Diminished Value-What it is and How to Make an Insurance Claim for a Cash Insurance Settlement
Does the insurance company owe you some additional cash for your damaged vehicle? Diminished value is a compensable loss in many third party auto accident claims, but owners don't know that they could be entitled to a cash award in addition to getting their vehicle repaired.
The basis of the diminished value insurance claim is the duty of the insurance carrier to restore the owner of a damaged vehicle to the same position they were in before the accident. And if your beautiful late model car sustained structural damage, or was repaired with cheap foreign parts, your car will likely not have the same value in the marketplace as it did before the auto accident.
Why is that? Well, consider your own reactions if you were shopping for an expensive vehicle and one of the alternate choices on the lot had no prior accidents, but the other choice had sustained substantial damage involving structural members or had replacement of important parts from an uncertified source somewhere overseas.
Surely you would never value those two vehicles the same. Same thing for any potential buyer who simply checks the Internet with any of the several growing car-history services; they're not going to be willing to pay as much for it as they would have before it was hit-irrespective of how well it's been repaired.
The difference in the market value between the two vehicles is the diminished value suffered by the vehicle that was damaged. Thus, in order to restore the owner to where she was before the accident, the insurance company should be made to pay her the diminished value in cash in addition to repairing her vehicle. But, as we shall see below, there are SEVERE RESTRICTIONS on most such payments, especially in first party claims.
Our own Doctor Settlement, J.D. (Juris Doctor) is an experienced personal injury attorney, and he has addressed these issues on www.allexperts.com, and we report here some of his remarks for our own visitors. Diminished value insurance claims have become more prevalent because of three factors.
The more expensive the vehicle, the easier to prove diminished value.
Vehicles are increasingly more expensive, and hence there is an expectation of high quality associated with having to part with tens of thousands of dollars. No one wants to take a chance on a vehicle that has been wrecked when they are paying big money. The higher the value of the vehicle, the more apparent it becomes that a wreck will reduce the fair market value.
|This factor does raise the issue of whether or not diminished value insurance claims are viable-or are more difficult to prove-for cars that are valued at less than $7,000. By that stage of their existence, the existing parts in the vehicle are worn, and not as good as the imitation foreign parts, and in many cases, the repairs actually are an improvement for older cars. As discussed below, older or less valuable vehicles usually do not merit much consideration for a diminished value award.|
State full disclosure upon sale laws mean you have to tell about accidents.
Many states have laws that require full disclosure upon sale of the vehicle, so it is no longer possible to "hide" (or fail to disclose) the facts of an accident and subsequent repairs. Even if one tries to just trade-in the vehicle, the dealer will likely require completion of a disclosure form. Since failure to reveal the accident could be a fraud (or at least a misrepresentation), it is more likely that the damage history will follow the vehicle wherever you try to unload it.
Internet sites can disclose significant repairs.
It is now easier than ever to pay a small fee and to check for the most serious damage accidents right online. This means it will be virtually impossible to hide the fact that your vehicle has suffered major damage.
No-or few-diminished value insurance claims allowed in FIRST PARTY insurance claims.
When can you claim for diminished value? NOT IN FIRST PARTY CLAIMS-at least not in most states and not with the revisions insurance companies have added to their policies to eliminate any right to make such a claim. So if you are having your own company repair your car after an accident, it is unlikely that you will be able to make a first party claim. Still, it would not hurt to check with your state insurance commissioner. Give a call to see about making such a first party claim for diminished value in your state and under your own policy.
Third party diminished value insurance claims must be proven BY YOU.
So that leaves us with the third party claims. When someone hits your late model car and causes substantial damage, you should plan to make a diminished value insurance claim. Remember that in order to succeed, it will be your burden of proof to show that there is a difference in value between similar vehicles with a clean history, as opposed to your vehicle that was in an auto accident. YOU must gather to facts and professional opinions necessary to carry the day in proving that your vehicle has a measurable difference in value because of the accident.
Three Causes of Diminished Value
Let's go to school on this topic: there are three factors that you will want to know about in order to gather and present the evidence to prove your diminished value insurance claim as part of the third party payment for damages caused.
