Diminished Value Due to Accident – Insurance and DV

Accidents Happen, and So Does Diminished Value

Car enthusiasts understand the inherent value of a automobile decreases if it is involved in a major accident. The decrease in value is known as Diminished Value and your loss is recoverable from the insurance company if you are not at fault. When frame damage is involved, the market value of the automobile decreases significantly according to appraisers and dealers although insurance companies do not appear to be going out of their way to inform you of the loss.

Here’s a few things I’ve found while researching Diminished Value that you may find helpful:

“There are several sound reasons for using retail prices to determine the pre-loss value. The vehicle owner is a retail consumer, and paid retail price for the automobile. It is also common knowledge that a dealer will not offer a retail price to a consumer when they trade their vehicle in, and they are basing their trade in price on the assumption that the consumer is going to purchase another vehicle from them. Another consideration is disclosure. If a dealer discloses the previous damage history, the chances of selling the vehicle to a prospective buyer is greatly reduced especially when there would normally be other similar vehicles available without a damage history available on the same lot. Also, a vehicle suffers depreciation in the eyes of a dealer once it has been titled and driven off the lot. Consumers should not be negatively impacted by this depreciation when considering Diminution of Value.” SOURCE: Collision Consulting

According to a 2009 survey by AutoLoss.com, a wreck in the past could drop a vehicle’s resale value between 10 percent and 30 percent, with frame damage being a total deal-breaker for most respondents.” (SOURCE: Diminished Value Article: How much is that wrecked car worth? By Jay MacDonald • Bankrate.com)

“When a vehicle’s frame has been damaged, it may be fixable, but the financial damage is permanent. Assuming it is accurately documented, a vehicle is valued significantly less due to the stigma to consumers who are in the market for a vehicle…. Another setback related to a frame-damaged vehicle is the likelihood that a car dealership will reject it altogether. We know from firsthand accounts that certified used vehicle programs have strict standards when it comes to a vehicle’works repair history.

In 2009, CNN Money did a value comparison between used and certified pre-owned vehicles. Here are a few examples of the dramatic differences:

  • Toyota Camry
    Used 2007: $14,713
    Certified used 2007: $18,114
  • Cadillac CTS
    Used 2007: $23,304
    Certified used 2007: $27,892
  •  Chrysler 300C
    Used 2007: $19,215
    Certified used 2007: $22,157″

SOURCE: How Frame Damage Ruins Vehicle Resale Value

Diminished Value Recoverable in Ohio – July 24, 2007 Opinion

In Rakich v. Anthem Blue Cross and Blue Shield, 10th Dist. No. 06AP-1067, 2007-Ohio-3739 the 10th District Court of Appeals held, in a 3-0 decision, that Plaintiffs may recover for the diminished value to their car after repair.

The Rakich Court noted that the traditional measure of property damage was either the cost of repair or the difference in value between the time immediately before and after the damage, but not both. Rakich argued that while she had been compensated for the cost of repairs, she still had not been made whole. The Court’s ruling followed the common-sense argument that a wrecked-and-repaired car is not worth as much as a car that has never been wrecked, and held that this difference in market value is a compensable damage. The Rakich Court found that allowing recovery for diminished value was consistent with the standard measure of damages in a tort case: the amount which makes the plaintiff whole. Therefore, the Court permitted Rakich to recover for diminished value if she could show that the repairs were insufficient to restore her car to its pre-crash value.
SOURCE: http://www.safecollisionrepairs.com/

2 thoughts on “Diminished Value Due to Accident – Insurance and DV

  • APPRAISER

    (September 29, 2013 - 5:16 pm)

    If only it were as simple as hiring a licensed appraiser and submitting their automobile diminished value report to the insurance company. When prospective clients call us with questions, after they hear the answers, most of them disappear – never to be heard from again…. We hate to turn away business but the cold hard truth is, regardless of the fact that you’ll be submitting irrefutable evidence of how much value your car has lost after collision repairs, companies like Allstate, American Family, Farmers, Liberty Mutual, Nationwide, Progressive, State Farm, Travelers and USAA will still offer settlements representing a fraction the actual diminished value. Where do these people vanish to? Perhaps other independent appraisal companies promise huge settlements or maybe people become frustrated and meekly accept these lowball payouts but being dishonest about our customers’ prospects is no way to do business. A more reasonable reality is that you’ll need to make a formal complaint to your state’s insurance department for unfair claims practices and, perhaps, go so far as hiring an attorney. But in the event your complaint escalates into a courtroom battle, you’ll be asking for compensation for appraisal and attorney fees on top of your diminished value and there’s a good chance you’ll win! Why? Read on.

