Lower Car Value
With the popularity of CarFax and similar vehicle history reports it’s likely that a potential buyer or dealer will know whether your car has been in an accident when it comes time to trade or sell. Even when your car has been repaired, if your car report reveals an accident it’s also likely the resale or trade in value will be less than if your car had never been in an accident, and it’s a factor many consumers now use to evaluate a potential vehicle purchase. In the insurance industry and the law this effect is termed an “inherent diminution in value” which refers to the fact that a vehicle (or any property) involved in an accident typically has a lower market value, even after repairs have been made.
As one court put it, “the prospective buyer would never have complete assurance that the repairs were, in fact, entirely successful; the buyer would inevitably bear the risk; and therefore the property would bear a certain degree of stigma, which would be reflected in a lower price.” So, can you recover for inherent diminution in value when your car is damaged in an accident then repaired either from your own insurer or a third party’s insurer? In a recent case, the Massachusetts U.S. District Court answered “no.” (Martins v. Vermont Mutual Ins. Co.)
No Compensation for Diminution in Value
In that case, a vehicle owner brought suit against the insurer of the third party responsible for the accident to recover for the “inherent diminution in value” of his vehicle. The insurer had already paid for the repairs to the vehicle, towing and storage, and rental car costs. On cross-motions for summary judgment, the district court judge determined that under the policy, the insurer was not obligated to further pay for the inherent diminution in value to the vehicle resulting from the accident. The judge found that in Massachusetts the general rule for measuring property damage is diminution in market value, however, if the damage is reasonably curable by repairs, the expense of repairs, if less than the diminished market value, is the proper measure of recovery. Acknowledging that there is no reported Massachusetts case addressing the specific issue, the judge relied on case law involving similar contexts to find that a plaintiff asserting a tort claim for damage to property cannot recover both for the cost of repairs and for loss of value.
The judge also noted that the Massachusetts Supreme Judicial Court had decided that an insured could not recover for inherent diminution in value under his own policy, and that the Commissioner of Insurance did not interpret the Massachusetts standard automobile policy to encompass compensation for inherent diminished value in addition to compensation for the cost of repairs. The judge concluded that because inherent diminution in value was not separately recoverable through a court judgment or settlement, the insurer was not required to pay for such damages.
Free Consultation and Report
If you or a loved one were injured in a car accident, obtain a copy of our Free Report, Some Straight Talk About Insurance Companies and Your Car Accident Claim. In addition, you can contact Attorney Allison now for a free consultation by calling 978-740-9433 or filling out our free consultation form We look forward to talking to you about your claim.