Diminished Value Claims Explained

General information, not legal advice. Insurance policies and state laws differ. Check your own policy, and for a legal question ask a licensed attorney or your state insurance department.

Diminished value is the difference between what your car was worth before a crash and what it is worth after it has been repaired. A car with an accident history can sell for less than the same car without one, even when the repair was done well. You may be able to claim that loss from the at-fault driver's insurance company as part of a third-party claim. Your own policy generally does not pay it, though the rules depend on your state and your policy wording. Either way, you have to ask for it and prove it.

What is diminished value?

The Washington insurance commissioner defines it as the difference between your undamaged car's market value before an accident and its market value after you have it repaired. The Maryland Insurance Administration adds an important point: a car can lose value even if the repairs have been done properly.

It is a separate loss from the repair itself. The repair restores how the car looks and works. Diminished value covers what buyers are willing to pay for a car that has been in a crash. If you have shopped for a used car, you know why. Our guide on buying a used car with accident history shows the other side of the same coin.

Who can file a diminished value claim?

Whether you can claim it, and from whom, depends mostly on who caused the crash.

If the other driver was at fault. This is the usual case. New York's Department of Financial Services says that when someone else's negligence damages your car, you may be able to claim against that person's property damage liability insurance, but you must establish that the other driver was at fault. The Washington insurance commissioner says you typically file a diminished value claim against the at-fault party's insurer, not your own. The Maryland Insurance Administration explains why: the claim is paid under the at-fault driver's liability coverage, and that insurer must pay the sums its insured is legally liable for. Maryland's regulator says Maryland case law recognizes diminished value as a valid claim in that situation. That answer comes from Maryland's own courts, so it does not tell you how a New York court would rule.

If you were at fault, or claim on your own policy. Usually not. The Maryland Insurance Administration says diminished value is not covered under your own policy, so you cannot claim it if you are at fault. The Texas Department of Insurance took a similar position in a 2000 bulletin: an insurer is not obligated to pay a first-party claimant for diminished value when the car is completely repaired to its pre-damage condition, because the policy language does not require it.

If the at-fault driver was uninsured. That same Texas bulletin says an insurer may owe loss of market value under uninsured or underinsured motorist coverage. Whether that helps you depends on your state and on what your uninsured motorist coverage pays for. In New York, the Department of Financial Services says the uninsured motorists coverage every policy must include applies only to bodily injury and does not cover damage to your car. See uninsured motorist coverage.

How do you prove diminished value?

Telling the insurer you want it is not enough. The Maryland Insurance Administration says you must be able to prove it, and lists two common ways:

1. A dealer's written opinion. Ask a sales manager at a dealership to put in writing what they would have offered for the car before the accident and what they would offer now, after the accident and repairs. The difference is the diminished value.
2. An independent appraisal. Hire an independent appraiser to evaluate the car and state the diminished value.

The Washington insurance commissioner notes that some owners file on their own and others hire a private company to document the lower value, and that even then an insurer may argue against it.

Once you have your proof, present it to the insurer. Maryland's regulator says the insurer can accept your evidence or reject it in favor of its own evaluation, and because these valuations are somewhat subjective, there can be room to negotiate.

When should you file?

After the repairs are done. The Maryland Insurance Administration says that once the at-fault driver's insurer has accepted liability, you can present the claim after all repairs are completed. That makes sense: the final repair invoice shows exactly what was damaged and replaced, and an appraiser can look at the finished car.

Don't wait too long, though. Claims can be cut off by legal deadlines, such as a statute of limitations. Under the NAIC model regulation, an insurer negotiating with a claimant who has no lawyer should give written notice before a statute of limitations runs out, at least 60 days ahead for third-party claimants. Ask the insurer, or a lawyer, what deadline applies to you.

What should you keep and do?

What if the insurer says no?

Ask for its reasons in writing and respond with your evidence. If the gap is about the amount, keep negotiating with documents, not opinions. If you are claiming against your own insurer under a policy that covers this loss, check for an appraisal clause. For other options, see what to do when a claim is denied or lowballed.

A quality repair is still the starting point for any diminished value claim. Learn more about collision repair.