What Is a Diminished Value Claim?
Everything You Need to Know

If you’ve been in a car accident, the value of your vehicle will be significantly lower. This is referred to as diminished value, which is the difference in your car’s market value before and after the accident.
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C.L. Mike Schmidt Published by C.L. Mike Schmidt

Schmidt & Clark, LLP is not currently accepting these types of cases and has posted this content for information purposes only. We encourage you to seek a qualified attorney, if you feel you might have a case.


On average, a vehicle can lose 15% to 25% of its value instantly after an accident, even if it’s been fully repaired.

This loss, known as diminished value, represents the difference between your car’s market value before the accident and its reduced value afterward. Many drivers don’t realize that they may be entitled to compensation for this financial loss.

Whether you plan to sell the car or keep it, the diminished value can significantly impact your finances. If you’ve been in a car accident, it’s important to understand your rights and consider pursuing compensation for this loss.

3 Types of Diminished Value

There are 3 types of diminished value, each of which relates to the depreciation in the cost of your vehicle after an accident:

Inherent Diminished Value

Occurs when a vehicle loses value due to its history of damage, which is recorded in the car’s history report.

Inherent diminished value, the most common and accepted form of auto accident diminished value, assumes that the car’s repairs were adequate and represents the amount the vehicle’s worth will decrease from the accident.

Example: A $30,000 car losing $4,500 in value due to accident history

Immediate Diminished Value

This is the reduced value caused by the accident before repairs have been made to the vehicle. When made, immediate diminished value claims demand more compensation than inherent diminished value claims. However, they are rare because insurance companies typically pay the cost of repairs.

Example: A car worth $25,000 dropping to $15,000 right after accident

Repair-Related Diminished Value

Refers to the loss of value due to the inability to repair a car perfectly. Repair-related diminished value means the car is now worth less after repairs than before the accident.

Example: Poor repairs reducing a $40,000 car's value by $8,000

How Do I Prove Diminished Value?

Your lawyer, with the help of an auto appraiser, can help determine the value of the car before the crash, and how much it would be worth after the accident and post-repairs. If you have a repair-related diminished value claim, you may be able to hire a mechanic who can determine exactly what the repairs were and how much it could diminish the value of the vehicle.

What Documents Do You Need?

To build a solid claim for diminished value, you’ll need to gather essential documents that will support your case.

Here’s a list of key items you’ll need:

  • Pre-accident value documentation: This could include a Kelley Blue Book printout, which shows your car’s value before the accident.
  • Repair estimates and invoices: Detailed records of the repairs done to your vehicle.
  • Before-and-after photos: Clear images of your car before and after repairs.
  • Vehicle history reports: A Carfax report can provide insight into the car’s history, including any previous accidents or damage.
  • Professional appraisals: A certified auto appraiser can assess the diminished value of your vehicle post-accident.

Your lawyer, in collaboration with an auto appraiser, will help determine the pre-accident value of your car and how much its value has dropped. If you have a repair-related diminished value claim, a mechanic may be necessary to assess the repairs made and how they affected the vehicle’s worth.

Timeline of the Claims Process

The timeline for filing a diminished value claim can vary depending on the complexity of the case, but here's a general guide to what you can expect:

  • Gather required documents (1-2 weeks): Collect all the necessary paperwork, including repair estimates, photos, and value documentation.
  • Obtain a professional appraisal (3-5 days): Hire a certified auto appraiser to assess the value loss due to the accident.
  • File the claim with your insurance company (1 day): Submit your claim, including all the gathered documentation.
  • Insurance company review period (2-4 weeks): The insurer will evaluate your claim and the evidence presented.
  • Negotiation with the insurance adjuster (1-3 weeks): You may negotiate to reach a fair settlement.
  • Settlement or decision to pursue legal action (varies): Once negotiations are complete, your claim will either be settled, or you’ll decide if you want to proceed with legal action.

It’s crucial to start this process as soon as possible after the accident. The sooner you gather your evidence, the fresher it will be and the stronger your claim will be.

