Diminished value is calculated by determining a vehicle's value before a collision and subtracting the vehicle's value after the accident and repairs. The difference equals the vehicle's diminished value. Insurance companies, like GEICO, Allstate, and State Farm, rarely pay this value in property damage claims.
So when an insurer pays to repair your vehicle does not - because it cannot with CarFax - restore the car to its pre-loss condition, the insurer must compensate its insured for the diminished value resulting from the irreparable damage you have suffered.
Many personal injury cases are with victims getting a sneak preview of how the insurance company will treat them in the property damage claim. Insurance companies do not settle serious accident claims - not typically, anyway - until far later down the road when the client has recovered or reached maximum medical improvement (the healing has come as far as it will).
Property damage claims are immediate, so it gives the victim the first glace of the extent to which the insurance company will completely jerk them around. Loss of value claims are tailor-made for insurance companies not to play it straight.
Insurance companies do not play fair when it comes to the diminished value of the victim's vehicle. By taking advantage of victims, they save hundreds of millions of dollars a year. We all know that the minute the dealer looks at CarFax. They see the car has been wrecked and they automatically give you less on your trade-in. This is the definition of diminished value.
Theoretically, the law is exactly what it should be. Maryland law allows the victim either (1) the cost of repairing the vehicle and the loss of value of the vehicle because of the accident, or (2) the fair market value of the car if it is a total loss.
The key word there is "and." The insurance company is responsible for both. Because a repaired vehicle will likely have a reduced value as a result of its history of being in a crash. Under Maryland law, compensation for diminished value is required under the "basic principle that the injured party should, insofar as possible, be restored to his original position before the accident.”
So this is not complicated. There are few tort claims you can solve with a calculator. But this is one of them. It is a simple calculation.
Specifically, and we flush this out below, the Maryland Court of Special Appeals found in 1971 that if a "plaintiff can prove that after repairs his vehicle has a diminished market value from being injured, then he can recover in addition to the cost of repairs the diminution in market value, provided the two together do not exceed the decrease in value before the repairs.” That is the calculator to use to prove diminished value on a car, not 17c or KBB diminished value calculators many want to use. The lost value is the actual lost value, not some formula that projects diminution of value without considering the actual vehicle at issue.
So Maryland law is that plaintiffs may recover damages for the diminished value of their property under either trespass, nuisance, negligence, or strict liability.
Sounds great. The problem is that insurance companies, at least in Maryland, ignore diminished value claims. How? They uniformly refuse to pay its policyholders and third-party claims when the vehicle has sustained damages that decrease the resale value.
Yes, Maryland law allows plaintiffs to bring a diminished value claim. But, practically, the insurance companies understand that most lawyers will not touch diminution of value claims unless they are connected to a serious injury claim (our law firm is certainly guilty of this).
So for most diminished value accident claims, no one is willing to hire an expert and file a lawsuit. So, unless you take them to the courthouse steps and beyond, these diminished value claims are unlikely to get paid.
This problem has become an even bigger deal with the rise of CarFax which allows everyone to quickly check the accident history of a vehicle. This cuts down the market for potential buyers when you go to sell the car.
The most surefire way to beat the insurance company in a diminished value claim is a long way -- a lawsuit.
What is the answer? Well, if you have been seriously injured in an accident, your lawyer may be willing to push the ball on your diminished value claim.
If not, there are not a lot of great options. The best is not the one you want to hear: push the insurance company by filing suit on diminished value, let them know you know you need an expert and line one up, and then settle your claim for the best value you can get.
- Property damage claims: how they work and how can you put yourself in a position to get the best deal.
- Personal Injury Victims Help Center (information on everything you want to know about personal injury claims)
- Demand Letter to Insurance Company (template demand letter for compensation to the insurance company in personal injury - not property damage - case)
Whether a diminished value case is worth it depends on how unreasonable the insurance company is. The juice is not worth the squeeze if the insurance company is shorting you $100. But if there are thousands of dollars involved, that is a very different story.
How to make a diminished value claim is a little bit tricky because it is rare that your case is going to justify retaining a lawyer and it is unlikely a lawyer would take a diminished value claim on a contingency fee basis.
