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Diminution in Value

What is Diminution in Value Claim and is the Owner of a Vehicle Entitled to that Damage?

In today’s electronic age, it is astonishing how much information is available on any subject.  If you have an accident in your vehicle and an insurance claim is paid… that information is now in a database that anyone with a few dollars can access.
Regardless of how well the repairs are done, the stigma of your vehicle will be that it was involved in an accident and possibly less reliable than it was prior to the collision.
If you trade in your vehicle for a new one, you will find that in most cases the dealership will run a report to see if the vehicle has ever been involved in a collision resulting in an insurance company payment. Once this is known, it can have a significant amount of impact on the “trade-in value” of your car. Although the at fault party’s insurance company paid you to have the vehicle repaired, and even if the sharpest eye can’t see the repairs, the market value of a vehicle can be much less than if it were not involved in an accident.
The reduction in value caused by the stigma of the vehicle being involved in an accident is called Diminution in Value.
When dealing with third-party claims, some insurance companies recognize this loss and will gladly pay the vehicle owner for the lost “resale” or “current” value. Others have argued there is no clear case law in Arizona addressing this issue, and since they have restored the vehicle to “like new” condition, they have no further obligation.
In July 2011, the Arizona Court of Appeals (Division One) ruled that the loss of resale value of a vehicle resulting from an accident is recoverable in third-party claims. (NOTE: This discussion of Diminution in Value Claims is applicable only in liability losses – not first party collision claims.) In Oliver v. Henry (1 CA-CV 10-0701), the Appeals Court recognized “Diminution in Value” as the measure of damages the difference in the value of the property immediately before the accident and the value of the vehicle immediately after the vehicle’s repair.
In this specific case, they established that the “trade in” value of his vehicle at a dealership was $8,000 less than if the vehicle had not been involved in the accident. Even though Mr. Oliver had no intention to sell the vehicle immediately – he argued that he was entitled to the $8,000 because it was a real and definable difference in value resulting from the accident.
It is rather easy to establish the dollar amount it will cost to repair a vehicle, however, it takes special knowledge to estimate the “reduced value” to a repaired vehicle. Some insurance companies have willingly hired consultants to calculate the “diminished value” while others have relied on input from local dealerships. Yet still, some insurance companies (such as in this case) have denied any legal responsibility for the reduced value.

Of course, there will continue to be arguments, and no doubt litigation, over how to determine the “amount” of loss resulting from diminished value. I’m sure there will remain enough confusion on how to determine “before loss” versus “after loss” values to keep the legal profession gainfully employed for many years.

Click Here for the Oliver v. Henry Court Case.

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