Proposed class action raises question of insurers' obligation to pay for loss-of-value damages
Are carriers responsible for the loss of value a third party’s vehicle sustains after an accident caused by a policyholder?
A proposed class action against Progressive Insurance stands to resolve an open question about whether insurers are required to pay certain damages.
The suit, captioned Alexander v. Progressive, contends that Progressive Advanced Insurance Co. fails to compensate third-party claimants for their vehicles’ loss of value sustained in accidents caused by the defendant’s insureds.
“This case presents a single primary legal issue: Whether diminution in value is recoverable property damage in the commonwealth of Pennsylvania,” the plaintiffs said in a Jan. 18, 2024, complaint filed in the Philadelphia Court of Common Pleas by Saltz Mongeluzzi Bendesky.
According to Saltz Mongeluzzi partner Patrick Howard, the question is one that has yet to get a clear answer in Pennsylvania. While some other states have grappled with the issue, he said the outcomes have varied based on state laws.
The plaintiffs in Alexander argue that Pennsylvania’s adoption of a particular section of the Restatement of Torts and part of the state’s civil jury instruction support the claim that they are entitled to diminution in value damages as a result of an automobile accident.
According to the complaint, which Law.com Radar surfaced, Progressive denied diminished value claims based on the assertion that they are unavailable under Pennsylvania law.
Counsel for Progressive have yet to enter an appearance, and a spokesperson for the company did not immediately respond to a request for comment.
The named plaintiff in the suit, Lee Alexander, seeks to represent a proposed class of Pennsylvanians who did not receive a loss-in-value payment when they submitted third-party property damage claims to Progressive stemming from a car accident in which a Progressive insured was determined liable.
“The precise dollar and cents amount is going to vary based on the car you have and the amount of damage, but the concept is uniform,” Howard said.
In addition to seeking damages for breach of implied and express contract, the plaintiffs are asking the court to “award a declaration that diminution in value and/or difference in value are permissible damages under Pennsylvania law for an automobile’s permanent loss in value following damage caused by a Progressive insured identified in the defendant class.”
The defendant class consists of individuals insured by Progressive who were found liable for vehicle accidents with members of the plaintiff class. The plaintiffs claim Progressive’s practices expose members of the defendant class to damages their insurers are obligated to cover.
Howard said the inclusion of the defendant class makes the Alexander case unique in a way that is intended to allow the diminished value issue to be addressed once and for all.
“There are some older cases that speak to this,” he said, “but a lot of that line of cases is that you can’t sue an insurance company to enforce policy rights that the insured has.”
Howard said the plaintiffs are including the insureds in the suit in an effort to account for case law restricting third-party claims against another person’s insurer.
He said, “This issue needs to get settled in Pennsylvania as to whether or not these damages are available.”
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