You just left your home for a shopping excursion, and 10 minutes later, another car slams into yours and the damage is extensive. The other driver appears to be at fault, so you file a claim with that person’s insurer, or through your own insurance company, which will then subrogate the claim to the at-fault driver’s insurer.
Some $3,000 and a week or so later, you get your car back. It looks fine — as good as new, you might even say — but is it really as good as new when it comes to resale value? Accident repairs become part of your vehicle’s record, so when you go to sell it, that fender-bender you were in can lower the value of your vehicle.
This is known as diminished value, and many car owners have no idea that insurance companies can be held liable for the loss in value of your vehicle. You can indeed file a diminished value claim with the at-fault driver’s insurance company.
If you’ve been involved in a car crash due to someone else’s negligence in or around Kansas City, Missouri, Kansas City, Kansas, or Lincoln, Nebraska, contact our team of attorneys at Stecklein & Rapp.
We have years of experience in helping car owners recover what is owed to them under insurance and other applicable laws. We will be happy to listen to the circumstances of your collision and resulting damages, assess liability, and point out the proper options for you.
What Is Diminished Value?
Even if the repair shop uses original replacement parts on your vehicle — that is, if you own a Honda, only Honda parts are used in the repair — the resale value of your vehicle will likely take a hit.
CARFAX, the online car resale site, bases its reputation on finding vehicles for sale that have never been in an accident because, simply put, they’re considered to be in better condition than a repaired vehicle and thus are worth more.
Types of Diminished Value Claims
Every state except Michigan has laws on the books allowing you to file a claim for diminished value against the at-fault driver and their insurance company. There are essentially three types of diminished value claims, but one is rarely used:
- Inherent Diminished Value: This type of claim is based on the fact that an accident record diminishes the value of your vehicle, even if the repairs are not even noticeable and the car looks like new.
- Repair-Related Diminished Value: If the repair shop uses other than OEM (original equipment manufacturer) parts in the repair, or does substandard work, the vehicle will be further diminished in value because it has not been restored to its original condition.
- Immediate Diminished Value: This is rarely used or applicable because it refers to the value of your vehicle immediately after the accident and before repairs have been done. Since repairs are likely to be made, this type of claim is rarely available.
How Is Diminished Value Determined?
There is no universal standard that insurers rely on to assess how much the value of your car lost because of the accident. A lot will depend upon the age and mileage of the vehicle and its condition before the accident.
Some insurers use what is called the “17c rule” that derives from a lawsuit filed by State Farm Mutual Automobile Insurance. Under 17c, the first step is to determine the value of your vehicle after the crash. Kelley Blue Book has a tool for doing this. Just enter the car’s make and model, year, mileage, and the extent of damage in the accident.
Suppose the resulting market value is $30,000. The insurance company will likely then apply what is called the base loss of value calculation, which is usually 10% of the overall value. This means your vehicle is subject to $3,000 in diminished value.
Calculations don’t stop there, however. The insurer next applies a damage multiplier, which is based on the degree of damage to your vehicle. Severe structural damage — say the frame has to be straightened — is worth 100%. Minor damage might be worth just 25%. If your damage is considered minor, that $3,000 becomes just $750.
Next comes the mileage multiplier. If your car has fewer than 20,000 miles, the multiplier is 1, or 100% of the $750. If it is over 100,000, the multiplier is 0 — or 0%. At 90,000 miles, your claim might be reduced to 20% of the result of the damage multiplier, or $150.
All of the above is based on the 17c rule. The insurer you’re dealing with may well have a different method of calculating loss.
When to File a Diminished Value Claim
Clearly, the more expensive, newer, and less worn your car is when you’re involved in an accident, the better your odds become of receiving a substantial diminished value claim settlement. If you’re driving a 20-year-old vehicle that’s been in prior accidents, your odds shrink considerably. The first step is to determine if it’s worth pursuing a diminished value claim.
Other considerations include how much proof or documentation you have to press your claim. You should obtain a copy of the police report, take pictures at the scene of the accident, get witness statements if possible, and also retain all repair records. Make sure the records reflect whether OEM or substitute parts were used.
Of course, these are the same steps — and precautions — that you should have taken at the time of the accident, whether or not you envisioned a diminished value claim at the time.
All of this assumes, of course, that the other driver was at fault and has insurance that you can file a claim with. If the driver is uninsured, you will have to turn to your uninsured motorist coverage, if you purchased such a rider on your own policy.
Diminished value claims can be lengthy and involved, so be prepared to be in it for the long haul. As with all insurance settlement offers, do not accept the first one presented to you. It’s likely to be the lowest amount the insurer feels they can get away with.
Experienced Legal Counsel You Can Trust
At Stecklein & Rapp, we can evaluate your claim for you and help you assemble the documents and evidence needed. We can also deal with the claims adjuster and negotiate with tenacity, aiming to seek the best possible settlement for you. We proudly serve clients in Kansas City, Kansas and Missouri, and Lincoln, Nebraska, and the surrounding areas. Reach out immediately.