by the violation.

However, the appeals court upheld the Superior Court’s decision to dismiss Morgan’s motion to file for class certification. Additionally, it sided with Homeland in deciding Morgan’s claims and the Superior Court’s conclusion that Homeland violated its regulatory requirements was “erroneous, and incorrect as a matter of law.”

“After basing its original offer on the lower CCC number, which included Autotrader listings, Homeland did consider the NADA report in upwardly adjusting the value of the plaintiff’s vehicle,” the appeals court stated in its ruling. “The plaintiff then ultimately received a check close to the amount of his original demand, approximately $14,000. The end result was very nearly what he requested and included consideration of retail book values presented by Autotrader and NADA.”

Therefore, the court concluded that in this case, the retail book value was considered both in Homeland’s initial offer including Autotrader information in the CCC comparative lists, and in its final offer, including NADA information.

“In sum, the regulatory requirements involving the consideration of retail book value were satisfied in the instant case, and there was no violation,” the court stated.

Topics Carriers Legislation Auto Massachusetts

About Elizabeth Blosfield

Elizabeth Blosfield is the East region editor for Insurance Journal. She can be reached at More from Elizabeth Blosfield

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