Diminished Value

[Tony skarbic]

Hello and Merry christmas and a Happy New Year

I have a good friend that just purchased a 1966 Roadster, frame off restoration, 327, 350HP, 4-spd. He paid $40,000.00 for the car. He was in an accident yesterday, $8000.00 damage. Does diminished value apply to classic cars and if so, how is it determined?

Thank you;

Tony

[Christopher R.]

Re: Diminished Value

After the $8K repair, how much will the car be worth? If that number is less than $40K, that's the diminished value. How is that determined? By expert testimony. Your expert witness vs. their expert witness.

But why can't the car be repaired in such a fashion that its value is not diminished after the repair? What I'm getting to is, spend more than $8K on the repair now, so that the value is not diminished later. If you're fighting with an insurance company, it's easier to prove repair costs. We think these cars are special. The general public, insurance companies, and the courts do not feel the same way.

[Jerry C.]

Re: Diminished Value

Had the same problem a few years ago and the SF insurance company said no way. I got an attorney and a court date. Well they cancelled twice but settled just before the third court date. They offered less than I had asked for but at least it was something. You will need to get a couple of corvette resto shops to look at the car after it is finished to determine the value lost after the accident. IE cracks in the bare fiberglass floorboard. If the car is just as nice as before you might not have a claim. Mine was a 60 and was hit in the rear and had damage to the spare tire well and that can never be fixed to look like original.

[Warren F.]

Re: Diminished Value

Very interesting question!

I would think that diminished value would certainly come into play, more for an original, unaltered collector vehicle, than a restored example. When a vehicle is completely restored, renovated, refurbished, whatever wording one wants to use for the reconditioning of the vehicle, that to me presupposes that the vehicle was in a state of condition that needed assistance to once again be in a like new operating condition. Having to re-restore or whatever, the vehicle back again, after a mishap, to bring it once again back to the former status it previously was prior to the accident, probably should not have an effect to it's value.

However, whatever value that can be placed on a vehicle because it's status is one, as an unmolested, original example (of course in the same comparable condition) is now lost forever, and in my mind irreplaceable as far as a value factor can be determined.

I don't know how this could ever be resolved.

[Bill Jackson]

Re: Diminished Value

In the Viper world this happens all the time because it is easy to establish a difference in the market value of a rebuilt vehicle compared to a virgin example. Also, the repair costs are out of this world ($15K for a hood.) Recently, insurers have been saying diminished value can't be proven until the vehicle is sold. Until then, the value is only speculation.

I think the best approach is to insist on complete repair with NOS panels. Properly done, the value loss would be close to zero.

[John H.]

Re: Diminished Value

I wouldn't expect any insurer to ante up anything extra for "diminution of value" without a court battle; every "collector" policy I've seen specifically excludes that from coverage (it's buried in the "fine print").

[Barbara S.]

Re: Diminished Value

Probably so, especially if the car had not been hit prior to the collision. The normal legal standard for damages is the difference in fair market value before the collision and after it. Even if the car is repaired, if the existence of a repaired collision reduces the FMV of the car below its value prior to the collision, then the negative variance is a component of your friend's damages. I'm handling a case exactly like that for a client of mine now in Missouri.

Also, if/when he offers to sell the car, he will have to disclose the repaired damages.

I hope that helps.
Tony

[Jack W.]

Re: Diminished Value

Have to agree with John - at one point in my legal career I analyzed coverage for insurance company clients, providing an opinion of coverage with regard to tricky or unusual claims that had been presented. I can assure you that the standard personal auto coverage form does not overtly provide coverage for diminished value or diminution in value (DIV), the grant of coverage is typically written as "we will pay for direct and accidental loss to your covered auto" and insurance companies do not automatically consider DIV claims to constitute "loss" to the covered property; furthermore most standard auto forms limit the ins. cos' liability to the ACV of the damaged or stolen property or the "amount necessary to repair or replace the property with other property of like kind and quality" - in other words, I fixed it back to the way it was before, discharging my obligation, no DIV recovery . . . .

Collector car policies might, as John says, even specifically address the issue with an exclusion as it is DIV claims are even more relevant in this context, I don't have my Hagerty-produced CNA auto policy handy to review.

Moral of story is try to get it fixed as well as possible using the insurance cos claim dollars, and avoid trying to recover DIV through the submission of a DIV claim, which will have an uncertain result.

[Bill W.]

