Diminished value refers to the loss of a vehicle’s market value after it has been damaged and repaired. For example, if a car worth $20,000 before an accident is involved in a collision, its market value might drop to $15,000 after repairs, even if it looks as good as new. This $5,000 difference is the diminished value.
Why Does Diminished Value Occur?
Several factors contribute to diminished value:
Perception of Damage: Potential buyers often view a vehicle with a history of accidents as less desirable, regardless of its current condition. An accident appearing on a vehicle history report, like AutoCheck or Carfax will reduce a car’s market value. (Source: Kelly Blue Book)
Repair Quality: If repairs are not done to a high standard, or if there are signs of previous damage, the vehicle’s value can drop further.
Market Trends: The overall demand and supply dynamics in the used car market can also influence diminished value.
How is Diminished Value Calculated?
The first step is to determine the pre-loss value of the subject vehicle based on year, make, model, mileage, and condition. After the repair, a qualified appraiser will review the final invoice for repair and photographs and may personally examine the vehicle to evaluate the quality of the repair. Lastly, the appraiser will research data and formulate a professional opinion of the post-repair value, thus calculating the decrease in value directly related to the accident and damage history.
Filing a Diminished Value Claim
Diminished value claims are “third party claims,” meaning the claim is submitted to the vehicle owner’s insurance company that caused the accident. The owner or the owner’s attorney will prepare a formal demand package of all relevant information to support the claim, including an appraiser’s report. Because claims adjusters are professional negotiators, hiring an experienced attorney to represent the vehicle owner is helpful.
Common Defenses and Challenges
- Fault: The vehicle owner was partially or totally at fault for their own negligence, which should reduce their recovery by their percentage of fault.
- Competing Claims / Pro Rata Distributions: If more than one car was damaged by the at-fault driver, there may be other vehicle owners and insurance companies all presenting claims to the same insurance company. If the property damage liability limit of the at-fault insurer is too low to pay all of the claims, it may offer pro-rata offers to all claimants. If there is only one vehicle, the vehicle owner’s insurance claim may also be seeking money from the at-fault insurer, creating an unfair competition between the vehicle owner and their insurance company for potentially limited funds.
- Valuations: The at-fault insurer may hire their own appraiser whose opinion may be lower than the owner’s appraiser’s opinion of the diminished value.
Conclusion
Diminished value claims are negotiated settlements. The vehicle owner must hire an attorney or be prepared to do the work necessary to properly advocate for their claim. The goal is to ensure that you are fairly compensated for your vehicle’s loss in value. By hiring an experienced attorney, you can leave the work to a professional who understands the law and has successfully resolved these claims.
