Diminished Value: Your Car Is Worth Less After a Crash, and the Insurer Owes It

Published May 13, 2015 · Injury Law Basics

Picture two identical three-year-old Honda Accords on a used-car lot in Beavercreek. Same color, same mileage, same options. One has a clean vehicle history. The other was rear-ended on I-75 last year and had $9,000 in body and frame work, all done well by a good shop. Which one would you buy, and would you pay the same price for it?

Everyone knows the answer. The car with the crash history sells for less, often thousands less, no matter how good the repair was. That difference has a name, diminished value, and when the crash was someone else's fault, Ohio law lets you recover it from the driver who caused it, which in practice means that driver's insurance company.

Most insurers will not bring it up. Many people never ask. This post explains what the claim is, how it is proven, and how it fits with the rest of your case.

What "diminished value" means

When another driver damages your property, the basic measure of your loss in Ohio is the difference between what the property was worth before the crash and what it is worth after. For a car that can be repaired, the insurer typically pays the cost of repair. But the cost of repair is not always the full loss. If the repaired car is worth less than it was before the crash, the remaining gap is diminished value, and it is part of the damage the at-fault driver caused.

There are a few reasons a repaired car loses value:

• The record follows the car. Insurance claims and police reports feed the vehicle-history reports that buyers and dealers now check as a matter of routine, so the crash is known to anyone who looks.
• Buyer perception. Even a flawless repair leaves buyers wondering what they cannot see. They pay less to compensate for the risk.
• Repair quality. Some repairs are not flawless. Paint that does not quite match, panels that do not quite line up, or a frame that was straightened rather than replaced all reduce what the car brings.
• Trade-in. Dealers routinely knock money off a trade-in with a reported accident, regardless of how it looks.

The newer and more valuable the car, and the heavier the damage, the larger the diminished value. A late-model vehicle with structural repairs can lose 10 to 20 percent of its pre-crash value. An older car with a dented bumper may lose little or nothing.

Who pays

This is a third-party claim. You make it against the at-fault driver's liability insurer, the same company paying for your repairs and your rental. It is not a claim your own collision coverage will pay in most policies; your own insurer's contract with you is usually limited to repair or replacement, not loss of market value.

That distinction matters. When the other driver is at fault, your damages are measured by the law of negligence, which says you are entitled to be put back where you were. A check for repairs that leaves you with a car worth $4,000 less than before does not do that.

How the claim is proven

Diminished value is real, but an insurer will not take your word for it. The claim needs evidence:

1. The repair records. The estimate, the final invoice, and the photographs the shop took before repair establish the extent of the damage, especially whether structural or frame components were involved.
2. A diminished-value appraisal. Independent appraisers evaluate the pre-crash value, the repair history, and the market and give a written opinion of the loss. The appraisal usually costs a few hundred dollars and is the single most persuasive piece of the claim.
3. Comparable sales. Asking prices and sales data for similar vehicles with and without accident history, from dealers and online listings, back up the appraisal.
4. A dealer's written offer. A trade-in quote that notes the accident history, compared with a book value for a clean vehicle, is simple and concrete evidence.

Insurers often respond with a formula that produces a small number, sometimes a few hundred dollars. The formula is a negotiating position, not the law. The law is the actual difference in value, and an appraisal that shows a larger number is the answer to the formula.

Property damage and injury are separate claims

Here is the most important point in this post. If you were hurt in the crash, you have two claims: one for the damage to your car and one for your injuries. They are handled separately, usually by different adjusters, and they settle at different times. The car claim can and should be resolved within weeks: the repair, the rental, the diminished value. The injury claim cannot be resolved until you know the extent of your injury and your treatment is complete, which can take months or longer.

When you settle the property-damage claim, read every word of what you sign. It should release only the claim for damage to the vehicle. If the paperwork says "all claims" or "bodily injury," do not sign it. Insurers sometimes bundle a modest injury payment with the car settlement and present it as one check, which is the same tactic I described in Why the Insurance Company Called With a Quick, Low Offer. Settle the car. Never release the injury.

Timing and deadlines

Under R.C. 2305.10, an action for injury to personal property must be brought within two years of when the damage occurred. That is the same two-year period that applies to bodily injury. In practice, the diminished-value claim should be made as soon as the repair is finished, because the car's value is easiest to establish while the repair is fresh and the comparable sales are current. Waiting until the car is sold or traded does not help; the loss has to be proven as of the time of the crash, and the insurer will argue that later depreciation is your problem.

If you do sell or trade the car before the claim is resolved, keep the paperwork. A trade-in offer that was reduced because of the accident is good evidence, and the loss does not disappear because you have already absorbed it.

A note on how insurers approach this

The property-damage adjuster is often friendly and efficient, and many people assume that goodwill extends to the rest of the claim. It does not. The same company that writes a quick check for your bumper will take a recorded statement about your injuries and use it against you. Keep the two conversations separate. Talk to the property adjuster about the car. Talk to a lawyer before you talk to anyone about your neck.

What this means for you

If your car was damaged in a crash that was not your fault, ask for diminished value, get an appraisal if the number matters, and do not let the property settlement release anything but the property claim. In a case with a serious injury, we handle the property claim alongside the injury claim so that the car is resolved quickly and nothing you sign about the car affects what you are owed for your body. Our car and truck accident practice does this in every case, including the rear-end collisions that make up so much of the damage on Dayton's highways.