Motor Vehicle Accidents And Diminished Value – Part 1: Types Of Diminished Value

For most of us, a motor vehicle is probably the most valuable item of personal property we own. In most cases, a brand new automobile costs at least $20k. A 2017 Ford F-series pickup truck, the best-selling truck in America in 2016, costs over $26,000 for an F-150 model. It is of the utmost importance to protect and maintain the value of this asset in case the vehicle is sold or traded. After a motor vehicle accident, a damaged automobile that requires repair will typically have a resale value less than a comparable, undamaged automobile. This damage results in “diminished value,” a reduction or “diminution” in the value of the automobile for resale purposes.

Motor Vehicle Accidents And Diminished Value - Part 1: Types Of Diminished ValueThe term “diminished value” is more complicated than it may seem. For example, there are three types of diminished value:

  • Immediate;
  • Inherent; and
  • Repair-Related

Immediate diminished value measures the loss of value resulting immediately after an accident before repairs. Inherent diminished value or “stigma” damage refers to the loss of value of an automobile after professionally repaired. This is the type of diminished value of most concern to consumers as it represents the loss of value that results from the fact that the vehicle has simply been in an accident although repaired. If a buyer had to choose between two identical vehicles, the undamaged vehicle has more value than the vehicle that has been damaged and repaired, regardless if the latter has actually been improved by repairs to be in better condition than the pristine one.

Repair-related diminished value applies to any loss of value resulting from incomplete or poorly performed repair work. It may be in the form of mechanical or structural deficiencies, or simple cosmetic damage.

There are two types of diminished value claims. First-party claims are made by a vehicle owner/policyholder against a driver’s own insurance company to recover the inherent diminished value of the motor vehicle. This is measured by the difference in the value of the vehicle before and after the collision after complete repair of the damage caused by the collision. This type of claim is usually governed by terms of an insurance policy. Thus, any recovery is dependent on the terms of the policy and contract law.

Third-party claims are governed by tort law and made by a vehicle owner against a third-party for negligently causing damage to the owner’s vehicle. There will be more about recovering for diminished value claims in Pennsylvania in the second part of this article. Stay tuned for more.

If you or a loved one has suffered any type of injury resulting from a motor vehicle accident, contact Powell Law at (570) 961-0777. The consultation is FREE and you don’t pay anything unless we win. Our attorneys, past and present, have represented motor vehicle accident victims for 110 years.

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