Diminished Value Claim: Everything you need to know

By Randy Luton | Last Updated: 09/06/2022

Damage to your vehicle after an accident, property damage you cause with your vehicle, and even damage caused by rodents nibbling on your car’s cables all be covered by auto insurance.

However, after a car has been damaged, its value might decrease, even if it has been totally restored. Even if a vehicle has been restored to near-perfect condition, the fact that it was involved in an accident and required repairs might affect its resale or trade-in value in the future.

This is where a diminished value claim comes into the picture.

What is a Diminished Value Claim?

The difference between the value of your car before and after the repairs of damage caused during an accident – is known as diminished value, and it may be protected by your auto insurance policy.

If you successfully claim diminished value, you will get reimbursement to compensate for the loss in worth; however, a diminished value claim is difficult, and it’s not a claim that can be made after every form of damage.

What are the types of Diminished Value Claims?

There are three forms of diminished value. Each kind refers to the depreciation of your car’s value after an accident:

  1. Inherent Diminished Value: This is the most prevalent and generally acknowledged kind of car accident decreased value. When a car loses value because it has a history of damage, which is documented in the car’s history records, this is known as inherent diminished value. This sort of diminished value after an accident presupposes that the car’s repairs were of excellent quality and shows the amount by which the car’s value will decline due to its accident history.
  2. Immediate Diminished Value: This sort of diminished value indicates the difference between the car diminished value after the accident and before it is repaired. Since your insurance provider handles the majority of damage repairs immediately after an accident, this form of lost value is seldom utilized when submitting a claim.
  3. Repair-related Diminished Value: This refers to the devaluation of a vehicle caused by substandard repairs conducted after an accident. For instance, if the paint is fixed with a color that is not an exact match or if aftermarket components are used in lieu of original equipment manufacturer (OEM) parts, the quality of the repair results in a loss of value that exceeds the value reduction caused by the accident. This lowered value is based on the assumption that the car cannot be restored to its previous state.

How to calculate Diminished Value?

The majority of car insurance companies in the United States calculate the diminished value using the 17c formula. The term stems from a Georgia court case that established the concept. Although there is no uniform diminished value calculator, insurers often use the 17c formula or a modified version of it.

Here are the steps for assessing the car’s diminished value after an accident:

First, assess the value of your automobile.

Utilize the National Automobile Dealers Association (NADA) website to determine the value of your car. To get an exact estimate, the website allows you to input specific vehicle information. Listed here are a variety of car options, features, and details that impact the value of your car like the year, condition of the car, color, and manufacturer.

Calculate the fundamental value loss in the second phase.

Typically, insurance companies place a 10% cap, commonly known as the basic loss of value, on the NADA-estimated sales price. 10% of the NADA assessment is the maximum amount for diminished value claims.

Apply a multiplier to the damage in the third step.

Insurance firms utilize a damage multiplier to adjust the fundamental loss of value. In other words, the aforementioned restriction is multiplied by a number ranging from 0 to 1. This results in a revised car accident diminished value calculator based on the insurer’s damage assessment. The multiplier begins at 0.00 for cars without structural damage or replacement panels and may reach a maximum of 1.00 for cars with significant structural damage.

  • 1.00 – Severe structural damage
  • 0.75 – Significant structural and panel damage
  • 0.50 – Moderate structural and panel damage
  • 0.25 – Minor damage to the structure and panels
  • 0 – No structural damage or panel replacement

In step 4, a mileage multiplier is applied.

The mileage multiplier and the damage multiplier serve the same function. Based on the number of kilometers on the car’s odometer, the mileage multiplier reduces the now-adjusted based depreciation. In general, an older car will have a lesser value than a newer one. Diminished value car accident calculator counts by multiplying the updated base loss of value from step three by the relevant mileage factor.

  • 1.00 – 0 to 19,999 miles
  • 0.80 – 20,000 to 39,999 miles
  • 0.60 – 40,000 to 59,999 miles
  • 0.40 – 60,000 to 79,999 miles
  • 0.20 – 80,000 to 99,999 miles
  • 0.00 – 100,000 miles or more

Which states allow Diminished Value Claims?

If the accident was your fault, you cannot file a claim against your collision coverage for lost value. Few states – and few insurance plans – permit it or have decided whether it is permitted. Similarly, if your car is flooded but not wrecked, you cannot normally submit a claim for car’s diminished value after an accident against your own policy.

It is difficult to identify whether you may file a diminished value claim in your state, particularly a first-party claim since most jurisdictions lack a specific statute on the subject. In Georgia and North Carolina, courts have definitively ruled that the practice is permissible.

Numerous other states are currently unclear or court judgments have ruled that it is not necessary for first-party claims. The states listed below include court decisions with positive outcomes for persons seeking compensation for decreased value (for first-party claims) – hence, you have a greater chance of at least having your claim considered in these jurisdictions.

