So what is Diminished Value (DIV)? How is it accurately measured? Who is entitled to it? These are the questions that we will address. We will break down and examine many false presumptions that insurance companies use to mislead the public. |
| MYTH 1: Your lost value cannot exceed the amount of the repair. REASON: First of all, you suffer the greatest loss of value from discernable repairs. This includes paint and body work, frame damage, core damage, and airbag deployment. On mechanical repairs, such as a new engine, little to no value is lost. Therefore, the cost of the repair has no bearing on the DIV. The location and nature of the repair need to be factored in. A prime example: A 2003 Chevrolet Tahoe with 30,000 miles suffers a rear collision. The bumper is slightly bent. This bumper is attached to extended frame rails that are shown to be bent. To fix this Tahoe and straighten the frame tips would run about $780. However the fact that the frame was damaged, and that the towing capability of the vehicle is impacted, the DIV can be as great as $3500. MYTH 2: Your car has not lost value if the repairs were done correctly. REASON: Look, whether you are a customer researching DIV, or you are an Insurance Agent researching our company, let’s be reasonable. If you are going to purchase a vehicle and you find out that it was in a wreck, YOU WILL NOT PAY THE SAME PRICE as you would for an undamaged vehicle. And if you think that an insurance company can convince a court that you do not lose value, you are wrong. In the history of the Texas Legal System, there has not been a single case were a court agreed that a vehicle did not lose value after experiencing an accident. They have agreed that the first party, or person at fault for the accident, could not collect the DIV, but the third party, or victim, has always been able to collect it. MYTH 3: The insurance company will happily send you a check for DIV, so you don’t have to go through the hassle of establishing it yourself. REASON: Did you let the insurance company repair your vehicle, or did you take it to a local body shop? Of course you took it to a body shop, people who would look out for your best interest and make sure the proper repairs were done. Now, why would you trust those nice insurance people to give you everything you deserve? They are in business to make and save money. You need an expert on your side to insure you get what you are entitled to receive. MYTH 4: We are the BIG INSURANCE COMPANY, and you don’t stand a chance! RESPONSE: We are willing to support our clients in court if the insurance company chooses to break the law. |
| First, let us examine what is DIV. If you are in an accident and you have your vehicle repaired, you will suffer a loss of value. Even assuming that the repair is perfect, most states require you to reveal the accident to anyone who wishes to purchase your vehicle. The knowledge of the accident will cause a loss of value. If you trade the vehicle into a dealership, they will easily spot even the best repairs. If you are the victim of the accident, then you are required by law to be “made whole,” or be compensated for any loss you suffer as the result of the accident. Everyone knows that you are able to have the vehicle repaired by the responsible party. What 99% of people do not know is that they are able to claim this DIV, or loss of value. |
There are many
myths about the
process of
establishing DIV
amounts. We
need to look at
these, and find
out why they are
not accurate:
myths about the
process of
establishing DIV
amounts. We
need to look at
these, and find
out why they are
not accurate:
| It is usually acceptable in a court room to present any method that can be explained and used reasonable by a purchasing authority, such as a car dealership. However, insurance companies use several methods that are inaccurate to determine a value that is much lower than you deserve. Let’s examine these: METHOD 1: 17C, or “The Georgia Rule” Let me quote an article by E. L. Eversman (which can be found in its entirety by clicking the button above marked “The Law”.) appropriate initial vehicle value and that 10% of that NADA value will appropriate initial vehicle value and that 10% of that NADA value will represent the maximum decrease in value suffered. Often there are no NADA values for particular vehicles, especially in the beginning of a vehicle's model year. Additionally, the 17c formula provides no explanation substantiating why 10% of the NADA value is an appropriate base figure for the decrease in value. Then, there are multipliers and discounts and subjective determinations as to how severely a vehicle has been damaged, none of which have any real relationship to the actual change in fair market value of the particular vehicle. change in fair market value of the particular vehicle. Insurers using this "formula" are, in many instances, paying diminished value for vehicles, which have not truly suffered any decreased value. Likewise, the actual diminished value suffered on other vehicles is significantly greater than as calculated under the 17c formula, and consumers are not being properly compensated for the decrease in value. As a result, how will any insurer be able to project future diminished value claims with any degree of accuracy? Additionally, consumers are often falsely led to believe that the 17c formula is the only applicable method for determining diminished value, when this is simply not the case. For those who contest the 17c- determined amount, insurers also place the responsibility on their insureds to "disprove" the 17c amount, which leaves claimants uncertain of their rights. Under the Mabry decision, however, the burden is on the insurer to establish that its valuation method is an "appropriate methodology and procedure". It is important for consumers to know that they have the right to a second opinion and do not simply have to accept the dollar value resulting from the 17c formula. Nor should they, because it is almost never correct. METHOD 2: Basing DIV on the amount paid for repairs. We have found a surprising number of insurance companies who base the DIV amount on the cost of the repairs. This is completely inaccurate. The cost of the repair does not determine whether the vehicles intended function has been impacted, nor if the repairs can be noticed by a purchaser of the unit. How does the price of a bumper determine if there is lost value? METHOD 3: Basing DIV on the simple opinion of the adjuster. We do not practice law. We are not formally educated or licensed to do so. Likewise, a claims adjuster does not have the knowledge, training, or background to determine the effect of the market on used or damaged vehicles. The opinion, without factual basis, of an adjuster has no bearing on the loss of value a vehicle suffers after an accident. THE CORRECT WAY TO DETERMINE DIV The proper way to determine DIV is to assess the vehicle with the same process a used cars manager would. First determine the value of the vehicle, in excellent condition. Then list the repairs that will be noticed on a typical “walk around,” or visual inspection. This includes any and all paint work, frame damage, core support damage, body filler, and airbag deployment. Once you have determined the initial value of the unit, and the areas that are listed above, devalue the unit based on a percentage for each of these areas. It is important to avoid two key areas that are claimed by inexperienced adjusters: Do not devalue for quality of work, as the body-shop warranty will cover this; and do not devalue for mechanical repairs, as these are not typically considered by a used car manager. The final result of your devaluation should then be cross checked with current market data to verify the loss is with range of the market. |
So how is DIV to be
measured? Well, there are no
set standards.
measured? Well, there are no
set standards.
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