When consumers inquire about their right to file diminished value claims (DV) after their cars have been damaged and repaired, they often hear opinions that dishearten and discourage them.  The opinions come from a wide variety of sources, but mostly from people they know and trust – coworkers, friends, relatives that have had car accidents, family mechanics and body technicians, even insurance agents and adjusters.

Despite the fact that we want to believe these people know what they are talking about and have our best interest at heart, their opinions regarding diminished value often miss the mark. This flood of misinformation puts consumers seeking DV facts at a great disadvantage, making it unjustifiably hard for accident victims to finalize insurance claims and collect money they are due. 

Earlier this past week I was surprised to find that one truth-seeker went to Yahoo Answers for a DV opinion, posting a sincere question in the headline that begged an honest reply:

Has anyone won a Diminished Value claim in court?

I didn’t see the question in time to post a response, but a 10-year veteran of Farmers Insurance Company graciously replied.  By graciously, I mean it was nice of him to post a response, though it would have been far better had he gathered correct information before having done so.  Known only as “Ryan” this claims guru offered an inside prospective into how Farmers handles diminished value (DV) claims - though the methodology, he doubted, differed much from how DV claims are handled by most other insurance companies. 

A third-party claimant from California bearing the moniker "Talkaboutnews," described an unsettling situation beneath the inquisitive headline that read:

I was rear-ended and the damages were $13,000. Vehicle was repaired and I attempted to negotiate with Farmers Insurance for DV. They stonewalled me. Next I hired a specialty firm to give me a DV claim report, which they claimed would have the insurance company jumping on the phone to call me and settle out of court. They did not, they offered me nothing. Now I have sent a demand letter to the driver for the claim--which is also supposed to get his insurance company jumping on the phone to settle out of court. But what if they don't? If I do go to court, what are my chances? A lawyer told me small claims is great with this stuff, however I find it very strange that googling seems to find no one out there talking about winning DV in court. It seems that you either deal with a good insurance company and they will settle with you immediately, or you struggle against them and get nothing. Farmers even cheated me out a week's car rental, saying the "repair took too long"!

Ryan writes:
I worked in claims for Farmers for nearly 10 years and was on the insurance side of this many times. I may be able to offer an inside perspective on this but doubt that it differs from other insurance companies. You should check with your state to be sure a claim like this is valid. Some allow it but cap how old a car you may claim this on (such as only those vehicles 6 model yrs and newer can make the claim). Assuming it is, you're doing exactly what I would do in your situation. The problem is proving it. First, you have to realize the loss by selling or trading the vehicle. Until you do that, your loss is on paper, just like a stock or mutual fund may be. Your loss today would be greater than, say, two years from now. T prove your case is often difficult. A sworn/notarized letter (or simply on dealership letterhead) from one or two local, reputable used car sales mgrs stating the pre and post-accident value may suffice. In person testimony is better. You may luck out in SCC and win with what you have but the burden of proof is on you. You would have to sue the driver of the other car, NOT Farmers. Furthermore, Farmers may bump the matter to circuit court to more formally address the loss and that would force you to decide to rep. yourself or retain counsel. The reasoning for this is SCC is a crapshoot and decisions generally can't be appealed. I've seen people win these and, more often, lose them. We've paid those that presented good support of their loss w/o going to court and resisted others that poorly supported their claim. It's entirely a case by case thing in each state. It rests on the strength of your proof and they won't be jumping on the phone to settle unless you have a well documented loss AND you've sold/traded the car. Check your state's property damage statute of limitations to see how long you have, assemble your documentation, make an appt with the adjustor to meet in person and ask that his supv and/or mrg. be present as well, make a reasonable presentation of monetary demand (usually 10-20% of the vehicle value) in a professional and cordial manner. Ask questions of them as to what you're missing, if anything, to prove this and be prepared to negotiate. A hot-headed demand in the clouds will likely get you the door. You may not get everything you came for and they may pay more than they'd like but that's usually a sign of a good settlement (if they're willing to pay at all). Your last resort is to sue in SCC. Good luck, my friend

The asker ultimately chose Ryan’s response, lame as it was, as the best post.    I’m not exactly sure why it received talkaboutnews’ nod of approval.  Perhaps, the greater length of Ryan’s reply made his comments seem more detailed than those of other responders.  Regardless, it matters little since Yahoo has closed the question to new replies.  Ryan’s response now stands as gospel, even though there was little that he said that could be considered truth..

