Today I received a call from one of my long time clients who was madder than hell about an accident his wife was involved in. An elderly woman had accidently pressed the accelerator in her 4Runner instead of the brake when pulling into a parking spot and plowed into my client’s vehicle causing $8,500 in damage. You see, Mr. Smith (not his real name) is a plumbing contractor in a small mountain town in Boone North Carolina who has worked his ass off his entire life and had just purchased this Chevy Tahoe for his wife – it was the first new vehicle she had ever owned.
Mr. Smith raised one of the recurring questions I get from insureds suffering auto damage. He asked “I understand that the woman who hit my parked car is liable for the damage. But what about the depreciation? What happens when I trade it in or try to sell it and they see the CARFAX report?”
He asked because he intuitively understood the fact that when a vehicle is damaged in an accident, the resale value will be less than a vehicle that has not been in an accident...even if the vehicle has been repaired to 100% of its previous state. In legal terms, the damage resulted in reduction or “Diminution Of Value” in the marketplace, even though repairs have been made. Insurance professionals call this a “D.O.V. Claim” and there are steps to take to ensure you get made whole.
First off, the definition of “diminished value” can be confusing. There are three types that are defined here by the partners at Matthiesen, Wickert & Lehrer in South Carolina:
Immediate Diminished Value
This is the loss in value that results immediately after an accident before any repairs are made. It is the difference in market value immediately before and after an accident caused by a negligent tortfeasor. In many states, this is the measure of damages for injury to personal property.
Inherent Diminished Value
This refers to the loss in value of a vehicle that remains after it is completely and professionally repaired. It is the loss of value that results from the simple fact that the vehicle has been in an accident. This type of diminished value is also known as “stigma damage.” Given two identical vehicles on a car lot, the one which has not been involved in an accident is preferable to the one which has been damaged and repaired.
Repair-Related Diminished Value
This refers to the additional loss in value to a vehicle which results from incomplete or poorly-performed repairs. It could include simple cosmetic damages that remain after repair or major mechanical or structural deficiencies.
You can read their full article here:
Please note that inherent diminished value is the most common form used by insurance companies. There are two types of inherent diminished value claims, both of which can use the tips below:
1.First-Party Claims: These are claims made by the vehicle owner against their own insurance company 2.Third-Party Claims: These are claims made by the vehicle owner against another person for negligently causing damage to the owner’s vehicle.
Here are my 5 tips when making a diminished value claim.
5 TIPS WHEN MAKING A DIMINISHED VALUE CLAIM
1. Don’t file until the vehicle is fully repaired
Picture this: In Mrs. Smith’s haste, she files a DOV claim immediately after the accident. She already has the repair estimate of $8,500 from her local Chevy dealer and the dealer was kind enough to give her trade in values for the vehicle from before the accident and after the accident so she could reference them when discussing the claim with us, her insurance carrier. The difference from pre to post accident trade in value is $3750 after the car was repaired 100%. The insurance company representing the driver that hit Mrs. Smith’s Tahoe may very well accept that initial estimate of $3750 on the spot.
Here is the concern with that. What if the damage exceeds the estimate? What if instead of simple body damage, the frame is bent and the transmission is out of alignment? In that case the perceived damage to this vehicle in its future owner’s eyes is much worse than body repair. It’s important that you wait until you know the full extent before you file. By waiting for the final repair to be completed you can have much more confidence that you are getting a fair value for the depreciation.
2. Make sure your vehicle is repaired with OEM Parts
For new vehicles like Mr. and Mrs. Smith’s it’s important that the vehicle is repaired with parts made by the original equipment manufacturer (OEM). Often times, repair shops will try to install generic or aftermarket parts to keep the repair cost down. Many insurance companies will encourage this as it will decrease their costs in the claim.
When working with the claims adjuster, you need to keep stating that you expect your vehicle to be restored to its “pre-loss condition”. Be prepared for a lot of pushback.
3. Gather evidence of your vehicle’s the lost value
Let’s circle back to my insured’s claim. They did a good job of getting the trade in value differences (even though she should have waited until after the vehicle was repaired). Additionally I would encourage her to shop multiple dealers for trade in information while making sure to disclose the damage.
On top of dealerships, please advertise the vehicle independently and record the offers made. Craigslist, autotrader.com, cars.com, carsguru.com are the big 4.
The insurance company is out to keep their premiums low for all of the policy holders so they will always try to minimize their losses. With this in mind, you need to know that whatever they offer to you is negotiable.
Let’s play out an example. If your estimated loss in value is $3750 like my clients, you should file a claim for $6000. They will offer you $2000. You need to provide evidence (gathered from the previous step) that your car has lost much more than $2000 and you expect to be made hole for this loss. The insurance will never come up to the $6K, but they may get to the $3750 that will make you whole.
5. Be prepared to sign a release
Finally, once you come to an agreeable number, the insurance company will ask you to sign a release. This form will state that the insurance company is no longer liable for any additional losses. Before you sign this, make sure you are ok with the settlement and what it represents.
If this is a situation you are facing, please feel free to contact me at any time. I’d love to help in any way I can.
All the best,