But for small value claims, most courts make it pretty easy to make a claim and they relax rules of evidence and other legal technicalities that can make bringing a legal claim a challenge. In Maryland, it is pretty easy to bring a lawsuit for less than $5,000.
Some insurance companies pay for diminished value and others do not. But clearly paying victims less is a path for the insurance companies to make a great deal of money.
There are no real statistics that give an average diminished value settlement claim value. No calculator will give you an exact amount for your claim. The appraisal of the vehicle has some subjective elements to it so any diminished value calculator you find online is likely to be of limited value.
More globally, some have estimated that insurance companies pay accident victims an average of 10% that what they deserve. So while our lawyers can cite an average, there is no question that insurance companies habitually pay victims less than the true value of the property damage claim.
As we discussed a few questions above, you can absolutely file a lawsuit for a diminished value claim. In Maryland, if you file a claim for under $5,000, it is much easier to get by without a lawyer than it would be if the claim is more than $5,000. Why? Maryland relaxes rules of evidence and other administrative hurdles when you file a lawsuit for less than $5,000.
Insurance companies are required to pay the diminished value of your vehicle from a car accident. The problem is that to make them pay what you are owed, you are often required to file a lawsuit.
We handle serious injury Maryland auto accidents and have prevailed at trial in hundreds of car accident cases.
Our accident lawyers have also successfully settled thousands of cases for clients injured in automobile accidents, recovering millions of dollars in compensation for victims by settlement or trial in 2017. If you or someone you love has been very seriously injured or killed in a car accident, call us at 800-553-8082 or click here for a free consultation. (Please note: we do not handle property damage only or minor injury claims.)Diminished Value Law Around the Country
We have pulled some of the laws around the country on the issue of diminished value claims. As you will see, the results are mixed:Good Cases
- Maryland: Fred Frederick Motors, Inc. v. Krause, 12 Md. App. 62 (1971) (This case is the major source of Maryland's diminished value law. Every car accident lawyer should know this case. Maryland's intermediate appellate court held that the owner of a car that is damaged may recover any reduction of the vehicle's value that exists after the vehicle has been repaired as well as it reasonably can be repaired. This means that the correct calculation of a measure of loss caused by an accident is the difference in the market value of the car immediately before the crash and the combined amount of its value immediately after being repaired.)
- Maryland #2: Admiral Ins. Co. v. John Stromberg & Assoc., 77 Md. App. 726, 738, 551 A. 2d 923,929 (1989). (For the definition of the word replace "generally defined to mean the ‘restoring to a former condition,’ or ‘the providing of an equivalent for.’”)
- Maryland #3: Taylor v. King, 241 Md. 50 (1965). (Maryland's rule on the measure of damages on vehicles that are not a total loss is "is the reasonable cost of the repairs necessary to restore it to substantially the same condition that it was in before the injury, provided the cost of repairs is less than the diminution in market value due to the injury...and when the cost of restoring a motor vehicle to substantially the same condition is greater than the diminution in market value, the measure of damages is the difference between its market value immediately before and immediately after the injury."
- Washington: Moeller v. Farmers Insurance (automobile insurance policy provided coverage for the diminished value of a fully repaired car because the average insurance consumer would read Farmers' policy to provide coverage of equal value to the real loss which includes diminished value)
- Ohio: Rakich v. Anthem Blue Cross (reversed the lower court finding residual diminution in value. The court said that the claim does not overlap the cost of repairs "because it is calculated based on a comparison of the value of the property before the injury and after repairs are made, i.e., excluding injury compensated by damages for the cost of repair." Court noted in its opinion similar findings in Arizona, Colorado, Florida, Iowa, Louisiana, Mississippi, New Jersey, Oklahoma, South Carolina, Virginia, West Virginia, and the District of Columbia.)
- Massachusetts: Given v. Commerce Insurance Company (court rejected diminished value claim saying: "We will not torture the plain meaning of the terms 'repair' and 'replace' to encompass 'repair' or 'replace[ment]' of damage caused by stigma, a form of damage that, by definition, defies remedy by way of 'repair' or 'replacement.")
- South Dakota: Culhane v. Western National Mutual Insurance Company (court disagreed insurer was obligated to pay, citing similar law in Florida, Louisiana, Maine, and Massachusetts)
A diminished value calculator that computes the exact value of the loss on the vehicle that a court could rely upon would make these claims a lot easier to manage. But there is no formula for these appraisals. The loss of value depends on the type of car, the type of collision, and a host of other facts.