1. "Inherent" risk of diminished value, just because it was in an accident.
FIRST, there is the "INHERENT" RISK OF DIMINISHED VALUE whenever we have a big car accident impact and repair. And, as noted elsewhere, the more expensive or the newer the vehicle, the higher the market place expectations will be on a "virgin" accident history.
In those higher end vehicles (and to a lesser extent even in the $10,000 value range), buyers just do not feel the same about a vehicle if they know it has been in a pretty serious accident. People do not trust that even the best shops can get the exact tolerances and centered welds and matching paint as the vehicle had to start with. Hence, they will just not pay the same as compared to a vehicle that has never had an accident. And that is true even if the collision repair shop owner has absolute proof that your vehicle was repaired in accordance with all manufacturer's specifications.
It is very likely the case that you will have to reveal the facts of this accident to any prospective purchaser of your vehicle. Call some dealerships and ask if you were trading in a vehicle such as yours, would they require you to complete a disclosure statement.
If so, be sure to mention that fact to the insurance adjuster as part of your proof. Even if you never would have to disclose this damage in your own state, there could be a record of serious repairs that was filed and will surely be picked up by online businesses such as www.carfax.com, which is used to check out very serious damage repairs for prospective buyers.
Thus, it is even more certain that a buyer will have knowledge of the fact your vehicle was in a very serious accident. If the expected market value of your vehicle before the accident was $33,000 and a buyer had a choice of two twin vehicles, one of which had $16,000 worth of good competent repairs done to it, so that they both appeared the same and were in the same mechanical condition, which one would be sold first?
Or, conversely, what would the market place penalize your vehicle for having been in that serious accident? NOTE: since this factor may depend upon the opinion of dealers, this will be the weakest link of your argument and the one more easily opposed by insurance companies. You will want to get a few opinions of dealers in writing to firm up this factor inasmuch as it is perhaps a bit more speculative than the other two below.
As you will see below, there is no shortage of businesses listed on the Internet that make a living preparing diminished value reports. We recommend going with one that is local so that an actual inspection can be made to examine the quality of the repairs, not just reliance upon general non-specific market information.
2. Big difference what was damaged-sheet metal, cosmetics, or structural.
SECOND, it makes a BIG difference what was damaged: SHEET METAL OR STRUCTURE. What if the repairs were just sheet metal and trim and paint, as opposed to important structural members that were damaged? Have someone who knows collision repairs review your repair order and invoice and tell you whether or not any important parts of your car were damaged.
If so, the existence of structural damage would likely reduce the value of your vehicle, even if it were done competently. List those important parts or structural members that show on the repair order and argue that a prospective buyer is likely to penalize your vehicle since you, as seller, would be asking him to take a chance that the repairs restored the vehicle to its previous good condition. Most buyers believe that important structural damage cannot be repaired to manufacturer's specifications.
It will be up to YOU to develop the facts here, so we suggest using both your own legwork and the professional opinion of one of the online sites that sells its opinions. Once again, our preference is for someone who is local and hence could actually inspect your vehicle. There are all kinds of things that can be found to show that the repairs were not done to professional standards. Ask the dealers for their estimates of price reduction THEY would expect should they have to sell your vehicle with prospective buyers fully aware of the damage done to your vehicle.
3. Insurance companies CAUSE DIMINISHED VALUE by trying to scrimp on repair costs: loss of manufacturer's WARRANTY.
THIRD is the topic of the QUALITY OF REPAIRS. This is where you really need some professional help. Most of us have no idea whatsoever whether or not repairs were done properly. It is just not in our experience to be able to spot problems in the finer points of repair work, such welds and finishing. For example, how would you tell whether or not the repairs were done to pre-accident standards?
Insurance related D.V. can be defined as the depreciation incurred due to oversights and/or omissions by the insurance company on their appraisal. Another major factor that contributes to Insurance related D.V. is the mandated use of imitation replacement parts. Insurance related D.V. can be eliminated through properly completed insurance estimates and supplements.
