Loss in value, also referred to as “diminished value” or “diminution in value,” describes the lowered value of an item, in this case, an automobile, after it has been damaged and repaired, whether in an accident, natural disaster or by vandalism.

Loss in value is mostly an issue in insurance claims made following an automobile accident. An automobile loses value after it is damaged in an accident. This is true even if the automobile is repaired and can be operated after the repair. How much value it loses depends on the nature of the damage and the quality of the repair.

If the owner of an automobile files a police report or an insurance claim reporting damage to their auto after an accident, the information is logged into Carfax. Carfax is a website that provides vehicle history reports. The information can be seen by anyone who has access to Carfax. Auto dealerships and others are likely to offer less money for the car if it has a history of sustaining damage in an accident. A claim for loss in value is different from a claim for the cost of repair or the cost of a rental car. It is the decrease in value that a car sustains solely because it has been damaged.

If Driver A is at fault for having caused an accident, then Driver A will be responsible for the loss in value of their own vehicle. However, if the negligence of Driver B caused the accident, Driver A may try to claim that Driver B is responsible for the loss in value. Driver A might then file a claim with Driver B’s insurance company or with their own insurance company, to collect damages for the loss in value of the car, even if it is repaired and becomes fully operable again.

When Can I Recover for Loss in Value in an Automobile?

The law in some states allows Driver A, the driver not at fault, to file a claim for loss in value with their own insurance company. However, most states allow Driver A to file the loss in value claim with the insurance company of Driver B, the driver at fault.

An insurance company is not required to compensate for loss in value just because Driver A claims it, and Driver A bears the burden of proving that their automobile has lost value. In order to win compensation from an insurance company for the loss in value of an automobile, drivers must show:

  • They were in an accident that involved the automobile of a driver insured by the company;
  • The driver insured by the company was at fault; their negligence caused the accident;
  • Their vehicle’s value decreased after the accident;
  • The owner of the automobile, Driver A, suffered damage as a result.

In some states, it is relatively easy to prove that a vehicle’s value went down because of an accident. What is more difficult is proving that the driver suffered damage. Some states require drivers seeking damages for loss in value to show that they were considering selling the vehicle before the accident. If the driver never planned to sell the vehicle, then a loss in value really does not cause the driver any harm.

Some states do not allow drivers to recover the loss in value of their own automobile from their own insurance company. Also, it is important to remember that all insurance payments for harm to a policyholder is based on the contract of insurance. If the contract does not provide coverage for loss in value, the insurance company will not pay such a claim. Standard collision coverage in an auto insurance policy provides payment for the provable cost of repair and maybe a rental vehicle while the repair is being done, but not for loss in value.

If, however, another driver caused the accident that damaged a person’s auto, then the person can claim loss in value from the insurance company of the other driver, the one who is at fault. The law varies from state to state, however, in some states, the insurance company for a driver whose negligence causes an accident must pay for the loss in value of the non-negligent driver.

If a person believes that their automobile has lost value, even after damage sustained in an accident has been repaired, they may want to consult an experienced auto accident attorney for guidance in making a claim for loss in value.

How Much Can I Recover?

The amount of recovery for loss of value is generally the difference in the fair market value of the automobile before and after the accident. Determining the fair market value can sometimes be a difficult task.

In some states, the insurance company will look at an insurance company’s comparable payments. That is, they will look at how much insurance companies pay for autos that have been completely destroyed in accidents if they have no history of damage. They will compare this to the amount paid for totaled autos that do have a history of involvement in an accident. The idea is that insurance companies themselves pay more for autos that have not been damaged in accidents than they pay for those that have been damaged.

Or, an insurance company might look at an independent source for information about values such as the Kelley Blue Book. The Kelley Blue Book has long been a trusted source for information about automobiles and prices for both new and used autos (as well as boats and other vehicles).

Insurance policies may also have clauses that limit when and how much can be recovered for loss in value. So it is important to find out what any insurance policy involved has to say on the subject.

Are There Any Defenses?

As stated above, the law regarding loss in value damage claims varies from state to state. This affects the situation with regard to defenses to the claim as well. The most common defense to a claim for loss in value include the following:

  • Contributory negligence: the negligence of the driver seeking to recover for loss in value contributed to the accident; so the driver is not entitled to recover damages for loss in value;
  • The vehicle was restored to a value that is comparable to the value it had before the accident when damage was repaired;
  • The value of the auto did not decrease because of the accident;
  • The car was totally destroyed, so the owner is entitled to be paid only what the auto was worth before the accident;
  • The value of the car was less than the amount the owner is seeking to recover.

Of course, it is always possible to counter the proof presented by the owner seeking damages for loss in value. So, for example, the insurance company could argue that the owner of the auto still owns it and has no intention of selling it in the near future. Thus, the owner has not suffered any damage.

Do I Need an Attorney?

If you have been in an accident, you may have questions about the diminished value of your car. Or, you may be having trouble dealing with insurance companies and making a loss of value claim. You may be unsure of the law regarding loss in value claim in the state where you live.

In any of these situations, it would be advisable to consult with an experienced car accident lawyer. An experienced car accident lawyer will know the law in your state and whether loss in value claims have any chance of success. They can guide you in making a claim and in negotiating with the insurance company. You have the best chance of success if you have an experienced personal injury or auto accident attorney on your side.