How to Calculate Diminished Value

If you’re looking for an easy way to calculate the diminished value, first determine the book value of your car. If damage from the accident is minor, figure 10% to 15% of the book value, and if the damage is moderate to severe, a figure roughly 15% to 25% of the book value.

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Common Insurance Company Tactics: How to Fight Back and Win

Insurance companies often employ various strategies to minimize diminished value claim payouts. Here are some typical objections and how to counter them:

Typical Objections from Insurers

Insurance companies may use these common tactics to deny or reduce payouts:

  • "We aren't responsible for diminished value"
  • "The vehicle was repaired properly, so no diminished value is owed"
  • "Your car is too old or has too high mileage for a diminished value claim"
  • "The damage was minor and doesn't affect the car's value"

Counter-Arguments

To strengthen your claim, use the following counter-arguments:

  • Cite State Laws: Many states allow for diminished value claims, regardless of whether the vehicle was repaired properly.
  • Accident History Affects Value: Even a well-repaired vehicle loses value due to its accident history, which impacts resale value.
  • Market Data: Provide market data showing value loss for similar vehicles that were in accidents.
  • Professional Appraisal: Present a professional appraisal that quantifies the actual diminished value of your car.

Is Diminished Value Negotiable?

If you are not happy with your insurer's payout offer following a car crash, contact your provider. Your insurance company may send an adjuster to handle the negotiations, or you may simply deal with them directly.

When negotiating with the insurance adjuster, ensure you understand what your auto insurance policy does and does not cover. Your insurer is not going to pay for damage that is not covered under your policy.

The declaration page of your auto insurance policy will provide a basic overview of your coverage, but you should also take the time to read through the entire policy to ensure you're only focusing on the damages your insurance covers.

Negotiation Tips

When negotiating with your insurer, keep these tips in mind:

  • Get a Professional Appraisal: Ensure your claim is backed by a certified expert’s appraisal.
  • Gather Evidence: Collect pre-accident value documentation, repair invoices, and photos.
  • Explain Your Calculation: Be ready to explain how you arrived at your calculation for diminished value.
  • Be Persistent: Stay confident and persistent during negotiations. Don't accept lowball offers.
  • Consider Legal Assistance: If the insurer refuses fair compensation, seek legal advice to explore further action.

Remember, insurance companies are motivated to minimize payouts. By understanding their tactics and preparing thoroughly, you can more effectively advocate for fair compensation in your diminished value claim.

FAQs

1. What Types of Damages Can Be Recovered in a Diminished Value Claim?

Damages in a diminished value claim typically include the loss in the market value of the vehicle due to the accident and any associated repair costs that impact its resale value.

2. How Is Diminished Value Calculated for a Vehicle?

Diminished value is calculated based on the vehicle’s pre-accident value, repair costs, and the impact on resale value. Expert appraisals and market comparisons are often used for accurate assessment.

3. What Evidence Is Needed to Support a Diminished Value Claim?

Necessary evidence includes a detailed repair history, pre-accident and post-repair vehicle appraisals, market value comparisons, and documentation showing the impact of repairs on the vehicle’s resale value.

4. Does Insurance Automatically Cover Diminished Value?

No, insurance typically does not automatically cover diminished value. You will need to specifically request it and demonstrate how the accident has reduced your vehicle's market value.

5. How Long Do I Have to File a Claim?

The time frame to file a diminished value claim varies by state and insurance company. Generally, you have 2-3 years from the date of the accident, but it's best to check with your insurer or consult a lawyer for state-specific deadlines.

6. What If the Insurance Company Denies My Claim?

If your insurance company denies your claim, you can appeal their decision or take legal action. Working with an attorney or appraiser may help in presenting a stronger case.

7. Can I Claim Diminished Value for a Leased Vehicle?

Yes, you can claim diminished value for a leased vehicle if the accident reduces the vehicle's worth. However, the leasing company may receive the payout, not you.

How Do Luxury Vehicles Differ in Diminished Value Claims?

Luxury vehicles generally have a higher diminished value due to their premium market prices. They may also require specialized appraisers to assess the loss more accurately.

 

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