  • Arkansas
  • California
  • Georgia
  • Maryland
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • New Jersey
  • New York
  • North Carolina
  • Oregon
  • Vermont

Now, if someone strikes your car, the insurance company of the individual at fault in many jurisdictions will compensate you for the car diminished value after accident. About half of the states permit diminished-value recovery on your own uninsured motorist property damage policy even if the individual who struck you is uninsured.

In the following states, third-party claims are permitted or favorable court decisions have been made regarding them:

  • Arizona
  • Arkansas
  • California
  • Colorado
  • Connecticut
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Louisiana
  • Maryland
  • Missouri
  • New Jersey
  • New Mexico
  • New York
  • North Carolina
  • Oregon
  • Pennsylvania
  • South Carolina
  • Texas
  • Utah
  • Vermont
  • Virginia

How long do you have to file your claim?

Seek the counsel of an attorney as soon as possible after an accident if you have any reason to believe that you may be able to file a diminished value claim. The longer you delay, the more difficult it may get to gather the necessary proof and supporting papers to establish your claim. You should also take into account the possibility that the value of your car may continue to fall as more time passes.

When it comes to submitting claims for property damage, the majority of states impose strict time constraints on residents. If you file a claim for diminished value too late, you may be prevented from receiving compensation for the loss. Since the legal concerns involving diminished value may be complicated, engaging with an experienced auto accident lawyer can assist you in determining if you have legal remedies and when you can begin the process of filing a claim for compensation.

When is the right time to file a Claim for Diminished Value?

If you have been in an car accident, you might think about submitting a claim for the lost worth of your vehicle. However, this course of action is not the best one for everyone. Take the following factors into consideration:

  • The value of your car before the accident: Cars that are older have a high number of miles on the odometer, or car diminished value after an accident have a lower value than cars that are more recent and have no prior accident history. It is possible that you may not get a satisfactory amount of compensation if you go through the trouble of filing a diminished value claim.
  • Who exactly was to blame: If you were at fault for the damage, your insurance carrier will not submit a claim for lost value on your behalf. Therefore, you won’t be able to submit a diminished value claim of this kind if you were responsible for an accident involving many vehicles or if you backed into the side of your own home.
  • The legal system of your state: The laws that govern diminished value claims and the manner in which they are computed vary from state to state. If you want to know what your alternatives are, you could talk to a lawyer about them or go to the website of the government of your state and investigate the laws that pertain to these claims.
  • Checking to see whether the other motorist has insurance: Check to see whether your auto insurance policy covers uninsured motorists in the event that the other driver causes an accident but does not have liability coverage. In such a case, you should contact your own insurance company about making a claim for diminished value after an accident.

How to file for a Diminished Value Claim?

If you do decide to submit a claim for diminished value, you need to take care of it at the moment you make that decision and move quickly. The following is a list of the actions that need to be taken in order to make a diminished value claim:

  1. You must decide who is at-fault amidst the accident scene.
    Insurance companies investigate accidents to establish who was at fault by looking at state legislation as well as the specifics of the incident. If you provide a copy of the police report as well as any additional documents, you may be able to move things forward more quickly. Take photographs, obtain statements, and get the other person’s insurance information. You also have the option of requesting a statement from any witnesses.
    When you are involved in an accident, it is imperative that you immediately contact the authorities. They will come out and speak to the folks who were involved in the accident and look at the location. As you can tell a lot of things by where the vehicles were struck and where the skid marks are, the insurance may be able to identify who was at blame by looking at those two factors.
  2. Do some research on the regulations that govern your state.
    So that you may have a better understanding of your rights when it comes to the car diminished value after an accident. To accomplish this, go to the website of the government of your state and look for the Division of Insurance to obtain the necessary information, or use a search engine to look up diminished value claims in your state.
  3. Make sure you are following the insurer’s requirements.
    You will make a claim with the insurance company of the motorist who caused the accident, so give them a call and inquire how the firm typically processes claims of this kind and what information you will need to supply.
  4. Collect all of the necessary documentation.
    After that, you will need to determine the worth of the automobile (based on its condition before the accident) and compile the necessary papers for the claim. Photos taken at the site of the accident, a copy of the police report, and a bill from the repair business may all be included in the documentation.
  5. Determine how much the value of your automobile has fallen.
    To do this, you might engage a qualified appraiser to determine how much the value of your vehicle has decreased. Your local car dealerships and body shops are also fantastic sites to conduct research, both of which are located locally. In any case, you should inquire about obtaining a signed report to back up your claim. Keep in mind that any costs you pay for these services will be deducted from any claim settlement you get, so evaluate whether or not it would be beneficial to do so.
  6. Submit an official claim.
    When submitting the claim, be sure to follow the guidelines provided by the insurance company and respond appropriately to any questions they may ask. This might increase the likelihood that you will be paid for the damage you incurred.
  7. Stay patient and wait for an answer.
    As the resolution of this kind of claim may take many weeks or even months, it is important to maintain communication with the claims manager. Inquire about any new developments once every couple of weeks. It’s possible that you’ll need to engage a lawyer to act as a mediator between you and the insurance company if you’re having problems speaking with them.

