Background
In September 2021, Douglas Gilleran’s vehicle collided with a BMW owned and operated by Jasmin Harding in Bloomfield, Connecticut. Harding alleged the collision was caused by Gilleran’s negligent driving and sued him in July 2022. Her complaint claimed damages for physical collision damage to her vehicle, diminution in value to the vehicle, loss of use, lost time, and loss of life’s enjoyment.
Amica Mutual Insurance Company, which insured Gilleran’s vehicle, sent a reservation of rights letter asserting it had no obligation to cover the diminution in value claim. Despite this position, Amica provided a defense to Gilleran. Amica then commenced a declaratory judgment action seeking confirmation that it had no duty to defend Gilleran in Harding’s negligence suit, arguing diminution in value damages do not constitute “destruction of tangible property” under the policy.
The trial court granted in part the defendants’ motions for summary judgment, concluding that Harding’s diminution in value claim potentially fell within the policy’s coverage, thereby triggering Amica’s duty to defend. Amica appealed.
The Court’s Holding
The Connecticut Appellate Court affirmed, holding that Amica had a duty to defend Gilleran because Harding’s diminution in value claim reasonably fell within the scope of the insurance policy. The court interpreted “destruction” in the policy’s property damage definition to encompass both total and partial destruction. Since Harding’s vehicle required repair following the collision, the court concluded it had been partially destroyed within the meaning of the policy.
The court noted that under Connecticut law, damages for partial destruction can include both repair costs and diminution in value—the difference between a vehicle’s market value before and after an accident. The court observed that the policy explicitly excluded diminution in value damages in Part D (coverage for the insured’s own vehicle) but contained no such exclusion in Part A (third-party property damage coverage). This structural difference suggested the insurer intended to provide coverage for diminution in value in Part A.
Applying Connecticut’s principle that ambiguities in insurance policies are construed in favor of the insured, and that an insurer’s duty to defend is triggered whenever an underlying complaint possibly alleges a covered injury, the court concluded Amica was obligated to defend Gilleran. The court rejected Amica’s argument that diminution in value damages fall outside “destruction of tangible property.”
Key Takeaways
- Connecticut courts recognize that “destruction” of property includes partial as well as total destruction; a vehicle requiring repair has been partially destroyed.
- Diminution in value damages—the difference in a vehicle’s market value before and after an accident—are recoverable in motor vehicle negligence cases even when the vehicle is repaired.
- An insurer’s inclusion of an exclusion for diminution in value in one policy section but not another suggests intent to provide coverage in the section lacking the exclusion.
- An insurer’s duty to defend is triggered by allegations that possibly fall within policy coverage, not only by allegations certain to be covered.
- Insurers must use clear, explicit language to disclaim coverage; failure to exclude a category of damages suggests coverage is intended.
Why It Matters
This decision strengthens the position of Connecticut claimants seeking diminution in value damages in motor vehicle cases and complicates matters for insurers. The court’s emphasis on the absence of an explicit exclusion in Part A—combined with its existence in Part D—establishes that insurers cannot rely on narrow interpretations to avoid coverage; they must use crystal-clear disclaimer language. The decision affirms that the duty to defend is a gatekeeping mechanism: if a complaint’s allegations possibly invoke coverage, the insurer must defend, even if ultimate indemnification may be denied.
The ruling has implications for insurance policy drafting and renewal practices across Connecticut. Insurers defending third-party property damage claims must confront the reality that broad exclusions for diminution in value may not survive judicial scrutiny, particularly where parallel policy sections explicitly disclaim such coverage—a discrepancy inviting the inference that coverage was intended elsewhere. For insureds, the decision affirms that diminution in value is a legitimate recovery avenue, bolstering leverage in settlement negotiations.