Hartford Insurance And Diminished Value Claims: Understanding Your Rights After An Auto Accident

Diminished value is the difference between a car's value before and after an accident. Even if a car is fully repaired, its resale value will decrease. This is called diminished value. There are three types of diminished value: immediate, inherent, and repair-related. Immediate diminished value is the difference in resale value immediately after an accident and before repairs. Inherent diminished value is the most common form used in claims and represents the amount the vehicle's worth will reduce based on accident history. Repair-related diminished value is used when repairs are of sub-standard quality.

Most insurance companies use the 17c Diminished Value Formula to determine the value of a vehicle post-accident. This formula involves determining the value of the car, applying a 10% cap, and then applying damage and mileage multipliers.

When it comes to filing a diminished value claim, it's important to note that the burden of proof is generally on the customer. The success of the claim also depends on whether the customer was at fault in the accident.

What is diminished value?

Diminished value is the difference between a car's market value before and after an accident. Even if the car is restored to its pre-accident condition following repairs, its market value decreases. This is because the car now has a history of damage, which is indicated in the car's history reports. This information will be available to potential buyers, who will likely offer less money for the vehicle.

There are three types of diminished value:

• Inherent diminished value: This is the most common form used in claims. It occurs when a vehicle loses value because it has a history of damage, and assumes that repairs were of optimal quality.
• Immediate diminished value: This type represents the difference in resale value immediately after an accident and before the vehicle is repaired. It is rarely used in claims as insurance companies typically cover the cost of repairs after an accident.
• Repair-related diminished value: This refers to the loss of value based on low-quality repairs, such as using aftermarket parts or non-matching paint. In these cases, it is assumed that the vehicle cannot be restored to its pre-accident condition.

Most insurance companies use the 17c Diminished Value Formula to determine the value of a vehicle post-accident. This involves determining the value of the car, applying a 10% cap to that value, and then applying damage and mileage multipliers.

It is important to note that filing a diminished value claim can be more involved than filing a standard insurance claim, as the burden of proving the car's diminished value is generally the responsibility of the policyholder. Additionally, if the policyholder was at fault for the accident, their diminished value claim will likely be denied.

Types of diminished value

Diminished value is the term used to describe the loss in a property's market value after being damaged in an accident and repaired. While it is most often associated with automobiles, it can also apply to other properties of value, including real estate, jewellery, and artwork.

There are three types of diminished value:

Inherent Diminished Value

The most widely recognised and accepted form of diminished value assumes that optimal repair quality has been completed. This type of diminished value claim may compensate the insured for a car worth less after an accident and subsequent repairs. It is based on the amount the vehicle will be reduced in value because it now has an accident history. This accident history is indicated in the car's history reports, such as CARFAX or AutoCheck, and can cause buyers to assign a lower value to the vehicle.

Immediate Diminished Value

This type of diminished value represents the difference in resale value immediately after an accident, but before the vehicle has been repaired. This type of diminished value is rarely used in claims because insurance companies usually provide repairs right after an accident.

Repair-Related Diminished Value

This type of diminished value refers to the loss of the vehicle's value based on low-quality repairs or the use of inferior parts. This can include repairs that were just poorly done or the use of aftermarket replacement parts. This type of diminished value assumes that the vehicle cannot be restored to its pre-accident condition.

Calculating diminished value

Diminished value is the difference in your car's market value before and after an accident. This value is calculated even if the car is repaired and back to its pre-accident condition.

The 17c Formula

Insurance companies commonly use a calculation called the 17c Diminished Value Formula to determine the value of a vehicle post-accident. This formula was created by State Farm in the Mabry V State Farm lawsuit in Georgia. The four steps to calculate the diminished value using the 17c formula are:

Step 1: Determine the value of your car

You can determine the sales or market value of your vehicle using the NADA or Kelley Blue Book websites. Both offer a calculator where you can input information such as the year, make, model, mileage, and extent of damage to your car.

