If your accident was fairly minor, then a car will be worth roughly the same after the repairs. But if the damage was major, such as frame damage, an experienced appraiser can detect this and figure how much the damage reduces the resale value of your car. The reduction in resale value due to the accident is called diminished value. A claim for reduced value is called a “diminished value claim.”
Arizona is a diminished value state, which means you may be entitled to the diminished value of your vehicle after an auto accident. However, there are specific things you need to learn how to claim diminished value on your car.
If the insurance company is offering you an unfair loss in value amount, you need to hire an independent appraiser to rebut their valuation. You can also escalate the claim by contacting the Arizona Insurance Commissioner.
Before you go about filing a diminished value claim, keep in mind there are some limitations that determine whether or not you have a valid claim.
When Diminished Value Cannot Be Claimed
Two-year Statute of Limitations
The statute of limitation on diminished value claims in Arizona is two years. This means that you need to file suit against the at-fault driver within two years of the accident.
At-fault Drivers Cannot Claim Diminished Value
You can’t submit an Arizona diminished value claim if you were the at-fault party in an accident, or if the damage was caused by something other than a collision.
Uninsured Motorist Exception
Arizona also does not have uninsured motorist coverage for diminished value claims. If you were injured by an at-fault driver who does not have insurance, your own auto insurer has no obligation to pay diminished value under Arizona law.
Age Limit of Your Vehicle
If your vehicle is six years old or older, you no longer have a diminished value claim in Arizona. Arizona only recognizes the diminished value claim for vehicles that are newer than six years. If you are right at that six-year mark, take a look at your VIN number and determine your vehicle’s manufacturing date because the at-fault insurance carrier will go by the earlier date.
Types of Diminished Value Claims
If your car is six years or newer, you were not responsible for the accident, the at-fault driver has insurance, and it’s been less than two years since the accident, you can claim diminished value.
Keep in mind there are three types of diminished value claims:
- “Inherent” diminished value means the reduction in value due to the car being in an accident, even if the repairs were done properly.
- “Insurance-related” diminished value means the insurance company only paid to have your car repaired using inferior parts and procedures (for example, it didn’t replace your expensive alloy rims).
- “Repair-related” diminished value means the auto shop failed to do the repairs properly.
To make a claim for diminished value, you’ll need to get a diminished value report from an expert, not just from your local used car dealer.
Three Steps to Filing a Diminished Value Claim
Step 1: Consider the Factors That Determine Lost Value
There are many factors that determine whether your vehicle has diminished value. The following are the most important factors:
Year, Make, and Model of Vehicle
Generally, the newer the vehicle, the more likely it has lost value.
Value of Vehicle Before the Accident
This can be established by looking at auto guides, newspaper ads, or by expert appraisal. The selling price is what establishes the “fair market value” of your vehicle.
Mileage and Condition Prior to the Accident
The higher the mileage, the less diminished value, and vice versa.
Types of Vehicle Damage
Structural damage is the largest contributor to a loss in value. On the other hand, cosmetic repairs such as dents and paint scratches will not contribute to any amount of diminished value.
Were Repairs Up to “Industry Standard”?
Did the repair facility do their best to return the vehicle as close to its pre-accident condition as possible? Did they use original (OEM) parts? If the diminished value on the vehicle is due to poor repairs, it needs to be properly repaired to determine its inherent diminished value.
History of Other Accidents
If your vehicle was involved in a prior accident other than the one you are seeking payment for diminished value on, it will be difficult to argue that the loss in value is due to this particular accident over the prior one.
Unable to Sell or Trade Your Vehicle After Repairs
Most people will only buy the vehicle, or accept it in trade, on the condition that they pay less than they would for a similar undamaged vehicle.
Step 2: Choose the Right Expert
Although in Arizona, you are allowed to testify as to the market value of the vehicle before and after an accident, auto insurers will not accept your testimony as evidence. They will not pay simply because you believe that a particular number is appropriate.
You will need to hire an expert appraiser to determine the pre-loss and post-loss value of your vehicle. The appraiser will write a report on the diminished value of your car.
However, when choosing an appraiser for diminished value, choose wisely. There are many so-called experts whose opinion on diminished value is not worth the paper it is written on.
Most knowledgeable experts will gather documentation such as repair estimates, photographs of the damage, maintenance records, and history of prior accidents, and use that information to familiarize themselves with the vehicle. A good expert will be able to consider all of the factors discussed in step 1 and render an opinion that can be supported with actual market data.
If you retain a local expert, they can do an inspection if there is some question as to whether the repair quality was up to industry standard. Although inspections are not necessary, it is a good idea to hire someone willing to inspect if necessary.
Step 3: Seek the Advice of an Experienced Diminished Value Attorney
Most insurance companies despise diminished value claims. They will argue that the loss is speculative and unrealized. Never try to negotiate your own diminished value claim, or retain an appraiser, without at least consulting a diminished value attorney first.
Consulting an attorney doesn’t necessarily mean you have to hire them. Many attorneys offer free consultations. If they don’t think you need a lawyer, they will say so.
Hiring the wrong expert appraiser can hurt your chances of getting compensated for diminished value. Being familiar with the experts hired by the insurance industry, and knowing how to counter their arguments, an experienced attorney will know who to retain and who to avoid.
Many attorneys do not have any experience in handling diminished value claims. Very few actually file a lawsuit to recover the damage. If an attorney has not handled diminished value claims and has neither arbitrated nor tried one in court, you should find another one.
Most diminished value attorneys, like those at Thompson Law Firm, work on a contingency basis. You do not need to pay until you get your diminished value claim is settled. Then, a percentage of the settlement goes to your attorney and you keep the rest.