Woodland Hills personal injury attorney Barry P. Goldberg is asked by his clients almost daily whether they are entitled to “Diminished Value” of their vehicle after a crash. Obviously, a car repaired after a crash is never the same even if expertly repaired. But, is the amount of the “additional damage” or “Diminished Value” recoverable? If so, how can it be calculated? The answers may surprise you.
Recovery on your own policy under Collision Coverage.
First of all, we have to break this down. Sometimes you can make a recovery against the at-fault third party, and sometimes you cannot. We are seeing more and more accidents where the at-fault party is either Uninsured or Underinsured for a sufficient amount of property damage coverage. In fact, our experience is that there is rarely enough property damage liability insurance when the accident involves multiple vehicles.
In such circumstances, you may have no real choice but to seek Collision Coverage under your own policy. While you can get your car repaired quickly, often you will start by having to pay a “deductible” out of your own pocket. Oh —– and one other thing—- Diminished Value is not generally available under your own policy!
This issue was recently examined in Baldwin v. AAA Northern California, Nevada & Utah Ins. Exchange (2016) 1 Cal.App.5th 545. As stated by the Court: “In this case, the policy language was clear and explicit. Regarding coverage for car damage, it provided that [insurer] ‘may pay the loss in money or repair . . . damaged . . . property.’ The policy’s use of the term ‘may’ suggests [insurer] had the discretion to choose between the two options.” (Id. at 550.)
We have found that virtually all policies issued in California have some form of similar language. So, do not waste your breath—- the insurer always opts for repair!
The Approved California Jury Instruction Allows for Diminished Value!
CACI 3903J. Damage to Personal Property (Economic Damage), states:
The harm to [name of plaintiff]’s [item of personal property, e.g., automobile]. To recover damages for harm to personal property, [name of plaintiff] must prove the reduction in the [e.g., automobile]’s value or the reasonable cost of repairing it, whichever is less. [If there is evidence of both, [name of plaintiff] is entitled to the lesser of the two amounts.]
[However, if you find that the [e.g., automobile] can be repaired, but after repairs it will be worth less than it was before the harm, the damages are (1) the difference between its value before the harm and its lesser value after the repairs have been made; plus (2) the reasonable cost of making the repairs. The total amount awarded may not exceed the [e.g., automobile]’s value before the harm occurred.]
To determine the reduction in value if repairs cannot be made, you must determine the fair market value of the [e.g., automobile] before the harm occurred and then subtract the fair market value immediately after the harm occurred.
“Fair market value” is the highest price that a willing buyer would have paid to a willing seller, assuming: 1. That there is no pressure on either one to buy or sell; and 2. That the buyer and seller are fully informed of the condition and quality of the [e.g., automobile].
The CACI suggestion is to give the optional second paragraph (for Diminished Value) if the property can be repaired, but the value after repair may be less than before the harm occurred. (See Merchant Shippers Association v. Kellogg Express and Draying Co. (1946) 28 Cal.2d 594, 600 [170 P.2d 923].)
Merchant Shippers, a California Supreme Court case from 1946, has been quoted repeatedly as the state of the law:
“[I]t is said . . . that ‘if the damaged property cannot be completely repaired, the measure of damages is the difference between its value before the injury and its value after the repairs have been made, plus the reasonable cost of making the repairs. The foregoing rule gives the plaintiff the difference between the value of the machine before the injury and its value after such injury, the amount thereof being made up of the cost of repairs and the depreciation notwithstanding such repairs.’ The rule urged by defendant, which limits the recovery to the cost of repairs, is applicable only in those cases in which the injured property ‘can be entirely repaired.’ This latter rule presupposes that the damaged property can be restored to its former state with no depreciation in its former value.” (Merchant Shippers Association, supra, 28 Cal.2d at p. 600, internal citations omitted.)
The popular way to handle the “Diminished Value” after a repair is to use the “CarFax” method. Essentially, you hire an expert to do a valuation on an identical vehicle. Then, do an evaluation on the same vehicle and insert the “CarFax” that the vehicle has been in an accident. The difference is “Diminished Value.”
Difficulties and Expenses in Proving Diminished Value.
The biggest hurdle in proving Diminished Value is not whether you are entitled to it or not—-you are. Rather, the cost, expense and delay often militates in favor of not fighting about it. The cheapest we have found for a valuation expert opinion has been around $1500. The insurer will have its own opinion—including an opinion that there was no Diminished Value. Next, the matter must be resolved by an Arbitration or Trial.
If the insurer agrees to an Arbitration, the cost also runs between $1500 and $2000. If the insurer does not agree to an Arbitration, the property damage is subject to a regular trial! Not only does a trial involve months, if not years, of litigation, but the costs of trial can be prohibitive.
So, what is an innocent property damage victim to do?
In most cases, it does not make economic sense to fight over Diminished Value. However, there are rare circumstances in which Diminished Value should be pursued. We recommend pursuing Diminished Value when an accident involves 1) a classic car; 2) a unique or rare car; or 3) an almost new very expensive car. In those circumstances, the insurer is likely to offer some Diminished Value if it is requested and demanded. Insurers will never automatically offer Diminished Value.
In most cases, the practical approach of maximizing the bodily injury claim is the best way to make up for the fact that your car has an “accident stigma” or “Diminished Value.”