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Smart Shopper Questions About Auto Insurance & Accidents
4405 messages, Last post on Oct 17, 2009 at 9:53 AM
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Insurance companies in Ohio in have no choice but to pay diminished value to insureds when repairs fail to restore a car to its preloss condition, whether or not there is an exclusion in the policy. Insurance is based on the premise of indemnification. So if I have a car worth $30k before an accident, it doesn't matter how much is spent on repairs, if it is not worth $30k upon completion then the insurance company still owes me money. The insurance company has the option of repairing my car, totaling my car and paying me the retail cash value, or replacing my car. It's their choice and they may choose the method most economical for the company. When they choose to repair, they take on the burden of repairing the car to the condition that it held prior to the loss. Since no car can be repaired to that level, there is a potential for DV on every claim. Insurers, too, understand diminished value and reluctantly admit to its existence when their backs are to the wall. During State Farm Mutual Automobile Insurance Co. v. Mabry, 274 Ga. 498, 501; 556 SE2d 114 (11/28/2001), a lawsuit that caused insurers to begin paying diminished value claims as a normal course of business in the state of Georgia, State Farm provided testimony under oath confirming that the potential for diminished value exists in every claim, even when cars appear properly repaired. Georgia Supreme Court Justice Robert Benham wrote the following November 28, 2001, recounting the testimony of State Farm's witnesses and documents it presented during discovery: “... The first question, whether diminution in value occurs even when physical damage is properly repaired, is one of fact. The trial court found that there is a potential for a diminution in value loss in every event of loss, and that diminution in value can occur even when a vehicle is repaired properly. In support of those findings, the trial court relied primarily upon documents produced by State Farm during discovery and upon the testimony of State Farm’s witnesses. The documents from State Farm acknowledged that there is a common perception that a wrecked vehicle is worth less simply because it has been wrecked. Witnesses for State Farm testified that a potential for diminution in value exists in every automobile accident, and that the public perceives a loss of value in any wrecked vehicle and would choose an unwrecked vehicle over a wrecked one, assuming the vehicles are otherwise the same ...” When the repair option is chosen, the quality of repairs is an important consideration for two reasons: 1) If I wreck my $30K car and it is totaled, it will cost the insurance company $30K to either replace it or pay me the cash value so I can buy another. But when the repair option is chosen by an insurer, the preloss language in the law prevent them from putting a wooden fender on in place of steel that they could buy for a fraction of the cost. I must get my car returned in the same condition after repairs as it was in before the loss. If that can't be accomplished (and it never can) they must make up the difference in money or keep repairing, re-repairing, and re-repairing the rerepairs. 2) If during repairs my car's value is enhanced in some manner, I would owe betterment. So why would it be that if an insurer chose to repair my car leaving it less valuable than it was, why would I be required to absorb the loss from a poor choice the insurer made? I pay when it is bettered and I also pay when its value is lessened???? What's fair about that? Personally, I don't know what the big deal is with this case, especially if it is third-party. I have been valuing cars for more than 10 years for attorneys and consumers, and all insurance companies pay diminished value in Ohio in third-party cases. All pay in first party cases where repairs fail to indemnify policyholders. Lastly, the difference in a car's value before and after the loss is the primary measure of damages in Ohio. Cost of repairs is a secondary measure to be used when there is no testimony regarding value. Now ask yourself this question: Why would insurers use the secondary method of determining a settlement instead of the primary method? Answer: Because with few people filing dimininshed value claims insurers wind up making out like bandits instead of paying all they owe, and most people don't even know they have been cheated. They skimp on repairs and very few ever consumers have cars inspected postrepair to find out the true condition of their auto and its postrepair value. Diminished Value Slideshow Diminished value is your auto insurance company's best kept secret David Williams Auto Repair and Diminished Value expert
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Replying to: dvexpert (Aug 25, 2007 5:07 pm) Determining inherent DOV (as opposed to repair-related DOV) seems like a difficult task. I know some folks use "calculators" (formulas) in order to quantify judgment but these formulas seem to create as many problems as they solve. |
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Replying to: dvexpert (Aug 25, 2007 5:07 pm) Just why Nationwide took this stance (you said "all" insurance companies pay such claims in Ohio) is unknown. |
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...isn't DV really only applicable when the car is sold at some point in the future?? You may suffer a loss today of X dollars but should the insurance company have to pay that amount if you don't sell the car immediately? After all, is the DV going to be the same in 10 years when you finally trade in that 200K vehicle? Devil's Advocate Here.
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Replying to: robr2 (Aug 27, 2007 9:24 am) In my example above a vehicle owner has an asset worth $30K in its preloss condition. A loss occurs and the value immediately depreciates by at least $10K with $10K in damage. The asset is now worth $20K. Repairs are begun and $10K is spent on reconstruction. But is the car again worth $30K now that its repaired and has a damage history? Probably not. Is it worth $29K? $28K? Probably not. Most people would rather buy an undamaged car than take the risk of buying the repaired one for only a $2K savings. Would $5K in savings turn the head of a buyer? What would it take to make someone want a repaired car over one that had never been damaged? When you find that number (a number that represents what a consumer will pay in an armslength transaction with full disclosure) you will know the amount of DV you are owed. If you have proof that your asset has lessened in value, and an insurance policy that promises to pay you for your losses, why wouldn't you want to collect for the diminished value just as you did for the damage to the fender? Both are losses caused in the same occurrance and covered by the same insurance policy. What logic has you convinced that you can be paid for one now, but you have to wait to collect the other? The average diminished value loss is staggering. Why would you want to wait to collect what you are rightfully owed immediately after the accident? David Williams Safe Collision Repairs |
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DV now means that the insurance can close the file on the claim...insurances hate nothing more than keeping a file open indefinitely for something as simple as DV...what if you do not sell the vehicle for 7 years, that is a long time to keep a file open, now multiple that by 1000s of vehicles, and the recordkeeping would be a nightmare... Also, the DV 10 years down the road may not matter, but it would when the car is newer...if you bought a ten year old vehicle, even knowing it was wrecked 9 years ago, would hardly change the vaue of the car at year 10, as it has already lost much of its value...so recovering DV at year 10 might just be silly... Did I miss the point???
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Replying to: marsha7 (Aug 27, 2007 5:34 pm) One does not have to sell their vehicle to collect diminished value. It is an element of loss just like damage to a bent fender and other property damage. If an insurance company accept liability for damage, diminished value should be included. Is there Good Hope for Fair Auto Insurance Settlements? David Williams |
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the point I may have missed...of course DV should be included, my point was that it should be paid at the same time the repairs are concluded, as DV will have the greatest effect the newer (younger) the car is... I meant that for a company to pay DV 5 years later would be silly, as the greatest DV takes place when the car is newer, or, put another way, paying $2500 in DV when the car at 10 years old is only worth $3000 from a wreck 5 years ago makes no sense... We incur the loss now, so DV should be paid now, as tho it would compensate us for the loss of value as tho we traded the car in today, not some time in the future... |
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Replying to: marsha7 (Aug 28, 2007 6:13 pm) I am curious though, why an advocate for the collision repair industry would be pushing dv so hard? It will only really detrimentally effect the industry (except for PRI's) More vehicles will total, earlier and more often. In addition, it likely will work out to be a wash for the carriers as they will now -- and with impunity -- be able to reduce total-loss ACV settlements for DV. If carriers start giving DV, you can rest assured they will start taking DV.
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Replying to: marsha7 (Aug 28, 2007 6:13 pm) |
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