But Ryan wasn’t alone in flinging fabrications about consumer’s rights regarding payment for diminished value.  The sad fact is that most of the responders offered inaccurate information despite each of them listing sources to back up his/her advice.  Claims guru Ryan proudly cited experience as his source, having worked with DV claims for nearly 10 years at Farmers.

In the rest of this article, we will examine the primary misstatement offered by nearly all of the Yahoo posters, namely that diminished value is NOT recognized in certain states as a valid claim.  In addition, I’ll provide some accurate facts that readers can share when they encounter consumers looking for truthful diminished value information.

Truth – Claims for diminished value are recognized and allowed in all state courts. This fact has never been in question.  Where confusion often exists, though,  is toward whom a lawsuit must be directed in order to collect payment. 

In third-party claims, payment for diminished value and accident-related damages is the responsibility of the negligent party (tortfeasor).  Whether the tortfeasor has insurance or not is of no consequence to those who are victims of his / her negligent actions.  Because the victims have no insurance policy with the tortfeasor’s insurance carrier, they are not in a position to make demands for payment directly from the insurer.  While it may not seem like a good deal to be excluded from filing against an insurance carrier who is often looked upon favorably for having deep pockets, it is by virtue of the fact that there are no ties that there are also no limitations on repairs that can be performed or related losses for which one can be paid.  Thus, in third-party cases, demands must be made of the negligent party directly, rather than indirectly through his/her insurance company.  Likewise, lawsuits in third-party cases must usually be initiated against the negligent party as opposed to his/her insurer, except in rare circumstances.

In first-party claims where one is collecting from his/her own insurance company, DV is more difficult to collect, though not impossible. The reason first-party claims are more difficult is because many consumers, unbeknownst to them, purchase insurance policies that have DV exclusions written in them.  By virtue of being bound to this contract that they purchased, these consumers will often be forced to forgo this portion of their claim.
But, when an insurer chooses to repair a vehicle as opposed to totaling it out or replacing it, the insurer, by law in most states, undertakes another obligation – restoring the auto to its preloss condition. Most insurers choose the repair option over other options available because it has proven  advantageous in reducing claim payouts.  The problem is that regardless how well an auto is repaired or regardless how much money is spent on its reconstruction, its post-repair condition is almost always inferior to the condition the car held before the loss, even when the absolute best repairs have been performed.  Because insurance is based on the premise of indemnification or making insureds whole after a loss, insurers are often forced to make monetary concessions to fulfill their obligations to policyholders when repairs they insisted on leave them shortchanged.  Granted, insurers rarely call this a diminished value payment for fear of setting a precedent that will eventually haunt them.  But that’s exactly what it is.  And, who cares what they call it as long as they pay what they owe?  Right?.

In both first ad third party cases, proving the loss is the most essential part to getting paid.  It is the burden of the vehicle owner to prove a lessened market value or inferior condition exists, and to what degree it exists. Is safety compromised, or is the deficiency a cosmetic problem like a paint mismatch?  With either, you are likely owed some compensation, though the amount you can collect may be vastly greater with structural damages than with cosmetic damages. 

If a consumer’s car was covered by a factory transferable warranty that was purchased as a part of the sticker price when they bought the car, it is likely that the accident destroyed portions of the warranty that can never be replaced. To make one whole, there must be a reimbursement for this loss as well.

