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When Making an Insurance Claim for Property Damages Don’t Forget to Include the Diminished Value of Anything Repaired but Not Replaced

Blog entry by Anthony Taibi

When we make an insurance claim for damage to our vehicle or other property, if the insurer chooses to repair rather than replace the damaged vehicle or other item, we are entitled to be compensated for the loss in future resale value that repaired property brings compared to that which was never damaged. You are not going to be reimbursed for your hassle, wasted time, and emotional upset, but you can and should demand payment for the economic losses that even a well-repaired collision almost certainly brings.

Technically, “Diminished Value” is the loss in “market value” that occurs when a vehicle is wrecked and repaired. It is easy to overlook this loss because you were not, at the time of your accident and repair, thinking about selling your car and we do not usually think about our car’s “value” as a financial asset. If the vehicle is quickly and properly repaired, it is easy to think that’s the end of it, because that is the end of it, at least until you try to sell or trade it, maybe years later. This loss in future resale value is a virtual certainty because a reasonable consumer will not pay the same price for a wrecked, then repaired vehicle, as he or she will for a vehicle with no accident history. Even if the repairs were done well, a vehicle will still lose value, and sometimes a lot of value.

This loss in value is particularly significant when a vehicle was seriously damaged to the point where disclosure of the wreck is required. In North Carolina, if a vehicle sustains 25% or more in damage the seller, by law, is required to disclose the damage by checking in a field on the vehicle’s title. This obviously reduces the vehicle’s resale value since few buyers will pay the same amount for a wrecked vehicle as they would a similar undamaged model. Even if the wreck is less substantial the individual will have significant legal exposure if the individual re-sells the vehicle and does not disclose the prior damage to the new vehicle owner, if the new owner asks about previous damage.

The concept of diminished value is recognized in our law; North Carolina courts have stated that vehicles involved in an accident suffer an inherent reduction in value, and that efficient repairs cannot return said vehicle to its pre-accident condition or value. The law simply reflects what we know: that most car shoppers will not be interested in acquiring a wrecked and repaired vehicle and the few that are demand a hefty discount. Buyers tend to be afraid of the long-term implications of a collision as well as the negative impact on the vehicle history report.

Unfortunately, many consumers do not know their rights and are unaware that they are entitled to a check for “diminished value” in addition to the repairs on their vehicle. Some insurance adjusters will not mention that you are entitled to this payment if you don’t remember to ask for it; some other adjusters refuse to pay it in cases in which the repairs are worth less than 25% of the car’s value. Do not settle for this nonsense! Even if the amount is small, you are entitled to receive it, and the insurance company cannot just argue that you should hide the fact of the repair from the next owner.

The value of your diminished value claim is equal to the difference between the “fair market value” of your property immediately before it was damaged and its fair market value immediately after it was damaged. “Fair market value” is defined as the amount which would be agreed upon as a fair price by you when you wish to sell, but are not compelled to do so, and a buyer who wishes to buy, but is not compelled to do so. You can determine the fair market value through a professional appraisal; more simply, you can arm yourself for negotiating with the insurance adjuster by researching the market — get quotes from dealers, list your car on craigslist.com for sale, and easiest of all through internet searches of book values (nada.com, edmunds.com, kbb.com, etc.). Get as many values as you can, and get them in writing.

At the end of the day, always remember that you need to watch out for your own interests, and insurance company representatives are not going to tell you everything that you may be entitled to. Be an educated consumer and stand up for your rights.