    The automobile diminished value report you receive from appraisal services can be based entirely on the opinions of used car managers at automobile dealerships. Was your Honda wrecked and repaired? Often, reports provide as many as six quotes from dealerships that specifically address your actual vehicle and the exact amount and severity of damage that was repaired. When people trade their cars in, those are the guys who buy them so their opinions are valid. Other appraisal companies providing diminished value reports may use formulas such as the inappropriate (as ruled by The Georgia Supreme Court) Rule 17-C or collect data from auto auctions to formulate their figures. I’m not guaranteeing success if you march into court with this type of appraisal. Insurers can successfully argue that they do not address your specific car or the damages it incurred.

    The Georgia Supreme Court’s ruling on the inequity of Rule 17-C laid the foundation for fair automobile diminished value settlements in all 50 states. Formulas such as State Farm’s Rule 17-C severely shortchanged vehicle owners and, in doing so, provided themselves and other insurers using formulas to determine diminished value with unjust enrichment.

    Subsequent to your accident, the adjuster from the responsible driver’s insurance company will offer you a settlement for diminished value. If you ask them how they came up with the figure they will either point to a formula, a “certified” appraiser’s report or simply refuse to explain their process altogether. I have seen the diminished value reports prepared by independent appraisers hired by insurers and they are a joke. They contain no reasonable facts to back up their assumptions. Most of them are not licensed in any state. Note that “certified” appraisers belong to pay-to-be-certified organizations, not unlike the Better Business Bureau and should not be confused with “licensed” appraisers. A number of insurance company attorneys have contacted us in the past to inquire about hiring us. Once they learned about our process of using dealer quotes, however, their interest faded quickly as they realized that our reports would result in higher (translation: fair) diminished value settlements. In front of a magistrate or mediator, these types of reports provide actual evidence of how much less your car is worth in the real world. Appraisals based on formulas or auction results can not compare. And insurance company diminished value estimates made up out of thin air (yes, they do exist) will certainly be looked upon as unfair at best and possibly fraudulent in the eyes of a judge.

    Face it, even your own insurance agent or broker hasn’t informed you of your right to collect diminished value from the insurer of the responsible driver. Regardless of the fact that the settlement isn’t even costing your own insurer a dime, agents are mum on the subject altogether. Automobile diminished value is the newest thorn in the insurance companies’ side. Their mission is to keep it a secret and their hope is that it will go away.

  • admin

    (February 17, 2014 - 11:46 am)

    In March of 2013, a DUI driver crashed into the back of my wife’s car. Thankfully, she was OK but the Lexus suffered substantial damage including a bent rail (frame damage on the CarFax report now). Progressive was the insurance company for the DUI driver at fault. They didn’t argue it was their (Progressive) responsibility to fix the car. The cost of repairing the car ended up around $11,000; we had the local Lexus dealer repair it and rented a car for over a month (paid by Progressive). However, when it came to Diminished Value Progressive low balled us at $2,000. I refused the offer and tried to negotiate with Progressive based on the usual resources for calculating diminished value for an automobile; Kelly Blue Book, NADA, dealer quotes, etc.

    The low-level, low-balling Progressive agent I was dealing with wouldn’t budge on the $2,000 offer. I researched “local lawyers” with diminished value experience. Found a few, hired a firm and the Progressive offer almost immediately went up to $5,000.

    My assessment of the diminished value for our car was about $10,000. I’m a car guy and that number was accurate in today’s marketplace with a CarFax report that includes frame damage. Prior to the accident, the car was a “certified Lexus” purchased from a reputable dealer.

    Our lawyer hired a “local automobile expert” and he calculated the diminished value to be just under $10,000. Progressive hired an out-of-state appraisal service and came up with a diminished value of $5,000. I told my lawyer to take it to court, which we did. Eight months later, the judge sided with our “local expert” (he went to court with us) given he saw the car, drove the car, and defended his diminished value number in front of the judge.

    Long story short, we won!

    What I learned: hire local experts that know the local courts, judges, and the local automobile experts that can appear in court with you. You won’t end up with the full amount after court fees and legal fees, but you’ll make the low-balling insurance company pay. Their costs far exceeded their initial offer and it is another case on the books that the insurance company lost in a diminished value case.

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