If you have been in a wreck in California and the other driver was at fault, you have a chance of recovering more than just the cost of your medical bills and repairs to your vehicle. It may be worth your while to file a diminished value (DV) claim with the other driver’s insurance company.
A wrecked vehicle almost always incurs a reduction in value. The stigma attached to a car that’s been in a wreck makes potential buyers unwilling to pay as much for it as they would pay for a nearly identical vehicle with a clean history.
It doesn’t matter if repairs were done so beautifully it looks like the vehicle just rolled off the factory floor and its frame and engine are in perfect condition. When buyers see an accident in a vehicle history they get suspicious of a car’s integrity.
What Is Diminished Value?
Diminished value is the difference between your car’s market value before an accident and after.
DV should not be confused with depreciation, which is a vehicle’s natural reduction in value over time. Unlike depreciation, diminished value is not a natural process. One day your car is worth $45,000; the next day BOOM! Suddenly it’s worth only $38,000.
Diminished value compensates vehicle owners for lost market value. If your car is older, high mileage, or a “garden variety” make or model, that amount won’t be very much. If it’s newer or is a luxury car or other very valuable vehicle, however, you could possibly recover thousands of dollars.
Mistakes in a Diminished Value Claim Cost Money
In California, you have three years from the date of an accident to file a diminished value claim. It may sound like there isn’t a rush, but it’s a mistake to delay. Delays can hurt your recovery chances; when you file in a timely manner it’s easier to prove your case. Otherwise, your car may continue to decrease in market value or more damage could happen, giving an insurer ample reason to argue against paying.
People commonly believe they can file a DV claim with their own insurance carrier, but it must go through the other’s driver’s company. It’s up to you to gather all the evidence and make the claim yourself.
If the other driver was uninsured it may be impossible to recover DV. However, if you have uninsured motorist property damage coverage in your policy, you may be able to file a claim with your own insurer.
It’s worth noting here that it’s probably a mistake to try to recover diminished value before repair work is completed. Such recovery is very rare and almost always requires a trip to court.
To file a DV claim, you’ll need to write a demand letter to the at-fault driver’s insurance company. It should contain all the basic information: you name, the other driver’s name, the date of the wreck, the claim number, the fact that it’s been established you were not at fault and the fact that your vehicle is now worth less than it was before as a direct result of damage incurred in the accident. (It’s up to you to provide evidence of the latter.)
Finally, your demand letter should include the amount of lost value you are claiming. Here’s where a lot of people make their biggest mistake in recovering DV; they undervalue their claim.
Why? Because they trust a free online diminished value calculator, which is notorious for undervaluing vehicles. Online calculators offer a generic estimate that doesn’t take into account such important things as a car’s great maintenance record and extra features.
The insurance company may know your claim is worth more, but they’ll happily take the discount you’ve provided and pay the lesser amount.
Another common mistake in DV recovery is blindly accepting the insurance company’s settlement amount.
Most insurance companies calculate DV using something called the 17c Formula and it also has a reputation for undervaluing cars. You have every right to challenge a settlement offer you believe is too low.
How to Get an Accurate Diminished Value Estimate
There are a couple of ways you can prove your car is not worth what it was before the wreck. You could offer to sell it to a dealer and get a statement of the price, but it may be difficult to get them to put in writing that the reduced figure is because of the accident. If you can get a dealer to say that, though, it’s excellent documentation.
A better route is to take the repaired vehicle to an independent expert auto appraiser. A well-documented report from an unbiased professional is much harder for an insurance company to dispute. The cost of appraisal can be added to the diminished value claim.
To prove your DV claim, find a licensed appraiser, such as Auto Mediator, and take your vehicle in to get a detailed report.
Auto Mediator knows the auto industry inside and out. Our expert appraisers have been helping owners recover diminished value for over 25 years.