What do you need to do to file a Diminished Value Claim?

One of the first steps after an automobile accident is to ascertain who, if anybody, is at fault for triggering the collision. If you bear most or all of the responsibility for causing a car accident, it is difficult to get a diminished value claim granted.

The most crucial aspect of filing any form of auto accident insurance claim is submitting credible proof. Nonetheless, it is crucial for establishing that you are not legally responsible for causing the crash. Photos and video footage captured by a camera placed at the accident site constitute the physical evidence. If a law enforcement agency reacts to a car collision, the official police report is the most vital document you must submit to your insurance carrier. The component of a formal police report assigns culpability for an automobile accident.

Are insurers required to pay a claim for Diminished Value?

Depending on state regulations and who was at blame, insurance companies might be forced to pay a decreased value claim. Check these two areas for information:

  • Your auto insurance agreement: Typically, auto insurance companies will not pay lost value claims if you caused an accident. But if another motorist causes an accident, you may submit a claim against their insurance coverage for lost value.
  • Your state’s laws: Except for Michigan insurance laws, all states permit drivers to submit a decreased value claim when another party is at fault. Typically, this is covered by the liability element of an insurance policy. Since each state handles reduced value differently, you should contact the office of your state’s insurance commissioner for further information.

How long does it take for a Diminished Value Claim settlement?

Typically, diminished value claims take longer to settle than typical car claims. Due to the intricacy of these cases, they can take weeks or months to conclude. In other instances, you may need to employ an attorney to act as a middleman between you and the insurance company in order to get the best outcomes, which may further prolong the process.

Due to the fact that each claim scenario is unique, the time required to resolve each claim varies. Claims involving injuries or many parties may take more time to resolve than those involving fewer parties or injuries. In general, insurance firms attempt to settle claims within a month after receipt. Depending on the particulars of your claim, a settlement may be reached sooner or later.

What if the insurance company denies the Diminished Value Claim?

There are occasions when insurance companies are hasty in their denial of claims for a car diminished value after an accident.

One of the reasons for this is that many lawyers unless they are already representing a party in the case, will not take on diminished value claims as a new client. Insurance companies are aware of this fact, and as a result, they reject claims of decreasing value in the expectation that the person filing the claim would withdraw it. If you already have an attorney, you may appeal the insurance company’s decision to deny your claim by having your attorney submit the appeal directly to the insurance company.

In any other case, you have the option of initiating action in your local court system in order to recover diminished value after an accident by filing a claim for diminished value in small claims court. In any event, if an insurance company rejects your claim, you should keep looking for another insurer.

Frequently Asked Questions (FAQs)

  • What is a Diminished Value Claim?

    A diminished value claim enables you to recover the difference between the pre-accident and post-accident value of your car.

  • How to calculate the Diminished Value?

    Calculating depreciation may be difficult. Typically, insurance companies use the “17c Diminished Value Formula” to determine the value of an accident-damaged car.

  • Who is responsible for paying Diminished Value Claims?

    While addressing the settlement of motor vehicle disputes, grant a car owner legal capacity to pursue a lost value claim against a culpable driver.

  • How to file a Diminished Value Claim?

    You may submit a diminished value claim if the accident was not your fault. You must send your documents and demand letter that must include the precise amount of diminished value you are seeking and a response deadline to the insurance company of the at-fault motorist. You may do this by mail or email.

  • What if your claim for Diminished Value is dismissed or underpaid?

    If your claim for diminished value is disallowed or you get a poor offer, you must first bargain. If the offer is still insufficient or your claim is still dismissed, legal action will be necessary. Typically, you may bring the negligent motorist to small claims court.

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Sources:

  • Visited website of OIC to learn how to file Diminished Value Claim after an accident.
  • Visited the website of DIFP to understand auto claim.

Editorial Guidelines: The above is meant as general information to help you understand the different aspects of auto insurance. This information does not refer to any specific auto insurance policy. Coverages and other features vary between insurers, vary by state, and are not available in all states. References to costs of coverages/repair, average or typical premiums, amounts of losses, deductibles, etc., are indicative and may not apply to your situation. We encourage you to speak to our insurance representative and to read your policy contract to fully understand your coverages.

Randy Luton is the Founder and CEO of RateForce. He is passionate about InsurTech services and has in-depth knowledge about the auto insurance sector of the USA.