Keep in mind that there is arguably a flaw in using a blue book calculation. Some argue that 90% of cars today are sold below blue book value. Why? It is common practice for trade-ins to take rebates, incentives, and other discounts available to the automotive dealership and add them to the trade-in value of a car during a new car purchase.
This artificial appraisal inflates the trade-in value of the car. Why do dealers do this? Buyer assumes they are getting a better deal when they get more for their trade-in. It gives the seller credibility that they are fair. The reality is that they are just giving you more on the trade-in and charging you more on the car. So this reality improperly inflates the value of cars. Be prepared for this argument with the insurance adjuster and at trial.
You may need an expert to bring a diminished value claim to appraise your vehicle and to calculate the inherent loss to the Plaintiff's vehicle following the crash. This is the best way to prove a diminished value claim. This is a partial list of experts who provide this type of estimation of loss testimony in Maryland
- Reed Appraisers: 301-946-6116
- Collision Consulting (Randy Williams): 443-324-4476
- Randy Cole: 410-207-6294
*Note: Miller & Zois does not endorse these experts. We are merely passing along the names of these experts who may be able to provide evidence that your vehicle is diminished in value because of its repair history.Lawsuit Language for Diminished Value Claim
COUNT II – DIMINISHED VALUE TO VEHICLE
- Plaintiff incorporates the above-referenced paragraphs as if the same were fully set forth herein.
- Defendant's negligence caused substantial and extensive property damage to Plaintiff's 2019 Honda Accord ("Plaintiff's car").
- On the date of this collision, Plaintiff's car had an odometer reading of 742 miles and it had not been previously damaged.
- The damage to Plaintiff's car was repaired for $18,398.16 and took at least 45 days to repair.
- As a result of Defendant's negligence, the resale value of Plaintiff's car has been significantly diminished because future buyers will know of the damage to the vehicle and the price will reflect this car crash.
- The car is brand new. There has been no prior damage.
- Plaintiff has not been reimbursed for the diminished resale value loss to her vehicle.
WHEREFORE, Plaintiff, demands judgment against Defendant Miner for Ten Thousand Dollars ($30,000.00) in compensatory damages, plus interest and costs.Maryland Law on Diminished Value Claims
A diminished value claim is permitted in Maryland if the sum of the diminution in value plus the repair costs is less than the difference between the vehicle's pre-accident value and its post-accident salvage value.
Accordingly, a Maryland plaintiff can claim the smaller of: (1) the sum of the repair costs plus any decrease in value of that vehicle after the repairs, and (2) the difference between the vehicle's value before the car crash and its value after the accident before any repairs (the salvage value).
If you are taking one of these cases to trial, bring everything relevant to the value of the vehicle including
- the blue book value and evidence of the value of this vehicle in this jurisdiction
- recent auction sales of the same vehicle
- warranty (even if expired)
- purchase records
- service records
- technical service bulletins regarding the vehicle
- Getting a Rental Car (overview of the rules and what you can do)
- Sample Expert Witness Diminished Value Report (sample report from expert showing the factors that go into a diminished value property damage claim)
- Kelly's Blue Book (the gold standard in determining the value for total loss)
- Property Damages Release (signing the wrong release can be fatal to your property damage claim
- Law Review Article on Diminished Value Claims
- How Long Should It Take to Settle My Case? (information on how long a personal injury claim - as opposed to a property damage claim - will take to settle)
- 8 Mistakes Car Accident Victims Make in Settling Their Own Case (what the insurance companies do to take advantage of people to settle claims for less than they are worth)
- An example of how insurance companies confuse victims with the law and what and how much they are entitled to recover
- What Happens in an Accident Case? (looking at the case from the client's perspective from beginning to end)
- Handling Your Injury Case Without a Lawyer (tips and strategies)
- What Is the Value of Your Accident Case? (article on how value is placed on the pain and suffering component of personal injury claims)
- Contacting Our Law Firm: Our lawyers handle only serious injury car accident claims. If you or someone you love has been seriously injured in a car or truck accident call 800-553-8082 or get a free online consultation.