QuestionMy wife was rear ended last week on the freeway (stop and go traffic) and was then forced into the vehicle in front of her.
Our 2005 Honda Odyssey sustained both front and rear end damage. The current repair estimate is between $12K and $15K.
The vehicle has a KBB value of $30K+ and that is also the asking price on these vehicles within a 250 mile radius of our area (Portland, OR).
My questions are; 1) What is the best way to determine diminished value on a vehicle?, 2) Do I file this claim against my insurance company or the at-fault party's insurance?, and 3) Is diminished value considered a valid claim?
I ask only because I would estimate that the resale or trade-in value of our van has now lost between 15%-20% of what it was pre-crash.
Thank you in advance for any insight you can provide.
Eric
AnswerEric,
The laws regarding diminished value vary from state to state as well as the methodology in determining what the DV should be. In my state, only first party carriers are required to pay DV (your own insurance company on the portion of a claim that they may be paying). Claimants can present a DV claim to another carrier, but the burden of proof is on the claimant.
One popular method is a matrix that assigns a number between 0 and 1 based on the extent of the damage. It is then multiplied by 10% of the vehicles current actual cash value and is then multiplied by a mileage factor between 0 and 1 based on anywhere from 0-100,000 on up depended on the type of vehicle.
I'll give you an example of one. Let's say you have a 2005 Impala with 25,000 miles and it has damage to the outside sheet metal along with the radiator support needing replacement. The damage factor would be around a .50.
Mileage factor would be .75 based on 25,000 miles of a normal 100,000 service life and the vehicle is worth $15,000 so the value factor is $15,000 x 10% = $1500
Value factor $1500 x damage factor .50 x mileage factor .75 = Diminished value of $562.50
One thing that you have to keep in mind is that the amount of the repair estimate has little to do with the dimunition of value. This is because no shop is going to end up at the same amount and any amount really doesn't describe the extent of structural damage. A brand new Honda is likely to have parts that cost twice as much as a 4 year old Honda simply for the fact that there is absolutely no competition to bring the parts prices down to a reasonable level. Therefore, the damage on your 2006 may cost 40% of the ACV to repair while the exact same damage on a 4 year old Odyssey may only cost 25% of the ACV. The only difference is the amount of profit that Honda makes on the parts which shouldn't have anything to do with the diminished value. I just handled a claim today on a 2006 Lexus with absolutely no structural damage. It's getting a plastic bumper cover, hood, fender and headlight. Just the headlight is $1400. There will be no welding; the parts are all brand new Lexus parts so this will be the exact same vehicle that it was before the loss. However as there is more than one sheet metal component being replaced, we will be paying DV. As this is a brand new, $50,000 vehicle, the DV could theoretically exceed the amount of the damage. However, this is what our liberal courts have determined is appropriate because they haven't thought it through. It aggravates me because I know in the long run; my employer insurance company isn't the one paying this. They will take these payouts to the insurance commissioner and will get a rate increase that will affect us all.
In reality, a properly repaired accident history vehicle will end up bringing as much as any other vehicle in most cases. It may be rejected as a trade in by a Certified Used Car program, but that shouldn't be considered a dimunition in value. After all. They are selling the same car as everyone else, but for a premium for the label and the warranty. Insurance however, doesn't cover labels and warranties.
The whole DV trend was invented by class action attorneys and like everything else that they've touched, society as a whole ends up with the bill. The car dealers take advantage of it go give people less money on a trade in, but then turn around and sell the car for full price. What really blows me away is that the sales end of the Honda store will say the value is diminished while the Honda body shop says it's repaired to factory spec. How can it be both? If a car has been fully restored to exact factory specifications by a Honda certified body shop, why is it worth less money? These of course, are purely theoretical questions. What I'm waiting for next is the attorney's convincing some judge or jury that having an engine replaced diminishes the value of a car as well. I know it's coming.
Again, I have no way of knowing what methodology is used in what state or by which company to determine your DV.
As your vehicle is so new and may have extensive damage, it would likely be worth the money for you to hire an independent appraiser in your area to determine the DV.
Good Luck!
