Friday, September 16, 2011

Compensation for the Diminished Value of Your Vehicle

Our clients frequently ask whether they are entitled to compensation for the diminished value of their vehicle when it is damaged by the negligent act of another driver. The answer is "yes".

The following describes a typical situation: A vehicle collision is caused by the negligent driving of another person. The innocent person’s vehicle is extensively damaged, but not enough to be totaled. Let’s say the vehicle was worth $20,000 before the accident and the repairs cost $10,000. Let’s assume that the vehicle repairs are done well and the car is restored to its pre-accident condition. In this situation, everyone agrees that the vehicle is still worth less than it was before the accident. When the person goes to sell the vehicle, he is required to disclose the damage and the repairs. Further, with the advent of the CarFax service, any potential purchaser can look up your car on CarFax and determine that it was in a wreck. Most dealers will offer a lower trade-in value on a vehicle that has been damaged than one that hasn’t. Everyone knows that all other things being equal, a vehicle buyer will choose the vehicle that hasn’t been in a wreck over one that has been repaired.

The Arizona Court of Appeals has recently confirmed in Oliver v Henry, 613 Az. Adv. Rep. 31 (App. 7/28/2011) that the at-fault driver is liable to the innocent victim, not only for the cost of repairing the damaged vehicle, but also for the diminished value of the vehicle after it has been repaired. Importantly, the Court said that the vehicle does not have to be sold in order to establish the diminished value; rather, the owner of the damaged vehicle can hire an appraiser to form an opinion as to the difference between the value of the vehicle immediately before the accident and the value of the vehicle after it has been repaired. That opinion can be introduced into evidence to establish the diminished value.

Here are a few practical matters to consider. The diminished value claim will be paid out of the at-fault party’s property damage insurance coverage. That is the same coverage that pays for the cost of repairs to the innocent person’s vehicle. Many drivers only carry $10,000 in property damage coverage and, in many instances, there may not be adequate insurance to cover your diminished value claim after the cost of repairs has been paid.

If the at-fault driver does not have property damage coverage, or has inadequate coverage, any collision coverage you may have on your own vehicle to pay for repairs to your own vehicle likely will not cover damages for diminished value.

We are Arizona personal injury lawyers and Arizona insurance lawyers. For more information about our law firm and the services we provide, please contact us at

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