Diminished Property Value: Do I Have a Claim?

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If you’ve been in a car accident, in addition to potential injuries, your car is damaged. It goes without saying that in the secondary market, buyers pay less for cars previously involved in accidents.

Stated generally, Louisiana car insurance can be categorized in 2 areas: (1) bodily injury and (3) property damage.  While bodily injury coverage will apply to the aches and pains associated with an accident. Property damage coverage will generally cover the mechanic bills to get your car back on the road. Within your property damages claim, there’s the ability to make a claim for diminished value.

The simple fact is that cars that have been involved in accidents are worth less money than those that haven’t been in accidents.  Even if the mechanic or auto body shop does a great job and two cars may appear identical, a car that has been involved in an accident will not fetch the same sales price.

Due to this difference, if you’ve been in an accident, you may have a diminished value claim.

How Do I Make a Diminished Value Claim?

After initiating your claim to the insurance company, you should specifically request that the insurance company, whether the at-fault driver’s or your own UM insurance carrier, to adjust the claim to include the diminished value of your car.

It is best practice to have your own calculation of diminished value, either performed by your own research or using the service of a diminished value expert.

How is  Diminished Value Calculated?

There are three types of diminished value claims:

  1. Immediate Diminished Value- This type of claim refers to the resale value immediately after your car is involved in an accident, before it gets repaired.  The only time that this type of claim would be used is if your car was not totaled, but you decided to sell it in its post-accident condition, perhaps to a used car dealer.
  2. Repair-Related Diminished Value- If your mechanic uses low-quality parts or provides low-quality workmanship, you may experience repair-related diminished value.  This type of claim is rare as it inherently pits the insurance company against the mechanic.
  3. Inherent Diminished Value- This is the most common type of diminished value claim.  Even if the car is repaired, the accident history decreases the car’s worth.

Depending on the type of diminished value claim made, the calculations can be different.  While there is no standard diminished value calculator, many insurers use the “17c Diminished Value Formula.”  This formula was discussed by State Farm in State Farm Mutual Automobile Insurance Company v. Mabry, et al.

Step 1- Calculate the Value of Your Car

By using the Blue Book Value of your car or even soliciting an offer or valuation from a dealer, you can determine the value of your car.

For example, let’s assume that the Blue Book Value of your car in it’s pre-loss condition was $25, 000.00.

Next, apply a 10% cap to the market value revealed by the Blue Book or dealer offer.  Therefore, $2,500.00 represents the maximum amount of your diminished value claim under the 17c Diminished Value Formula.

Step 2- Apply a Damage Multiplier

Depending on the amount of damage to your car, the 17c Diminished Value Formula will further reduce your diminished value damages.

MultiplierDamage Severity
1Severe Structural Damage
.75Major Damage to Structure and Panels
.5Moderate Damage to Structure and Panels
.25Minor Damage to Structure and Panels
0No Damage

 

Statisically, most accidents yield minor to moderate damage to structure and panels.  If your vehicle suffered major or severe structural damage, it has likely been damaged beyond the prudent cost of repair, rendering it a “total loss”.

Step 3-  Apply a Mileage Multiplier

Depending on the mileage on your car, the 17c Diminished Value Formula will reduce your diminished value damages even further

MultiplierMileage
10-19,999
.820,000-39,999
.640,000-59,999
.460,000-79,999
.280,000-99,999
0100,000

 

Thus, if your $25,000.00 vehicle with 40,000 miles sustained moderate damage, the 17c Diminished Value Formula says you also sustained $750.00 in diminished value damages.

If you have any questions or would like to discuss this matter further, please contact us today.

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