QuestionQUESTION: Hi Ernest my question is I received a check from my insurance company for Diminished value on my vehicle which was in a accident on 9/21/09 they sent me a check for $284.54 and stated that the actual NADA ACV was $12,500 the insurance company then states in the letter that the Base Loss of value 1,250.00,DSM Varible 0.35,Milage variable x 0.65 = Final DOV Amount $ 284.54 my car is 08 Hyundai Sonata with 34,963 actual miles I really need to know is this check fair? I have not cash the check yet.
ANSWER: Mike,
I think it would be helpful to define a few terms:
Diminished Value (DV) is the loss in value that your vehicle suffers simply as a result of having been in an accident. The theory behind DV is that even if the car is fixed perfectly (which is never really the case if you ask me) your car is still worth less simply by virtue of it having been in an accident. Insurance companies historically never paid for DV even though everyone understood that it affected a vehicles' market value. It took a lawsuit against State Farm in Georgia in 2001 for the insurance industry to even acknowledge the effect - apparently State Farm isn't "Like a good Neighbor" until there's a court order requiring it.
Some consumer groups claim that certain cars (rare or special vehicle in particular) can lose as much as 20% of their value simply due to the existence of an accident in the car's history. Carfax and AutoCheck has built entire businesses on this effect by providing vehicle history reports to prospective buyers.
ACV = Actual Cash Value. This is basically the current market value of your vehicle considering its condition, mileage, options, location, etc. The insurance company is saying that the ACV of your 2008 Hyundai Sonata is $12,500. You can go to sites like nadaguides.com or kbb.com or edmonds.com to see if you agree with their assessment. You could also go on cars.com or autotrader.com and search for similar vehicles to see if they are giving you a fair shake. I'm not sure where you're located, what options, condition, which trim level you purchased but that can have an effect on the valuation. Their assessment seems pretty close to me assuming a middle of the road (no pun intended) vehicle with about 35k miles.
Anyway, back to the calculation... they are saying that they are giving you a Base Loss of Value equal to 10% of your ACV ($1,250) which is typical. They are then multiplying this by a damage modifier which is meant to address the severity of the damage. They have used .35 which roughly equates to somewhere between moderate (.5) and minor (.25) damage. Only you can tell me if that's accurate. The last element is the mileage modifier which is meant to account for the mileage of your vehicle. They have set this at .65 which seems about right. So while $284.54 doesn't seem like much - it appears that your carrier has calumniated the DV claim correctly.
If it makes you feel any better, most carriers won't acknowledge a DV claim since they won't recognize the value of a car as having been diminished after an accident. Let's see... if you had the chance to buy 2 identical cars - one with an accident history and the other perfectly clean - which would you buy? Pretty obvious you'd choose the car that had not been in an accident.
By the way, you can always bring a DV claim against the other party in the accident as part of a civil lawsuit but you can't be at fault and it's probably not worth bringing by itself due to it's relatively low value. I counsel my clients who are bringing a claim for bodily injury to include a DV claim - especially if they have a high value or unique car.
Best of luck - Ernest Ferraro.
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QUESTION: Thank you Sir! I live in Georgia and I truly appreciate the definition part of Diminished Value that helped me out greatly SINCE I DID NOT HAVE A CLEAR UNDERSTANDING ANYWAY!Secondly I plan to have a Atty look at my case as well I did have some personal injury as a result of the accident in which the other party was charged and is at fault by the way I forgot to mention that we are insured with the same insurance company that's why I questioned the amount sent, I was concerned that the insurance company may try to cover themselves by not paying me what they should with a pending injury claim coming there way I worry about getting treated fairly! It is like they have to pay out money but they also want to keep as much as they can. How can you get a fair deal with that?
AnswerPaying out as little as they can and taking as much of your money is the whole point behind every insurance company. It never amazes me how many people think insurance companies are on their side - they are not. That's why the public opposition to health care reform (which should really be called "Insurance Industry Reform") surprises me so much.