Some Efforts to Collect DV Have Failed

While it’s true that some insureds and claimants have failed to collect diminished value in courts, failures are almost always the result of one of the following errors in judgment:

1) Lawsuits have been unsuccessfully grouped and tried as class actions - A rash of lawsuits were brought against major insurers in the late 90’s after a successful class action case mandated that State Farm pay diminished value to insureds and claimants in the state of Georgia.  While the Georgia case was celebrated as a big win for consumers, cases brought in other states against other insurance companies using similar arguments were not as successful.  Courts that heard these cases were split on the belief that claims could be grouped and tried as class actions given the unique circumstances of individual accidents and degrees of damage suffered.  Insurers spun the stories in the press to make it appear as though courts across the nation rejected claims for DV, when in fact it was NOT diminished value cases that were rejected, rather the ability to try DV cases as class actions.  This tactic of manipulating the press regarding diminished value, I believe, provided the genesis of misinformation many consumers believe as truth today. 

2) Claimants failed to show that repaired cars were in some manner compromised despite best efforts to repair them correctly -  Again, in the early days of trying diminished value cases some attorneys thought it best not to confuse jurors with too much information of a technical nature.  So, they consciously opted to keep cases simple and cluster their efforts on collecting Inherent Diminished Value (IDV) only.  Inherent DV is a loss based on the public’s awareness that even if a vehicle is repaired to the best of human ability, it will still exhibit remaining deficiencies and inconsistencies from its preloss condition that make it less desirable to the public and therefore less valuable.  With good intentions most lawyers in these cases offered no evidence that cars were impaired or weakened as a result of accidents and repairs.  With no physical evidence to consider, some courts ruled there was nothing on which a loss could be based.  Thus, they awarded nothing and insurers touted the victories to the press. 

Keys to Collecting Diminished Value

Having thorough documentation and unquestionable proof are the keys to collecting diminished value. In addition, it may often be necessary to hire an attorney to put teeth in the demand so insurers will take these types of claims seriously.  The attorney will then likely hire an auto valuation expert to examine the auto and provide a statement of value that can be shared with credibility in court.   Despite an insurer’s obstinacy to the contrary, DV is owed where a loss can be proven, and those who are persistent stand the best chance of being paid.

There’s no requirement that a person sell or trade his/her car in order to have proof that diminished value exists.  This is a lie that insurers spout to try and get consumers to forgo payment to enhance their own profitability.  The fact is, DV is owed as of the date of loss, not at some point in the future as the claims master contended. 

Diminished value is not a separate claim from the claim that pays for physical losses like bent fenders and hoods.  Rather, it is an element of recoverable damage in the same claim that occurred at the same time, during the same event.  If an insurer accepts liability for one element of loss, it must also, where proof exists, accept liability for other elements of loss that extend from the same occurrence. 

As for the value of a DV loss, Ryan had that wrong, too. Click here to read a summary of our findings in recently worked cases, and learn how much money is really at stake in the average diminished value claim.

content & design 2002-2008 David Williams and SafeCollisionRepairs.com

About Safe Collision Repairs

For more than ten years, David Williams of Wheelersburg, Ohio's Safe Collision Repairs has worked with consumers and attorneys in the tri-states of Ohio, Kentucky and West Virginia to expose unsafe auto repairs and maximize recovery on auto insurance claims. Some of the company's services include Post-Repair Inspections, Prepurchase Inspections, Auto Damage Assessments, Lemon Law Investigations, Expert Court Testimony and Diminished Value Calculations using an advanced version of Network Information Communication's WreckCheck program.

Inquiries can be directed to: Safe Collision Repairs David A. Williams Post Office Box 70 Wheelersburg, Ohio 45694 (740) 456-1111 (740) 355-4056

Disclaimer

The content expressed on this website and in the article above represents the opinions of David A. Williams. Williams is neither an attorney nor public insurance adjuster, but is an expert, consultant, and writer specializing in the field of automotive collision repair and valuations. The information provided herein is not intended to be a substitute for legal or insurance advice. Because collision repair is a continually evolving science, any text, materials or links found herein are provided without claim or guarantee to their accuracy or completeness.