You might be eligible to make an insurance claim for the diminished value of your vehicle after an accident. Learn more here.
If you’re in an auto accident, you almost always make an insurance claim. Everybody knows that insurance can pay for injury expenses and vehicle repairs.
But even if you receive payments for your injuries and car repairs, you still may have a loss you haven’t considered yet. Set aside for a moment the cost of repairs to get your vehicle back to its pre-accident condition. The very fact that you car has been in an accident can decrease its value.
Websites like CARFAX track the accident history of vehicles. If your car has been in an accident, that accident may mean that you get less money when you sell that car. In other words, the value of your vehicle has been diminished.
A diminished vehicle value claim allows you to recoup the value lost merely by the fact of the accident, even assuming that your vehicle is repaired.
This article will examine inherent diminished value claims and claims for reduced vehicle value resulting from substandard repairs.
Can You Make a Diminished Value Claim?
Diminished value claims are not as common as other types of insurance claims.
In most states, you cannot claim diminished vehicle if you caused the accident.
Currently, 15 states allow diminished value claims even if you’re at fault:
- New Mexico
- New York
- South Carolina
No matter what state you’re in, know the rules. If fault for the accident is going to be an issue, be one step ahead. Make sure you have a copy of the police report that establishes that you were not at fault for the accident.
Apart from the fault issue, there are other factors that can tell you whether a diminished value claim is worth your time. Newer cars that have passed their steepest depreciation are generally more reliable and could lose more value due to a crash. The same is true for lower mileage vehicles. Because low-mileage cars are worth more, they stand to lose more value from an accident.
Of course, if a car has not been in any accident before this one, the effect of the current accident on the car’s value will be more pronounced. As a rule of thumb, if this is your car’s first accident, a diminished value claim may be worth your time.
Inherent Diminished Value Claims
The most common type of diminished value claim is for inherent diminished value — the loss to your car that results just from being in an accident.
While it’s easy to understand how the resale value of your car can be affected by an accident, diminished value is a hotly contested topic.
Insurers typically calculate diminished car value using a Rule 17c formula. This formula starts by capping depreciation of the vehicle at 10% of market value from an accepted source.
Once the formula has established the initial value, it factors in the amount of damage and the vehicle’s mileage.
To maximize your compensation for inherent diminished value, you’ll need to invest extra time and effort on your claim. Car insurance companies will force you to prove your case, and they won’t make it easy for you.
After you get your car’s value from KBB or NADA, you’ll need detailed evidence of the damage to your vehicle. The 17c formula makes significant distinctions between major and minor damage caused by an accident.
The final assessment of diminished value will be made by an insurance adjuster, but you can influence the adjuster’s decision. For example, it’s important to have photographs and other information that accurately show the amount of damage done to your vehicle.
When negotiating diminished value with the adjuster, it may also be helpful to have information showing how other vehicles similar to yours have been valued. This may require some additional research or even a professional appraisal.
Repair-Related Diminished Value Claims
A second type of diminished value claim is repair-related. Unlike a claim for inherent diminished value, this type of diminished value claim is based on the fact that repairs made to the vehicle were unsatisfactory.
First, notify the insurance company as soon as possible after the unsatisfactory vehicle repair has been completed.
If you notice problems at the repair shop, mention it to the shop manager and take pictures of the substandard repair.
Second, know that raising the issue to the shop and taking photographs may not be enough. You may also need the assistance of a used car dealer, appraiser, or other expert to explain to the insurance company why the unsatisfactory repairs have significantly lowered the value of your car.
Can’t Recover the Full Diminished Value?
In most cases, when you approach the insurance company with sufficient evidence of diminished value, they should do the right thing and pay out on your claim.
However, as with other types of claims, insurance adjusters may balk at paying claims with higher-than-normal values.
If the adjuster rejects your claim, or comes back with an offer that is too low, you will need to marshall your evidence and attempt to explain where the insurance company’s valuation is wrong. This is where your photographic and expert evidence will help you in explaining to your adjuster, other others at the insurance company, why you are correct.
If you are not able to negotiate a reasonable settlement with the insurance company, it may be necessary to hire an attorney to help you with your claim. While there is usually some cost involved in getting an attorney, insurance companies will often respond better to attorneys because of the increased risk of a lawsuit.
In the event that the insurance company won’t cooperate with you or your attorney, you might have a claim against the insurance company for unfair or bad faith practices.
Generally, you can’t make a bad-faith claim against the other driver’s insurance company. Bad faith may arise in a situation where you are making a diminished value claim on your own uninsured motorist coverage.
Make Yourself Whole, Now and In the Future
Insurance payouts are supposed are put you in a position you would have been in had the accident never happened. Getting compensated for your injuries is part of that. Getting your vehicle repaired is another. Diminished value claims further help you rebuild by protecting you in the future.
While you may not be selling your car tomorrow or even in the next year, it’s important to cover all your bases. Think about the fact that even a minor accident can reduce your vehicle’s resale value.
Diminished value claims need more time, attention, and evidence than other types of insurance claims. But that doesn’t mean that you should give up. If you’ve been in an accident and wonder if you have a diminished value claim, consider a free consultation with a qualified attorney.
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