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Diminished Value Claims Explained

The value of your car starts to slowly drop the moment you buy it, but most people already know about depreciation. What many people don’t realize is that the value of their car drops significantly after an accident, even if the insurance company pays to have it completely repaired.

You only find out about this when you go to sell your vehicle and the offers you get are way below what you thought it was worth. Once there is an accident reported in your vehicle’s history, no one wants to pay full price. Companies like Carfax have conditioned everyone to run a full report before they buy a used car so it’s nearly impossible to avoid this. 

The insurance companies are often relatively quick to cover the repairs after an accident, but no one warns you that your car may now be worth substantially less. This is where a diminished value claim can help you recover what you have lost.

What Is a Diminished Value Claim?

A diminished value claim lets you recover for the value your vehicle loses from being involved in an accident. The insurance company will typically cover the cost of any medical expenses or repairs to your vehicle, but the value of your car will still be lower after an accident even if it is fully repaired. Diminished value claims allow you to recover for this difference in fair market value.

What Are the Different Types of Diminished Value Claims?

Inherent

  • Also known as “reputation” or “stigma” damage, this is the most common claim as your car loses value just by having an accident recorded in its history.
  • Calculated as the difference between the value of your vehicle before the accident minus the value after being fully repaired.

Repair-related

  • This is used to recover the value your vehicle lost due to poor repair work or because it could not be restored to its original condition.
  • If your vehicle was a classic car or a late model, it may not be possible to find certain parts. A classic car may have a signature paint color or some other unique component that is no longer available.

Immediate

  • This claim is for the difference in value of your car immediately after an accident before repairs. 
  • It is rarely used because people usually get their car repaired as quickly as possible after an accident.

Your claim may involve a combination of these types. If you’re unsure which applies or how to file a claim, an experienced lawyer can advise you on how to proceed.

Who Can File a Diminished Value Claim?

  • The legal owner of a vehicle that was involved in an accident can file a diminished value claim if they were not at-fault.
  • If you are leasing the vehicle, then you can’t bring the claim as you don’t own it. 
  • If the insurance company deems your vehicle totaled, then you can’t bring a claim.

When Can You File a Diminished Value Claim?

Diminished value claims place the burden of proving the case on you, so there are certain criteria to look at when considering if you should bring a claim. 

Who caused the accident?

If the other driver was at fault in the accident, then you can most likely bring a claim against their insurance company.

If you were responsible for the accident, then it is unlikely you can bring a claim.

Are they insured?

If the other driver is uninsured, it will be difficult to bring a claim. Depending on your insurance policy, you may be able to recover something from your own insurance. A lawyer can give you an idea of if there are any legal strategies you can pursue in this situation.

Has your vehicle been in an accident before?

If your vehicle has other accidents already recorded in its history, it will be difficult to bring a diminished value claim as the insurance company will argue that the value already was reduced due to the previous accidents.

Was your car totaled?

If the insurance company determines that your car was totaled, then you will not be able to bring a diminished value claim.

Is it worth it?

The age of your vehicle and the severity of the damage are important factors to consider in deciding whether to bring a claim. If your car is newer (5–7 years) and has low mileage, then you should most likely bring a claim.

If you have an older vehicle with over 100,000 miles on it, this will make recovering anything meaningful much less likely. An exception to this could be where it is a classic car that has been restored to great condition and had a high value prior to the accident.

Talking to a lawyer about the details of your situation can help you understand if you have a valid claim and what the likelihood of recovery is. The sooner you start your claim, the easier it will be to prove it as you will want to address the issue while the accident is recent and you have access to any repair records or other information necessary to support your claim.

How Do You File a Diminished Value Claim?

Once you have established that you meet all the requirements to bring a claim, you will have to file it against the at-fault driver’s insurance company.

If you previously accepted a diminished value payment from them, then you may not be able to file another. You will need to prove all of the following elements of the claim to the insurance company:

  • The accident was not your fault.
  • Your vehicle’s fair market value before the accident (Kelley Blue Book or NADA valuation).
  • Your vehicle’s fair market value after being repaired from the accident, which requires hiring a certified appraiser.

The specifics for filing a claim vary by state. An experienced lawyer will know all the details of your state law and how to deal with the insurance company to maximize the likelihood of a successful claim.

How Do You Calculate a Diminished Value Claim?

Many insurance companies use the 17c formula which is often not a fair valuation. This method has many flaws that a lawyer can point out in arguing for a higher claim value.

The 17c method applies a 10% cap to your vehicle’s value assessment as determined by a site such as Kelley Blue Book or the National Automobile Dealers Association. They evaluate your vehicle based on a number of factors including:

  • Make
  • Model
  • Year
  • Condition
  • Mileage

The 10% number is the maximum amount you can recover under this formula, and they will further reduce this amount using a multiplier chart that factors in the extent of the damage and the mileage on your vehicle.

The damage chart ranges from no structural damage up to severe structural damage, but there are some inherent problems with this formula. They assume that the relationship between increases in damage to increases in expense of repair are linear, and also the descriptions for the different levels of severity are subjective by nature.

The mileage chart is also flawed as it allows minimal recovery for vehicles over 100,000 miles even though certain brands of modern vehicles are known for their reputation to continue providing high quality performance well past this mark. They also punish your vehicle’s mileage twice in their formula because it is already used in the valuation for the initial 10% cap; yet another way they work to reduce your recovery amount.

You definitely don’t want the insurance company to be the one performing this calculation as they are incentivized to not pay out a penny more than they have to. Having a skilled attorney who has experience handling these case types can pay off dividends and help you avoid accepting a lowball offer.

Should I Hire a Lawyer for My Diminished Value Claim?

Unlike a car accident claim where it can be relatively straightforward if no one disputes anything, bringing a diminished value claim is substantially more complicated. The burden of proof is on you to establish each element of your claim. This means you have to collect evidence, prove fault, and hire a certified appraiser to determine your vehicle’s value post-accident. Having a lawyer on your side from the start can help you determine if your claim is worth pursuing and how to go about this.

At Morgan & Morgan, we provide free consultations and are ready to guide you through the entire process of filing your diminished value claim. Before you invest your time and money pursuing a claim, let one of our attorneys help you assess what your options are. We operate on a contingency fee where there is no cost to you unless we are successful because we believe that everyone deserves the right to proper legal representation.

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