Massachusetts Court Upholds Insurer’s Right to Repair or Total: What You Need to Know

In a recent decision important for all Massachusetts automobile insurers, the Appellate Division of the District Court has issued a ruling providing guidance on several key issues that arise when insureds pursue claims against their insurers for auto accident repairs and whether an insured has any rights to have their vehicle declared a total loss. The court’s decision in Krinsky v. MAPFRE U.S.A. Corporation et al. affirmed in part and reversed, in part, a lower court’s dismissal of all counts in a lawsuit brought by an insured, David Krinsky, against MAPFRE and its subsidiary, Commerce Insurance Company.

The Appellate Division’s ruling made three key holdings on the issues before it:

It affirmed the dismissal of all claims against the parent company MAPFRE, finding the complaint lacked any allegations of the “rare circumstances” required to hold a parent company liable for the acts of its subsidiary.

It affirmed the dismissal of Krinsky’s breach of contract and bad faith claims, ruling that the plain language of the Massachusetts automobile insurance policy gave Commerce the option to either repair the damaged vehicle or declare it a total loss.

However, the Appellate Division reversed the dismissal of Krinsky’s claim for unfair claim settlement practices under Chapters 93A and 176D, finding that there were factual issues regarding whether Commerce acted in bad faith by refusing to declare the vehicle a total loss and refusing to appraise the vehicle at the repair shop of Krinsky’s choice after he invoked the policy’s appraisal clause.

This decision is useful for insurance professionals because it clarifies that Massachusetts auto insurers can rely on the plain language of their policies, giving them the option to repair or total damaged vehicles in handling claims. However, the decision also indicates that an insurer denying a total loss claim or refusing an appraisal demand might have to face a factual inquiry into whether it acted in bad faith in violation of Chapters 93A/176D.

The factual background of the damage repair dispute

David Krinsky’s 2015 Toyota Camry XS was damaged in a rear-end collision on June 27, 2017, while driving on Route 90 eastbound in Newton, Massachusetts. At the time of the accident, Commerce Insurance insured Krinsky’s vehicle under a standard Massachusetts automobile insurance policy, which included optional collision coverage under Part 7.

After Krinsky reported the loss to Commerce, an independent appraiser, Advanced Appraisal Services, conducted an initial vehicle inspection at Krinsky’s home on July 3, 2017. The appraiser noted the likelihood of hidden damage requiring a supplemental appraisal when Krinsky’s chosen body shop disassembled the vehicle for repairs. Using Commerce’s reduced “Preferred Shop” discounted rates, the appraiser estimated the damage at $5,121.57.

Krinsky brought his vehicle to Accurate Collision in Worcester for repairs and notified Commerce that he intended to pursue a third-party claim against Allstate, the at-fault driver’s insurer. Allstate appraised the damages at $9,125.29.

After receiving Allstate’s appraisal, Krinsky informed Commerce that he wished to pursue a first-party collision claim with them.

At Commerce’s request, Krinsky’s vehicle was moved to their drive-in appraisal location in Worcester on August 14, 2017, for a supplemental appraisal. This appraisal, conducted by a Commerce employee, included additional repairs and increased the total damage estimate to $10,383.75.

A disagreement arose between Krinsky, his shop, and Commerce regarding the repair costs, prompted Krinsky to initiate statutory arbitration under the terms of his insurance policy on August 24, 2017. Both parties selected their respective appraisers, but delays ensued, and the arbitration process apparently stalled. Throughout September and October, Krinsky asserted he repeatedly contacted Commerce to inquire about the status of its appraiser’s inspection of the vehicle.

Eventually, as the arbitration did not move forward, Krinsky purchased a new vehicle for transportation on November 6, 2017. This decision left him in the position of having to finance and insure two vehicles simultaneously for an extended period.

Despite the delays and lack of communication, the arbitration process eventually moved forward after the parties petitioned the Westborough District Court to appoint an umpire. Once appointed the parties submitted their respective appraisals. The inspection of Krinsky’s vehicle took place at ADH Collision in Everett, Massachusetts, where the vehicle was placed on a lift and frame for a thorough examination.

The umpire’s decision, filed on January 15, 2021, with the Westborough District Court, appraised Krinsky’s vehicle’s loss for repairs to be $15,533.34. The parties agreed that the vehicle’s actual cash value at the time of the accident was $20,800, and the salvage value was $7,332.

Commerce paid the arbitration award. However, Krinsky claimed that based on the award, Commerce should declare the vehicle a total loss, as his vehicle’s repair costs added to its salvage value exceeded its actual cash value.

When Commerce refused to declare the vehicle a total loss, Krinsky filed suit.

The District Court lawsuit

On June 24, 2021, Krinsky filed a lawsuit against MAPFRE, Commerce’s owner, and Commerce in the Westborough District Court. His complaint asserted four counts against each defendant:

Breach of Contract

Violation of 211 CMR 133

Unfair and Deceptive Business Practices under M.G.L. c. 93A and c. 176D

Breach of the Implied Covenant of Good Faith and Fair Dealing

Krinsky argued that Commerce had breached the insurance contract by failing to declare his vehicle a total loss despite the amount of the arbitration award exceeding the vehicle’s actual cash value. He also claimed that the defendants had engaged in unfair and deceptive business practices under M.G.L. c. 93A, by refusing to total the vehicle and by failing to adhere to the appraisal process outlined in the policy.

