Diminished Value Claim in Texas

What is a diminished value claim in Texas?

A diminished value claim in Texas is a type of claim that a vehicle owner can make when their vehicle has been in an accident and has been repaired, but the vehicle’s value has been diminished as a result of the accident. This can occur even if the repairs were done properly, as the fact that the vehicle has been in an accident can still negatively impact its value.

To pursue a diminished value claim in Texas, the vehicle owner will need to first determine if their insurance policy covers such claims. If it does, they will need to file a claim with their insurance company. The vehicle owner will need to provide evidence of the diminished value, such as a pre-accident valuation of the vehicle and a post-accident valuation. They may also need to provide documentation of the repairs that were done to the vehicle.

Establishing a Diminished Value Claim in Texas

The type of evidence that a person will need to make a diminished value claim in Texas will depend on the specific circumstances of the case. However, some common types of evidence that may be required include:

A pre-accident valuation of the vehicle, such as a Kelley Blue Book or NADA valuation
A post-accident valuation of the vehicle, such as a professional appraisal
Documentation of the repairs that were done to the vehicle, such as repair invoices and photos of the repairs
Any documentation of the accident itself, such as a police report or accident report

It is difficult to find specific statistics on the frequency and success rate of diminished value claims in Texas, as this information is not typically tracked by the state government or insurance companies. However, the National Association of Automobile Insurance Commissioners (NAIC) reports that only a small percentage of policyholders file diminished value claims, and that these claims are often denied by insurance companies.

Laws regarding diminished value claims in Texas can be complex, and it is always recommended to consult with an attorney or other professional who is experienced in handling these types of claims.

Diminished Value Claim in Texas

What are the types of diminished value claims?

There are two main types of diminished value claims: inherent diminished value and repair-related diminished value.

  1. Inherent diminished value refers to the loss of value that a vehicle experiences simply as a result of being in an accident, regardless of whether or not it was repaired. This type of diminished value can result from factors such as the vehicle’s history of accidents, the severity of the accident, and the specific make and model of the vehicle.
  2. Repair-related diminished value refers to the loss of value that a vehicle experiences as a result of poor or incomplete repairs. This type of diminished value can result from factors such as the use of aftermarket or used parts, substandard repair techniques, or the failure to properly align or calibrate the vehicle’s systems.

Some states only recognize one of the two types, that is inherent diminished value, and does not recognize repair-related diminished value.

How are diminished value claims calculated?

There are several methods used to calculate the diminished value of a vehicle. The most common methods include:

  1. The “17c formula” – This method calculates the diminished value of a vehicle by taking 17% of the pre-accident value of the vehicle and multiplying it by the number of years old the vehicle is. This formula is often used by insurance companies and adjusters.
    • 17C = (Repair Cost + Loss of Use + Loss of Income + Diminution of Value) – (Depreciation + Betterment + Salvage Value)
    • Repair Cost: the cost of repairs to the vehicle
    • Loss of Use: the cost of a rental car or other transportation while the vehicle is being repaired
    • Loss of Income: any income lost due to the vehicle being out of service for repairs
    • Diminution of Value: the difference in the pre-loss value of the vehicle and its value after it has been repaired
    • Depreciation: the decrease in value of the vehicle due to age, mileage, or wear and tear
    • Betterment: the cost of any upgrades or improvements made during the repairs
    • Salvage Value: the value of the vehicle if it were to be sold as salvage
  • The “comparison method” – This method calculates the diminished value of a vehicle by comparing the pre-accident value of the vehicle to the value of similar, non-accident vehicles currently on the market. This method takes into account factors such as the make, model, year, mileage, and condition of the vehicle.
  • The professional appraisal – This method is used by hiring a professional appraiser who will take into account all the factors of the vehicle, including, the make, model, year, mileage, condition, and repair work that has been done on the vehicle. They will also look at the market trends and comparable vehicles to give an estimated diminished value.

It’s worth noting that there’s no universally accepted method for calculating diminished value and that the results can vary widely depending on the method used and the individual circumstances of the case.

How do you file a diminished value claim?

Filing a diminished value claim can vary depending on the state and the specific circumstances of the case. However, here are the general steps for filing a diminished value claim:

  1. Check your insurance policy: Before filing a claim, make sure that your insurance policy covers diminished value. Not all insurance policies include coverage for diminished value.
  2. Gather evidence: Collect evidence of the diminished value of your vehicle, such as pre-accident and post-accident valuations, documentation of the repairs that were done, and any documentation of the accident itself.
  3. Contact your insurance company: Contact your insurance company and inform them that you would like to file a diminished value claim. Provide them with the evidence you have gathered.
  4. Provide evidence of the pre-accident value: Provide your insurance company with evidence of the pre-accident value of your vehicle, such as a Kelley Blue Book or NADA valuation, or a professional appraisal.
  5. Provide evidence of the post-accident value: Provide your insurance company with evidence of the post-accident value of your vehicle, such as a professional appraisal.
  6. Provide documentation of the repairs: Provide your insurance company with documentation of the repairs that were done to your vehicle, such as repair invoices and photos of the repairs.
  7. Negotiate: Once the insurance company has received all the necessary information, they will review the claim and make an offer to settle. If the offer is not acceptable, you may need to negotiate with the insurance company to reach an agreement.
  8. Hire an attorney if necessary: If you are unable to reach an agreement with your insurance company, and your diminished value claim is large enough, you may want to consider hiring an attorney who is experienced in handling diminished value claims.

The process of filing a diminished value claim can be complex, and it’s always recommended to consult with an attorney or other professional who is experienced in handling these types of claims.

When should you consider filing a diminished value claim?

You should consider filing a diminished value claim if:

  • Your vehicle has been in an accident and has been repaired, but you believe that the value of the vehicle has been negatively impacted as a result of the accident.
  • Your insurance policy covers diminished value claims and you would like to seek reimbursement for the loss of value of your vehicle.
  • You plan to sell or trade-in your vehicle in the future and you want to recoup some of the loss of value caused by the accident.
  • You can provide evidence of the diminished value of your vehicle, such as pre-accident and post-accident valuations, documentation of the repairs that were done, and any documentation of the accident itself.
  • You are willing to negotiate with your insurance company to reach an agreement on the settlement amount, or if necessary, hire an attorney to help you with the claim process.

Diminished value claims can be difficult to prove and can be time-consuming, so it’s important to weigh the potential benefits against the potential costs before deciding to file a claim. Additionally, not all states recognize diminished value claims and not all insurance policies cover them. It’s always recommended to check with your insurance company and consult with an attorney or other professional who is experienced in handling these types of claims.

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About the Author

Benson VargheseBenson Varghese is the managing partner of Varghese Summersett. He is a seasoned trial attorney, highly esteemed for his comprehensive knowledge and expertise in the field. He has been to trial throughout state and federal courts in Texas. 

As a former insurance adjuster himself, Benson has insights into how insurance companies evaluate claims – and why without the proper encouragement, they are likely to undervalue a claim. Benson uses these insights combined with his clout in the courtroom to obtain justice for his clients – in and outside of the courtroom.

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