Diminished Value and the modern day Boogey Man

freddy copyIf you ever saw the movie Nightmare on Elm Street, you will remember the repulsive villain – Freddy Kreuger and the look he left on peoples faces every time he appeared on screen. That is the face the insurance claims adjuster sees when he hears the words “Diminished Value”.

Insurance companies made $25.2B in 2014 and they get rich off your premiums.  They manage their profitability by reducing what they call “severity” which is their effective cost to settle a claim.  The less they payout, the more profit they bank and they get richer by not paying claims!  You can’t begrudge them for wanting to make more money but you don’t have to become their victim in addition to their policy holder.  All you can do is educate and arm yourself more than the next guy and get the most you can out of your accident claim.  

Let’s get back to the accident… if you are lucky,  it’s your first which makes you a “newbie” to the claims handling process.  This is the insurance company’s advantage because you have no idea what to expect.  They are the authority and they will lead, while you have no choice but to follow.  There are some trends with insurance claims handling that are quite troubling however and we see people getting the shaft more as a matter of course than upon occasion.  

Here are a few that consumers need to be aware of:

  • If you are in an accident and not at fault, your insurance company will tell you that the “at fault” party’s insurance company will be handling your claim.  Most people don’t see this as a big deal at first and agree but this is a really bad deal for you as the policyholder.  Why?
    • You have been loyal to your insurance company for 20+ years, you are just a number to the other company and will be treated as such.  We hear horror stories every day that range from “nobody will call me back” to denied claims, capped settlements, steering, used parts coercion, inferior repairs, etc.  Remember, your insurance company takes your money but prefers to let someone else handle their customer?  Who will make sure your vehicle is repaired properly and your claim is settled to your satisfaction?  Go get your smart phone and take that “selfie” and get a good look at it because that is the only person looking out for you!  Make sure you let your insurance company know that you are their customer and you want them involved in the claim every step of the way.
    • If the “at fault” party has insurance, you need to file a diminished value claim.  They will tell you that their policy holder does not have that type of coverage and you may need to sue them directly – nice, huh?  They will also try to convince you that diminished value does not exist or isn’t realized until the vehicle is sold – this is false.  Diminished Value happens when the accident happens and your loss in value happens when vehicle history reflects that accident on CarFax or AutoCheck.  Most state insurance commissioners will tell you that in 3rd party claims, diminished value compensation is up to negotiation which means you get what you settle for, not what you are entitled to!
    • If you are not at fault and the person that hit you has limited coverage, you have to accept what they offer.  Wrong!  Their policyholder was negligent and the insurance carrier is responsible for your diminished value loss.  If your damages are greater than the property damage limits on the policy, you will have to file a claim with your insurance company for the difference, but this should not include a claim for diminished value.  Your insurance claims agent will most likely advise you that your rates will be affected if you file a claim with your own insurance company as an attempt to dissuade you but do it anyway if you are getting the shaft from the at fault parties carrier.

How does diminished value happen?

The accident happens and is reported at multiple touch points.  The towing company provides their data to vehicle history agencies like CarFax, indicating an accident happened and the vehicle was inoperable and towed from the scene.  The insurance carrier will report that a claim was paid out on your vehicle to the NICB and that data flows to CarFax.  The police report data is all recorded and transmitted to CarFax.  Impound and storage yards report to CarFax.  In short, everyone that can possible verify that your vehicle was wrecked will most likely do so and be compensated for their trouble.  Your vehicle will unequivocally have accident history and depending on the comments recorded from any one of the above-listed sources, these announcements could be highly detrimental.  We regularly see improvised commentary like “vehicle destroyed”, “probable total loss”, “severely damaged”, etc.  Would you buy a used car that this on the CarFax?  Absolutely not.  This is how “stigma history” negatively impacts the value of your vehicle.  It could look exactly the same as it did before the accident, but nobody will ever purchase the vehicle private party, nor will a dealer accept it as a trade-in because the vehicle is too difficult to dispose of and it will have to be heavily discounted.  That discount equals your diminished value loss.

If you have been in an automobile accident and did not receive compensation for the loss in value, you have up to 4 years to file a claim.  For assistance please visit www.crashcalculator.com or call (888) 674-1068