What Is Diminished Value?
The phrase "diminished value" refers to the decline in the resale value of an asset or vehicle damaged or involved in an accident, even if it has been entirely restored. This is true even if the damage has been completely fixed. For instance, the resale value of a vehicle that has been in an accident but has been repaired might be lower than that of a comparable vehicle that has not been involved in an accident at any point in its lifetime.
This decrease in value can be attributed to several factors, such as the fact that the vehicle's history was damaged, the perception that the vehicle is less reliable or less safe than a vehicle that has not been damaged, and the possibility that the repairs were not done correctly, which could lead to potential issues in the future.
An asset or vehicle's diminution in value may be a significant factor when purchasing or selling it. Insurance companies often include it in the total compensation that must be paid to the owner of a damaged vehicle.
The Different Types of Diminished Value
There usually are three distinct forms of diminution in value: inherent or residual diminution in value, immediate diminution in value, and repair-related diminution in value.
Even after all of the damages caused by an accident or damage have been rectified, a vehicle will still have a value that is reduced because of the accident or damage. This value loss is often referred to as "inherent diminished value" or "residual diminished value." It is predicated on the notion that a vehicle that has a history of being involved in accidents or receiving damage is fundamentally worth less than a vehicle that does not have such a history.
The term "immediate diminished value" refers to the the reduction in value that happens immediately after an accident or damage before any repairs are done. This term refers to the loss that occurs before any repairs are completed. This might include aspects such as the perceived safety of the environment, the perceived quality of the product, and any apparent damage.
The term "repair-related diminished value" refers to the reduction in value that occurs as a direct consequence of the repairs carried out on the vehicle in the aftermath of an accident or damage. Incomplete repairs, the use of components that are not original equipment manufacturer (OEM), or the belief that the vehicle's structural integrity has been damaged are some of the variables that might cause a vehicle's value to reduction in value after an accident even if it has been completely restored.
The particular forms of diminished value might change based on the circumstances and the kind of asset or vehicle being discussed here. For instance, the value of the vehicle may decrease for various reasons, including the vehicle's location or condition.
The term "residual or inherent diminished value" refers to the reduction in value that continues even after a damaged vehicle has been entirely restored to its pre-accident state. This reduction in value occurs regardless of whether or not the property or vehicle was insured. The fact that the vehicle now has a history of damage, which may have a detrimental influence on its resale value, is the primary contributor to this reduction in value.
In other words, even if a vehicle has been restored to the point that it looks brand new, the value of the vehicle may still be lower than that of a similar vehicle with no history of damage. This is because prospective purchasers may be reluctant to purchase a vehicle with prior accident involvement, even if the vehicle has been completely repaired. Therefore, the prospective purchaser may be prepared to purchase the prospective vehicle at a lesser price.
How Is Diminished Value Calculated?
When determining a vehicle's residual or inherent diminished value, it is common practice to consider various criteria, including the make and model of the vehicle, its age, the condition it was in before the accident, and the degree of damage that was repaired. This computation, which may be used to calculate the compensation owed to the owner of the damaged vehicle, is usually carried out by a licensed appraiser or valuation expert.
Are You Eligible for Diminished Value?
The ability to file a claim for diminution in value under an insurance contract might be contingent on a number of factors, including the particulars of the occurrence, the insurance contract itself, and the State's laws. Nonetheless, in general, most parties not at-fault for an accident are eligible to recover the residual diminution in value after repairs.
Suppose you own a vehicle that has been damaged in an accident or has been damaged in another form. In that case, you may be eligible to file a claim for diminution in value if you can demonstrate that the damage has reduced your vehicle's resale value. This is the case if you can prove that the damage has resulted in a reduction in the resale value of your vehicle.
The driver who is found to be at fault in an accident:
If you are found to be at-fault in an accident, and your insurance contract includes liability coverage, you may be required to pay for the diminished value of the other driver's vehicle as part of the total compensation that is awarded.
The driver who was not at fault in the accident:
If you were the driver who was not at-fault in an accident, and the driver who was at-fault had an insurance policy that included vehicle damage liability coverage, then you may be eligible to file a diminished value claim with the insurance company that covered the at-fault driver.
Notably, the eligibility criteria for submitting a claim for diminished value may vary based on the insurance contract and state legislation. These conditions must be met to be eligible to file a claim. Additionally, filing a claim for diminished value can be complicated. Consult with a licensed adjuster, experienced appraiser, or licensed attorney, to ensure that you follow the appropriate procedures and make the most of the compensation you are entitled to.
The regulations governing diminished value claims differ in each state, and some states do not permit residents to file these claims at all. Nonetheless, a few jurisdictions acknowledge claims for diminished value, and some states mandate that insurance companies pay compensation for the reduction in value of a vehicle that has been involved in an accident and sustained damage.
It is important to remember that the specific laws and regulations governing diminished value claims can vary significantly from one state to the next. Because of this, it may be beneficial to consult with a licensed adjuster, experienced appraiser, or licensed attorney, to ensure that you are following the appropriate steps to recover your residual loss.
How to File a Diminished Value Claim?
The procedure for filing a claim with an insurance company for diminished value might differ from one insurance company to the next, depending on the kind of insurance contract you have and the particulars of the accident. On the other hand, in general, the following stages could be included in the process of submitting a claim for diminished value:
Obtain a professional, USPAP-compliant appraisal report:
You will need to seek a professional evaluation from a competent appraiser or valuation expert to determine the amount to which your vehicle's value has decreased due to the damage. This evaluation has to consider a variety of elements, including the make and model of your vehicle, its age, the condition it was in before the accident, and the level of damage that was repaired.
Inform the insurance company of your intention to recover diminution in value after getting an appraisal. Once you have obtained an appraisal, you should tell the insurance company of your wish to file a claim for diminished value. The insurance company you work with has specific conditions that must be met to file a claim, such as a specific date by which the claim must be submitted or a particular set of documents that must be presented.
Documentation must be submitted:
In addition to an expert appraisal, you may be needed to provide other documents to support your claim. This material may include copies of the police report or repair invoices.
Negotiate a settlement:
When the insurance company has investigated your claim and the evidence that supports it, they may give you a settlement offer to which you may agree. Negotiate a settlement. You can negotiate for a more considerable amount of compensation if you feel that the settlement amount offered is insufficient.
Explore legal alternatives:
If you cannot achieve an acceptable settlement with the insurance company, consider speaking with a knowledgeable attorney who specializes in insurance bad faith or property damage and can advise you on your legal options.
The processes needed in submitting a diminished value claim may vary based on the facts of the occurrence and the insurance contract. Also, the process of submitting a claim may require some clarification. It may be beneficial to speak with an licensed adjuster, experienced appraiser, or licensed attorney to ensure that you are following the appropriate and best processes and making the most of the amount you are entitled to.
Citations and Disclosures:
*Please note that the following information is provided for general informational purposes only and should not be construed as legal advice. It is recommended to consult with a qualified attorney for advice specific to your situation. Laws regarding auto accident claims may vary by jurisdiction, and the outcome of individual cases depends on the unique circumstances involved.