Re: Diminished Value

I have run into diminished value "requests " a few times at work.(Chevy dealer body shop)but none have collected any money. From what I have been told many states have decided in court that the insurance co. is only liable to repair the car to its pre loss condition. I also agree there is no diminished value until the car is sold for "less" than it pre loss value. The money a person has in the car has nothing to do with the value. We see lots of newer cars get totaled and sent to the salvage yard and after the owner is paid off he or she still owes quite a bit due to the car being worth less than money owed. Many people are now buying GAP insurance to cover the difference. On the other hand if you own an orig. paint untouched 67 BB you bought new for $6500 what is the value ?????

[Barbara S.]

Re: Diminished Value

The diminished value demand is made upon the other driver who is "at fault". If the "at fault" driver's insurance company doesn't recognize the value of the claim, then you file suit and seek statutory penalties, including attorney's fees, for the "at fault" insurance company's vexatious refusal to settle a legitimate claim.

The insurance companies will never voluntarily agree with the theory. You have to either file suit or threaten it. That's the problem with insurance companies. Allstate is the worst.

Tony

[Jack W.]

Re: Diminished Value

not to defend insurance companies (they are hard to defend, but I have done so quite successfully) but they would say that they do not collect premium for DIV, so they have a hard time paying a type of claim they did not include in their premium rate calculation, at least on a first-party proerty damage basis.

More valid is the point made about the nature of the accident giving rise to the DIV claim - a first party claim (as in I backed into a telephone pole and I am submitting the claim to my own insurance company) vs. a third party claim (as in Tony rear ended me). In one scenario you are dealing with your own insurance company and the terms of your property damage section of your insurance policy, in the latter case you are dealing with someone else's insurnace company and their third party liability obligation - possibly a big difference.

P.S. You are certainly entitled to keep the insurance companies honest, I myself have been in the land of dealing with an insurance company claims adjusters where their policyholder was clearly at fault (actual grandmothers who took left turns directly in front of me, two seperate incidents, both while I was riding my motorcycles), and even with my supposedly enhanced knowledge, I had a really hard time getting fairly compensated, had to make all kinds of legal noise just to get a fair deal - makes you wonder. If you are keeping score, one of those times was A--S----, another was G. Acc.

[Barbara S.]

Re: Diminished Value

I think your examples are valid. There is a difference between the insured backing into a pole vs. a second driver running a red light and T-boning the Corvette owner who has 0 fault.

Most victims misunderstand who is "liable". Most point to the other driver's insurance company. It may work out that the at fault driver's insurance co. pays the claim, but really, the driver at fault is the real party in interest. At least here in Missouri and Kansas, the claim in court is actually brought against the driver at fault and not his/her insurance company (unless there is a vexatious refusal claim and I don't want to discuss that here). Conceivably. the driver who is at fault may not have insurance coverage for the entire loss, if it includes a diminished value claim. Regardless of whether there is insurance coverage, that isn't relevant to the question of whether the driver at fault is liable for the dimished value loss. But it is relevant of course to see who writes the check! It's entirely possible that the at fault driver may have to come out of pocket for a part of the loss if the dimished value claim is not a covered loss on the at fault driver's insurance contract.

Now that will get an insured and an insured's insurance company sideways with each other!

It's 6 degrees here, so it doesn't look like I'll be getting my '61 out any time soon.

Happy holidays to all.
Tony

[Dave#24235]

Re: Diminished Value

In Iowa, any damage to a vehicle that exceeds $2000 has to be reported to the subequent purchaser(s) at the time of sale. A positive answer to the question of damage exceeding $2000 always results in a dealer giving a lot less for a car at trade in time, even in neighboring states (such as mine, Illinois). The dealer claims next buyer may be from Iowa and will not give the same price for a car that has been repaired.

If an old Corvette is damaged, my advice is as posted above: do the best you can to get NOS/exact-repop panels and parts, and to get the original finish restored and matched. IMO although the car cannot be sold as an unmolested original, most old cars cannot, and most classic car buyers are only interested in seeing a car that appears to be close to "as originally delivered".

[Wayne K.]

I've seen too many old "no hit" Corvettes that....

"where hits". An acceptable repair many times is a judgement call on the part of the owner and may be viewed differently by someone else. I strive for perfection in all that I do but find few that appreciate the effort now days. As such I find that I've become more tolerant of near perfection. Now I just wish my wife would.

[Bill W.]

Re: Diminished Value

Allstate is very hard to work with no matter what type of claim.