Auto Insurance: Diminution Value Contract

Diminution in value is the difference between a vehicle's market value before an accident and its value after repairs. This type of claim is based on the fact that a vehicle's market value decreases even after it has been repaired following an accident. In most cases, you cannot file a diminution claim against your own insurance company, but rather against the at-fault driver's insurance company.

Immediate diminished value

The calculation of immediate diminished value is as follows:

> Immediate diminished value can be calculated as the difference in resale value of a vehicle before the damage occurred and the resale value before repairs have been made after damage has occurred.

Inherent diminished value

To file an inherent diminished value claim, you will need to prove your car's diminished value. This may involve providing photos and documents of the accident scene and damage to your vehicle, as well as obtaining an appraisal from a certified vehicle appraiser. It's important to note that state regulations vary, and each state will handle these claims differently.

Repair-related diminished value

For example, if the paint is repaired with a colour that does not match or if aftermarket parts are used instead of original equipment manufacturer (OEM) parts, the quality of the repair will decrease the vehicle's value beyond the inherent diminished value caused by the accident history.

When filing a diminished value claim, it is important to prove the repair-related diminished value of the vehicle. This can be done by providing photos and documents of the accident scene and damage, as well as getting an appraisal from a certified vehicle appraiser.

It is worth noting that not all states allow for diminished value claims to be filed, and the process for filing a claim can vary depending on the state and insurance company. Additionally, if you are deemed at fault in the accident, your diminished value claim will likely be denied.

Filing a claim

Filing a diminished value claim can be a complex and time-consuming process, and there is no guarantee of receiving compensation. However, if your vehicle has lost significant value, even after being restored to its original condition, it may be worth pursuing a claim. Here are the steps you can take to file a diminished value claim:

• Check the insurance company's process: Each insurance company may have its own process for filing diminished value claims. It is important to understand their specific requirements before initiating the claim.
• Document the car's market value: Use reputable sources like Kelley Blue Book or NADA calculator tools to determine the market value of your vehicle before the accident. This will serve as a baseline for calculating the diminished value.
• Prove the diminished value: Gather evidence, such as photos and documents of the accident scene and the damage to your vehicle. Consider getting an appraisal from a certified vehicle appraiser to support your claim.
• Satisfy the insurance company's conditions: Ensure you meet all the conditions set by the insurance company for filing a diminished value claim. This may include providing specific documentation or following certain procedures.
• Understand state regulations: Diminished value claims are handled differently in each state. Research the regulations in your state to understand your rights and the specific requirements for filing a claim.
• Consider hiring an attorney: The claims process can be complex, and insurance companies may try to deny or reduce your compensation. Consider consulting a personal injury attorney or a property damage lawyer who has experience with diminished value claims. They can guide you through the process, negotiate on your behalf, and help you receive a fair settlement.

It's important to note that not all situations may require filing a diminished value claim. Before initiating the process, consider the following:

• Your vehicle's value before the accident: If your car is older, has high mileage, or had pre-existing structural damages, you may not receive a payout for diminished value.
• Fault in the accident: If you were at fault for the accident, your insurance company will likely deny a diminished value claim. Diminished value claims are typically filed against the insurance company of the at-fault driver.
• Uninsured or underinsured driver: If you were in an accident with an uninsured or underinsured driver, you may have the option to file a diminished value claim with your own insurance company, provided you have uninsured motorist coverage.
• State regulations: Different states have varying regulations regarding diminished value claims. For example, in Georgia, you can file a claim regardless of who was at fault, while in Texas, the insurer is not obligated to pay for diminished value if the car is completely repaired to its pre-accident condition.

Proving diminished value

• Hiring an independent appraiser to value your vehicle
• Getting a sales manager at a local auto dealership to make a written estimate of what would have been offered for your vehicle if it hadn't been in an accident
• Selling the vehicle or offering it as a trade-in and comparing its sales or appraisal price against other vehicles of the same make, model, and mileage

Additionally, having photos and documents of the accident scene and damage to your vehicle may help your case. You may also need to get an appraisal from a certified vehicle appraiser as part of the claims process.

It's important to note that state regulations also affect how diminished value claims are handled, so researching state laws can help you understand your rights and the specific requirements and process for filing a claim.

Frequently asked questions