In November 2001 the Georgia Supreme Court ruled in favor of two State Farm customers who asserted that wrecked cars are worth less simply because they have been wrecked — no matter how expertly they're repaired — and that insurers are liable to pay the difference. Because of that ruling, all auto insurers in Georgia must now pay diminished value claims. In January 2002, Allstate settled a similar class action case in Georgia, agreeing to pay Georgia policyholders a total of $59 million for the diminished value of their cars repaired after crashes since January 1997.

Diminished value lawsuits have seen varied success around the country. Successful cases are generally made by third-party claimants in an accident, not the insured.

"We believe that the courts [in previous diminished-value cases] were not interpreting contract language and were not setting forth any public policy prohibiting insurers from amending their contracts with an exclusion for diminished value," says a spokesperson for the ISO. The purpose of the ISO filing was to clarify that current policies do not cover diminished value for first-person property-damage claims.

Proving diminished value

Proving diminished value boils down to a comparison between the pre-accident and the post-accident values of your car. You can get an idea of how much your car is worth before an accident by taking it to dealers for quotes or by using the National Automotive Dealers Association price guide or Kelley Blue Book.

However, putting a value on your vehicle after an accident is more complex, and you should have your vehicle inspected by a repair facility such as a Wreck Check franchise that uses a diminished-value software program, by an independent appraiser, or by a dealership after it's been repaired. The inspection can cost anywhere between $75 and $150.

It can unearth problems you might not be able to see. For example, the trained eye of a professional will be able to spot unrepaired frame damage. Refinishing techniques might have also been substandard. The inspector will determine what, if anything, is wrong with the repair. Make sure you get that in writing.

You can then take the diminished-value report to your insurer and request a rerepair or diminished-value payment. If your insurer objects, ask the insurer to put in writing why it refuses to pay. Plus, have the company supply the policy language that shows your car's diminished value is not covered. Back to page 1