Take, for example, the issue of using Original Manufacturers' Equipment (OEM) parts versus those "quality replacement parts" the adjuster insists upon using. Here is the scoop: we all want to use Original Manufacturers' Equipment (OEM) parts to repair our vehicles. There are two problems in using after market NON-OEM parts to repair late model or high value vehicles.
The first is that most manufacturers will consider their warranty to be void once such parts are installed in their vehicle. You can do your own research for your own vehicle, but here, for example, is what General Motors thinks about that adjuster making you repair with NON-OEM parts:
"General Motors' vehicle factory warranties transfer when repairs are completed with new genuine GM Parts. The use of used salvage and/or imitation/counterfeit parts is not covered by the GM factory transferable limited warranty on that part and all adjoining parts and systems that are caused to fail by these parts."
Even if your vehicle is no longer in warranty, if it has significant life left in the parts, one would want to fight for OEM parts. The exceptions to this are when the vehicle is older, or when one wants to voluntarily reduce the cost of repairs so as to retain a trusted vehicle, rather than forcing the adjuster to total it.
With respect to an older vehicle, the parts have seen their useful life, so the car is not entitled to be repaired with new OEM parts. That would significantly improve the condition, so the adjuster could be entitled to a "betterment" payback.
Thus, for older vehicles, it is just fine to get NON-OEM parts, as they usually will have more useful life than what you had in there to begin with.
But, for medium to higher end vehicles with significant life left, the insurance adjuster's insistence on using NON-OEM parts could contribute to a diminished value insurance claim. The question is: how can you or I know what the market place is going to think of this or that part, and, furthermore, how can we tell if it has been installed to proper tolerances.
For example, even something as simple as a hood can present difficulties in both safety and tolerances, since the end product from overseas can vary quite a bit from what the manufacture put in there.
This would take an examination by someone knowledgeable, and it is a RECOMMENDED INVESTMENT to hire a professional to go over all of the places of repair. They can spot things we would miss, such as paint being where it should not be, panel spacing not being even on the trunk, hood, doors, etc, welds not being proper, or important parts being replaced with inferior after-market foreign-made parts.
The point of your diminished value insurance claim is to demonstrate the extent to which a potential buyer will surely devalue your vehicle. So you need help to gather evidence regarding even things like a hood. But what if the adjuster insisted on replacing some important functioning parts (i.e. starter motor, alternator, air conditioner compressor) with NON-OEM parts from some uncertified shop overseas? Wouldn't that result in an obvious reduction in value?
Not necessarily: some of those parts will be touted by the supplier as being as good as the originals, and who are you to argue with that kind of evidence? Hire some help. The issue in proving your diminished value insurance case is to FIRST hire a professional to identify the parts, and then to figure out HOW MUCH the market will punish you for having those parts in your repaired vehicle.
Finally, see the first link below to Dr. Settlement's FAQ on diminished value. There you will read two additional reasons to hire a professional for diminished value insurance claims, EVEN IN A FIRST PARTY CLAIM. Preview of the article: these two reasons to make a diminished value insurance claim in ALL CIRCUMSTANCES are: 1) to provide proof to take a LOSS on your IRS INCOME TAX RETURN; and 2) to provide proof (via the insurance adjuster's written response to your claim) that there was no diminished value, or that it was of the minimal value that the insurance adjuster states; thus relieving some of your responsibility to disclose on subsequent sale of your vehicle.
USEFUL PROPERTY DAMAGE RESOURCE LINKS FOR INSURANCE CLAIMS:
FAQ: Diminished value insurance claims explained in answers by Doctor Settlement, J.D.
Auto body shop witness car accident damage
Evidence damage car accident
Car Accidents: totaled, repair, valuation, your insurance claim rights
If you have sustained enough damage to have a diminished value insurance claim, there likely was also enough trauma to your body to cause personal injuries. Thus, we present the following information to help in making your own personal injury claim on a do it yourself basis.
USEFUL PERSONAL INJURY INSURANCE CLAIM RESOURCE LINKS:
Keys to a maximum insurance injury claim settlement
Insurance company payment of medical expenses as incurred
It is NEVER TOO LATE TO REPORT PERSONAL INJURIES FROM A CAR ACCIDENT
Managing medical care after you auto accident:
Overview tort law personal injury legal claims