What is a Diminished Value Claim?

/ / Car Accidents, Kansas Auto Insurance
Personal Injury Law

Did you know that nearly 80% of all automobile accidents in Kansas are property damage only crashes? For instance, in 2017, out of the 58,000 crashes reported, the motorists and passengers walked away unharmed in over 46,000 accidents, while their vehicles did not fare as well.

These figures are good news considering what that means for motorists avoiding injuries. The average vehicle damage claim is in the vicinity of $3,000, and insurance companies often pay up without much dillydallying. However, many people don’t realize that they may have endured a greater loss than just the cost of repairs by being in such an accident.

Have you heard of diminished value?

Even if your car is restored to mint condition after a crash, the fact that the vehicle has endured an accident and subsequent repair work will drive down its value significantly. This loss is known as diminished value.

  • An open secret: Because information about the accident and the extent of car damage caused will become a part of your vehicle history report, you cannot hide this fact from prospective buyers and car dealerships. Actually, you have a legal obligation to divulge this information.
  • It’s not about face value: Make no mistake; your car does not have to bear obvious signs of the crash or repair for its value to plummet. In fact, even if your vehicle is restored to a better than before condition, the resale value of the car would still be drastically lower than that of a car of a similar make and model that was not involved in a crash.
  • Not just about the parts: Another misconception is that the reduction in value is attributed to the use of aftermarket parts. However, cars that are repaired at manufacturer and insurance company authorized workshops with authorized original parts also have lower resale values.

The thing to understand here is that the mere mention of a crash and accident-related damage is enough to send many buyers running in the opposite direction. Since the value of any product/asset is based on buyer perception and sentiments, the mention of a crash in your vehicle history report is bound to impact its value in a big way.

The biggest problem with diminished value is that vehicle owners are often blissfully unaware of the significant financial hit they have taken. Of course, you cannot expect the insurance companies to volunteer this information. Most car owners realize the extent of monetary damage suffered by them only when they try to resell/refinance their car. But by then it’s too late as most people have already accepted a settlement for property damage.

Can Kansas Laws help you to recoup diminished value?

Yes, in Kansas you are allowed to file a diminished value claim after an auto accident as long as certain requirements are met. For instance:

  • You cannot file a first party diminished value claim. This means that you cannot seek compensation from your own insurance company.
  • A diminished value claim is only allowed if you are not the “at-fault” driver. At this point, there is no clarification offered on what happens in case of comparative negligence. However, an expert lawyer can sway things in your favor.
  • There is a 2 year statute of limitation for filing a diminished value claim.
  • Your uninsured/underinsured motorist coverage does not protect you from diminished value. If the at-fault motorist is uninsured or underinsured, you cannot claim diminished value compensation from your own insurance provider.
  • A diminished value claim cannot be filed if the damage is caused by an incident that is not the negligent act of another motorist.

The three forms of diminished value!

Different definitions are used to estimate the diminished value of a vehicle by insurance companies, courts and experts. There are three ways in which an automobile can lose value after an accident:

Immediate diminished value: As the name suggests, this is the value of the car right after the crash. Simply put, it is the difference in the value of the vehicle before the crash and its value after crash related damages have been sustained and not yet been repaired. In other words, this is how much money you would lose on the sale of the car if you were to sell it as–is after the crash, without bothering with repair work.

Inherent diminished value: This is the loss on resale value after the vehicle has been restored/repaired. The most common type of diminished value, this loss is also the most expected as it impacts buyer perception about the vehicle even if the car is restored to its pre-crash state.

Repair-related diminished value: The term applies to the loss of value incurred when a car is not repaired properly or completely or by using authorized parts. The damages that prevail after repair may be cosmetic, structural or functional, but they will lead to diminished value.

How is diminished value calculated?

Insurance companies use a variety of methods to calculate the diminished value of a vehicle, but the “17C method” is the most favored and frequently used. It involves 3 steps and includes adjustments for extent of damage incurred as well as the vehicle mileage before the accident. Here’s an example.

  • Assume that the pre-accident value of the vehicle is $20,000. If you are calculating the actual diminished value of your car, use a car website to find a car of the same make, model and, if possible, condition and color, as your vehicle (pre-accident). Remember, car prices also differ based on location, so stick to your city and state. Start with this as the base price and work your way down from there as explained below.
  • Assume that you are the no-fault motorist in the accident. 

Step 1

The insurance industry has collectively assumed that the vehicle cannot possibly depreciate by more than 10% after an accident (more on how faulty this assumption is later). Therefore, with the 17C method, the maximum diminished value will never be more than 10%.

Going ahead with our example of the $20,000 vehicle that would be $2,000.

Step 2

This is where you adjust for the extent of damage sustained, and the figures are:

  • 1.00: Severe damage to the structure, such as destruction of the windshield pillars or the frame, and rollover damage.
  • 0.75: Major structural and panel damage, such as bent axle and broken frame.
  • 0.50: Moderate structural and panel damage, such as significant denting and airbag deployment.
  • 0.25: Minor structural and panel damage, such as a fender and dented hood.
  • 0.00: No damage to the structure and no need for panel replacement, such as scratched paint, minor dents, broken side mirrors, cracked/smashed headlights.

To make the adjustment for damage, you multiply $2,000 by the applicable number/percentage. Assume that your vehicle has suffered major structural damage, this is what the figure will look like:

$2,000 X 0.75 = $1,500

Step 3

This is where you make the adjustment for vehicle mileage prior to the accident. Here are the figures and their explanations for this multiplier:

  • 1 for less than 20,000 miles (1 to 19,999 miles)
  • 0.8 for less than 40,000 miles (20,000 to 39,999 miles)
  • 0.6 for less than 60,000 miles ( 40,000 to 59,999 miles)
  • 0.4 for less than 80,000 miles (60,000 to 79,999 miles)
  • 0.2 for less than 100,000 miles (80,000 to 99,999 miles)
  • 0.0 for more than 100,000 miles.

Assume that your car is practically brand new with just 15,000 miles on it, the diminished value would be – $1,500 X 0.8= $1,200 or 6% of the value.

If the car has 70,000 miles on it, the diminished value will be: $1,500 X 0.4= $600 or 3% of the value.

As you can see, when the 17C method is employed, the percentage of loss of value keeps deteriorating progressively from a highest of 10%. Of course, an insurance company may not use this method at all or may use some variation of it. The diminished value according to your insurance provider can be different from the value calculated by you.

However, appraisal experts are of the opinion that depending on the type, make and model of the vehicle, the extent of damage, and the quality of the repair work, the value of a car can plunge by 30% or more. The bad news is that, if you were to pursue the claim on your own, it is very difficult to get that much value from an insurance company.

Insurance companies are none too keen to settle diminished value claims!

A diminished value claim is basically a demand for compensation to make up for the loss of value of your asset due to the accident. This is not bundled with or automatically provided as part of the compensation for repair costs.

That said, unless you have proper documentation and professionally prepared paperwork, your claim, even if you are following the 17C method, may be doomed to fail from the start. Claims that are not submitted with the proper documentation not only lead to delays but also denial of compensation.

At DeVaughn James Injury Lawyers, the first thing our attorneys do is make sure you are physically healthy. Then we can help determine your rights for a personal injury claim and eligibility for a diminished value claim. We can bring in expert appraisers to evaluate the loss you suffered. Our lawyers have the experience to get you fair compensation.  

If the insurance provider of the at-fault motorist is offering you pennies, don’t settle for less. It is your right to demand fair compensation and we will make sure that you get it. Contact us today and we will take care of the rest.