In California, if you pursue a Diminished Value Claim and succeed, you’ll be compensated for your vehicle’s value loss pre and post-accident.
Essential insights into diminished value claims include:
- the compensation they provide,
- the three modes through which a car’s value can decrease,
- the significance of fault in the accident,
- the role of insurance companies in assessing diminished value, and
- the challenges in proving diminished value.
Does a diminished value claim compensate me for the decrease in value of my car?
In California, diminished value claims are designed to reimburse you for the decrease in your vehicle’s value following an accident. When another driver is at fault, you’re entitled to compensation, which primarily addresses:
- your medical expenses,
- pain and suffering, and
- lost earnings due to personal injuries.
Additionally, you can claim costs for car repairs. A crucial, but often neglected, part of property damage claims is compensation for the diminished value of your vehicle caused by the accident, recoverable from the responsible driver’s insurance provider.
There are three types of diminished value claims
There are three distinct ways a vehicle’s value can decline following an accident:
- The vehicle’s resale value decreases due to the stigma associated with its accident history.
- The vehicle suffers immediate value loss right after the accident, prior to any repairs.
- The value of the vehicle is further diminished by the repairs.
Depending on your case’s progression, you might have one or several of these diminished value claims at your disposal.
Value diminished by stigma
Recovering value lost due to the stigma from an accident is the most prevalent type of diminished value claim. This stigma can significantly affect the resale or trade-in value of a vehicle, as potential buyers often research a car’s accident history, paying close attention to:
- the accident’s severity,
- any structural damage,
- the damage location, and
- the repairs undertaken.
The presence of an accident in the vehicle’s history typically leads to reduced offers from potential buyers, who may be concerned about the quality of repairs or possible undisclosed issues resulting from the accident. This reduction in value is attributed to the accident’s stigma, especially when the accident wasn’t your fault, warranting compensation.
In California, such claims are recognized as:
- inherent diminished value,
- stigma damage, or
- residual diminished value,
distinct from depreciation, which refers to value loss from normal wear and tear, whereas diminished value specifically addresses losses due to an accident.
Immediate diminished value
Filing a claim for your vehicle’s immediate diminished value, which represents the loss in value from the time of the accident until repairs are completed, is a less common approach. This type of diminished value reflects the vehicle’s depreciation directly resulting from the accident, prior to any repair work.
Such claims, when made, typically seek higher compensation compared to other types of diminished value claims. Nonetheless, they are infrequent because auto insurance companies usually cover the repair costs. After the completion of repairs, filing for these immediate diminished value claims is not an option.
Value diminished by repairs
Compensation can be sought for the depreciation in your vehicle’s value due to the quality of repairs. Often, repair shops, particularly those preferred by less expensive auto insurance providers, fail to perform top-quality repairs. They might:
- opt for used or aftermarket parts,
- resort to cost-cutting repair methods, or
- mismatch the paint on the repaired part with the vehicle’s overall color.
While these repairs might suffice in terms of making the vehicle operational and safe, they can still lead to a reduction in the car’s value. Given that these losses stem from the accident, you’re justified in seeking compensation for the diminished value attributed to repair-related issues.
If I am at fault for the car accident, will I not be able to recover compensation?
Should you be responsible for causing the car accident, your ability to obtain compensation may be restricted. Numerous auto insurance agreements do not cover the depreciation in value of the insured’s car if the damage was their fault. Nevertheless, this is not a universal rule. Prior to making a claim against your insurance, it’s advisable to closely examine the specifics of your policy.
Yet, there are exceptions driven by state legislation, mandating that insurance companies compensate for diminished value even when the policyholder is at fault.
Insurance companies calculate diminished value
In California, diminished value claims are submitted to an insurance company, which then assesses the vehicle’s depreciation following a crash. To calculate the diminished value, most insurers and their adjusters utilize the 17c Formula.
The process begins with determining your vehicle’s appraisal value, reflecting its worth before the accident, often derived from sources like the National Automobile Dealers Association (NADA) or Kelley Blue Book.
This value is multiplied by 0.1, establishing the crash’s maximal potential impact on the vehicle’s value, known as the base loss of value.
Subsequently, a damage multiplier adjusts this base value, with the scale ranging from 0 (indicating no structural damage or panel replacements) to 1 (indicating severe structural damage), according to the extent of the damage:
- 0 for no structural or panel damage,
- 0.25 for minor structural or panel damage,
- 0.5 for moderate damage,
- 0.75 for major structural and panel damage,
- 1.0 for severe structural damage.
The figure obtained is further adjusted by a mileage multiplier, which considers the vehicle’s age and mileage, decreasing value loss for older, more driven vehicles. This multiplier varies from 0 (for vehicles over 100,000 miles) to 1 (for vehicles under 20,000 miles).
Despite its widespread use, the 17c Formula is often criticized for potentially undervaluing the diminished value of a vehicle. Should the insurance payout seem insufficient, consulting with a car accident lawyer for legal advice is recommended.
Could proving my case be tricky?
Proving the diminished value of your vehicle to an insurance company can be challenging, particularly for high-value claims. To substantiate the loss in value, several approaches may be taken:
- Employing an independent appraiser to assess your vehicle’s worth,
- Obtaining a written estimate from a sales manager at a local auto dealership on the vehicle’s value pre-accident, or
- Selling the vehicle or using it for a trade-in to determine its current market value.
Comparing the sale or appraisal price of your vehicle to similar models with equivalent make, model, and mileage can illustrate the reduction in value. If your vehicle’s value is lower than the standard market price, this discrepancy represents the accident-induced diminished value. This evidence can bolster your claim with the insurance company.