Step 2: Apply a 10% cap to that value

Insurance companies apply a base loss value of 10% after a vehicle has been in an accident, which is the maximum they will pay for a claim. So, you calculate 10% of the value estimated by Kelly Blue Book or NADA.

Step 3: Apply a damage multiplier

The 10% base value is adjusted to reflect the structural damage done to your car. It is multiplied by a number ranging from 0.00 to 1.00, where 0.00 represents no structural damage, and 1.00 represents severe structural damage.

Step 4: Apply a mileage multiplier

Insurance companies will adjust the value again to reflect your car's mileage. This number also ranges from 0.00 to 1.00.

Example Calculation

For example, if the market value of your vehicle is $15,000 with moderate damage to structure and panels and 20,000 miles, your formula to calculate diminished value would be:

$15,000 x .10 = $1,500 — This would be the maximum you would receive for a diminished value claim.

$1,500 x .50 = $750 — This would be the value adjusted for moderate damage.

$750 x .80 = $600 — This would be the value adjusted for vehicles with 20,000 miles.

Based on this example, an auto insurer would pay out a maximum of $1,500 for a diminished value claim on this vehicle. However, based on the damage and mileage, the final calculated estimate for a diminished value payout would be $600 for this vehicle.

How to file a diminished value claim

If you've been in an accident where the other driver is at fault, you can file a diminished value claim to recover some of the difference between your vehicle's pre-accident worth and its value after repairs. Here is a step-by-step guide on how to file a diminished value claim:

Step 1: Contact the at-fault driver's insurance company

Get in touch with the at-fault driver's insurance company as soon as possible. They will guide you through their specific process for filing a diminished value claim.

Step 2: Document the pre-accident value of your car

You will need to document how much your car was worth before the accident. You can do this by using online resources such as Kelley Blue Book, NADA, or Edmunds.com. These websites will ask for information such as the year, make, model, and mileage of your car, as well as details about any damage.

Step 3: Get a trade-in value letter from a car dealer

Contact a car dealer to get a trade-in value letter, which will help document how much your car is worth after the accident and repairs.

Step 4: Get an appraisal to calculate diminished value

An appraisal will be done to calculate the diminished value of your car. You can also calculate it yourself using the 17c formula, which is commonly used by insurance companies. Here are the steps to calculate diminished value using the 17c formula:

• Determine the value of your car using Kelley Blue Book or NADA.
• Apply a 10% cap to that value by multiplying it by 0.10. This represents the maximum amount the insurer will pay out on a diminished value claim.
• Multiply for damage by using a damage multiplier ranging from 0.00 to 1.00, depending on the severity of structural damage.
• Deduct more value by applying a mileage multiplier, as insurers will handicap the car's value based on mileage in addition to the market value.

Step 5: Satisfy all conditions of the claim

Make sure you satisfy all the insurance company's conditions for diminished value and file your claim. This will give you the best chance of having your diminished value claim approved.

It's important to note that if you are deemed at fault in the accident, your diminished value claim will likely be denied. Additionally, the age and mileage of your vehicle will affect your diminished value claim, with newer and lower-mileage vehicles generally recovering a larger amount of diminished value.

Considerations when filing a diminished value claim

Before filing a diminished value claim, there are a few things to consider:

• Your vehicle's value before the accident: If your car is older, has high mileage, or structural damage, you may not receive a payout.
• Whether you were at fault: If you caused the accident, your insurance company will likely deny your claim.
• If the other driver is uninsured: If you have uninsured motorist coverage, you may have a better chance of receiving compensation.
• The state you live in: Each state has different regulations regarding diminished value claims. For example, Michigan drivers may have more difficulty getting a claim approved compared to other states.

It's important to note that filing a diminished value claim takes more time and effort, and there is no guarantee of compensation. Therefore, it's recommended to research and consider the above factors before initiating the filing process.

Frequently asked questions