Insurance Coverage: Court concludes that automobile insurance carrier has a duty to defend and indemnify against third-party claims for diminution of value of property

Amica Mutual Insurance Company’s Duty to Defend and Indemnify

The plaintiff, Amica Mutual Insurance Company, seeks a judicial determination regarding its duty to defend and indemnify its insured. This issue arises after its insured struck a motor vehicle owned by a third party, who subsequently sued the insured for damages related to the diminished value and loss of use of the vehicle, as well as loss of life’s enjoyment and loss of time to pursue life’s interests.

Amica filed a motion for summary judgment asserting that it is entitled to judgment as a matter of law because neither diminished value nor inconvenience damages constitute “property damage” within the meaning of its auto policy. Therefore, Amica claims it does not have a duty to defend and indemnify its insured.

Defendant’s Claim for Diminished Value and Inconvenience Damages

In response to Amica’s argument, its insured, the defendant in this matter, claims, among other things, that Amica is obligated to defend and indemnify him because inherent diminished value has been recognized by the Connecticut Supreme Court as a legitimate form of property damage. More specifically, the Supreme Court has held that diminution in value may constitute a proper measure of property damage in the context of a damaged automobile in certain situations. When the injury is less than a complete loss, the measure of damages is the difference in value between the property before and after the loss, with interest from the date of loss.

Numerous other lower courts have subsequently recognized diminution in value as a proper method for measuring property damage in the context of a damaged automobile. Part A of the subject insurance policy reads in relevant part: “We will pay for damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident…. We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur…. We have no duty to defend any suit or settle any claim for bodily injury or property damage not covered under this policy.”

Other courts have analyzed similar policy language and have concluded that the insurer is required to defend and indemnify its insured in connection with a plaintiff’s diminution in value claim because the policy states that the insurer would provide coverage for losses if a claim were made, or a suit is brought against an insured for damages because of bodily injury or property damage.

Court’s Ruling on Summary Judgment for Diminished Value and Inconvenience Damages

The court finds no meaningful distinction between real property and personal property in this context. Moreover, the court points to the Connecticut General Statutes § 38a-334-5, which states in relevant part: “The insurer shall undertake to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage caused by accident….”

The court concludes that the plain language of the statute requires Amica to provide coverage for “all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage,” including damages based on diminution in value. However, the court determines that, in following the conclusions made by several other courts, claims for inconvenience damages are not recoverable under these circumstances.

Therefore, the court holds that Amica’s motion for summary judgment seeking a determination that it has no duty to defend and indemnify its insured in connection with a third-party claim for diminution in value is denied. The court also grants Amica’s motion for summary judgment seeking a determination that it has no duty to indemnify its insured in connection with a third-party claim for inconvenience damages.

Amica Mutual Insurance Company v. Douglas J. Gilleran, Et Al., No. HHD-CV-23-6169512-S, 2024 WL 5206007 (Conn. Super. Ct. Dec. 20, 2024).