In response, MAPFRE and Commerce moved to dismiss all counts of Krinsky’s complaint under Mass. R. Civ. P. 12(b)(6) (Failure to state claims upon which relief may given”). They contended that the plain language of the insurance policy gave Commerce the sole discretion to determine whether to repair the vehicle or declare it a total loss and that Krinsky had no right to compel a total loss declaration.

On October 6, 2021, the District Court judge allowed both defendants’ motions and dismissed all counts of Krinsky’s complaint. The judge agreed with MAPFRE and Commerce’s interpretation of the policy language and found that Krinsky had failed to state any claims upon which relief could be granted.

Krinsky appealed the dismissal of his case to the Appellate Division of the District Court

The Appellate Division’s Decision

The Court’s standard of review

A three-judge panel of the Appellate Division of the District Court conducted a de novo review of the District Court’s allowance of the MAPFRE and Commerce’s motion to dismiss under Mass. R. Civ. P. 12(b)(6). The de novo review required the Appellate Division to examine the same pleadings the District Court judge had reviewed, including any contracts or public documents referenced in the complaint or submitted to the lower court judge.

The Appellate Division had to determine whether the factual allegations in the complaint were sufficient, as a matter of law, to state a recognized cause of action or claim and whether such allegations plausibly suggested an entitlement to relief.

In making this determination, the Appellate Division accepted the facts asserted in the complaint as true and drew all reasonable inferences in Krinsky’s favor.

The ruling on Krinsky’s claims Against MAPFRE

The Appellate Division affirmed the District Court’s dismissal of all claims against MAPFRE, the parent company of Commerce. The complaint failed to allege facts sufficient to satisfy the “rare circumstances” required to hold a parent company liable for the acts of its subsidiary, such as fraud. Absent such allegations, the Appellate Division found that Krinsky’s claims against MAPFRE were merely formulaic recitations of the elements of a cause of action, lacking the necessary factual support.

Breach of Contract & Implied Covenant of Good Faith Claims against Commerce

The Appellate Division also affirmed the dismissal of Krinsky’s breach of contract and breach of the implied covenant of good faith and fair dealing claims against Commerce. The court found that the plain language of Part 7 of the standard Massachusetts automobile insurance policy gave Commerce the sole discretion to either repair the vehicle or declare it a total loss. The policy stated, “We will, at our option, repair the auto, repair or replace any of its parts, or declare the auto a total loss.” Given this unambiguous language, the Appellate Division concluded that Krinsky had no right to require Commerce to declare his vehicle a total loss. The Court found Commerce had acted within its contractual rights by opting to repair the vehicle instead of declaring it a total loss.

Dismissal of Krinsky’s Chapters 93A and 176D reversed

However, the Appellate Division reversed the dismissal of Krinsky’s claim for unfair and deceptive business practices under Chapters 93A and 176D. The court found factual issues regarding whether Commerce had acted in bad faith by refusing to declare the vehicle a total loss and by failing to appraise the vehicle at Krinsky’s chosen repair shop after he elected arbitration. The Appellate Division emphasized that the question of bad faith or ulterior motives in these instances were matters of fact that could not be resolved on a motion to dismiss. Accordingly, the court remanded this claim to the District Court for further proceedings.

Violation of 211 CMR 133 Claim

Finally, the Appellate Division affirmed the dismissal of Krinsky’s claim for violation of 211 CMR 133, which governs standards for the repair of damaged motor vehicles. Although the regulations required Commerce to file a total loss report with the Division of Insurance when the appraised cost of repairs plus the salvage value was reasonably expected to exceed the vehicle’s actual cash value, the Appellate Division found that the regulation did not provide for a private cause of action. As a result, Krinsky could not maintain a separate claim under 211 CMR 133.

Two takeaways from the Krinsky decision

Policy Language on Repair vs. Total Loss

The Krinsky ruling confirms that Massachusetts auto insurers can rely on the plain language of their policies when deciding whether to repair a damaged vehicle or declare it a total loss. As long as the policy gives the insurer the discretion to make this determination, policyholders cannot demand a total loss declaration based solely on the extent of the damages or the cost of repairs.

Potential Bad Faith Claims

While insurers have the contractual right to decide between paying for repairs or declaring a vehicle a total loss, the Appellate Division’s decision muddies the waters about what other actions in the course of a statutory appraisal or a disputed claim might give rise to a bad faith claim under Chapter 93A for unfair and deceptive business practices.

The court’s reversal of Krinsky’s Chapter 93A/176D claim dismissal highlights the potential for policyholders to at least assert bad-faith claims when they believe their insurer has wrongfully handled a damage claim under the policy or failed to follow the statutory appraisal process.

Agency Checklists will follow this case in the District Court to see what if any, further rulings the Court makes on Mr. Krinsky’s 93A damage claim against Commerce.

Owen Gallagher

Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists

Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.

Connect with me directly, by calling me at 617-598-3801.