Nearly everything you need to know about diminished value claims

(10 minute read)

If you’re researching diminished value claims, you may have been in a car accident recently. 

You are also part of an extremely small subset of the population who has actually heard of this thing called “diminished value”.

Most people have no idea what it is or that it even exists. But, since you’re heard of diminished value, this guide will teach you everything that you need to know about it and most importantly, how to claim it and how to get your diminished value settlement!!

What You’ll Learn:

What happens to the value of your car after it’s damaged or involved in an accident?

Your car’s been damaged. The insurance company has paid to fix it. They’ve even provided you with a rental car while your car was in the shop. But, now that you’ve got your freshly repaired car back from the body shop, all is not well.

Why? Because your car has an accident/damage history that will follow it around forever.

Even if you’re fortunate enough to escape without a blemish on your Carfax report, you’re still not out of the woods.

You might be thinking, there wasn’t a police report filed so I’m in the clear, “phew”. Not so fast my friend, some repair shops and even some insurance companies report to Carfax also.

The accident/damage incident may show up in a Carfax report, especially if there was a police report filed. Police reports are the primary way that Carfax will learn about your accident.


Because there are instruments called paint meters that are commonly utilized by car dealers. These meters can measure the thickness of your paint and detect the panels that were refinished by a body shop.

There’s also tell tale signs of previous repairs that car dealers may be able to visually detect such as tape lines, bolt scarring, overspray, slight color variations, etc.

Usually, there’s no hiding it.

Once a potential buyer has knowledge of the accident/damage history they will not want to pay full market value for your car. Even though your car was repaired and looks good, its value has gone down because most people would prefer to buy a vehicle that has never been damaged before as opposed to a previously damaged one.

Those who remain interested, will not want to pay full market value because they can simply pick another vehicle that is clean and accident free. To convince a buyer to chose an accident vehicle over an identical vehicle without an accident/damage history, the price will need to be reduced, thus a loss in market value resulting from the accident.

Many potential buyers won’t even consider buying a vehicle that’s been involved in an accident.

What is diminished value?

Diminished value is different than the usual car depreciation rate that happens as a vehicle ages. Over time, vehicles gradually depreciate and lose value, however, diminished value is different.

A simple definition of diminished value is the difference between a vehicle’s market value before the harm and its lesser value after the repairs have been made.

Diminished value is an additional form of depreciation resulting from the damage history.

There are three types of diminished value:

Immediate Diminished Value: The difference in market value immediately before the harm and immediately after the loss (before repairs).

For example; a vehicle was worth $25,000 just prior to being damaged and now in its damaged state, it is only worth $7,000 because the damage hasn’t been repaired yet.

$25,000 – $7,000 = $18,000 immediate diminished value

Most people will end up repairing their vehicle after an accident, therefore, immediate diminished value is not a common claim that is made.

Inherent Diminished Value: The difference between a vehicle’s market value before the harm and its lesser value after the repairs have been made. Inherent diminished value is a result of the accident/damage history.

The repairs were able to restore a portion of the damaged vehicle’s lost value, but not all of it. Despite the repairs, the value of the vehicle is still less than what is was before the damage occurred. 

This is the most common type of diminished value. It’s also the type of diminished value that an insurance company will compensate you for.

For example: a vehicle was worth $30,000 just prior to being damaged. After being properly repaired, it is worth just $24,000.

$30,000 – $24,000 = $6,000 Inherent Diminished Value

Repair-Related Diminished Value: Loss in market value due to substandard collision repairs. This may include something such as mismatched paint or misaligned body panels where the gaps are noticeably off.

Repair related diminished value is usually the responsibility of the repair facility and is the result of poor workmanship. Because it was the repair shop’s fault, it falls outside the scope of what an insurance company would typically compensate you for when making an insurance claim.

What is a diminished value claim?

A diminished value claim is intended to make up the difference between the car’s value before the accident and its lesser value after the repairs have been made. To make you whole from the accident.

Depending on the circumstances, you may be able to file a diminished value claim to help you recover your car’s loss in value.

As a rule of thumb, you can only make a diminished value claim when the accident was not your fault.

A notable exception is in the state of Georgia where you can claim diminished value in at-fault accidents and not at-fault accidents, even single car accidents. Georgia law requires that insurance companies assess diminished value on all auto claims.

In states other than Georgia, if it wasn’t your fault, you would file a diminished value claim with the at-fault driver’s insurance company – it’s covered under their property damage liability.

You may be wondering why you can’t claim diminished value under your own policy using your comprehensive or collision coverage.

Most people’s insurance policies have an exclusion for diminished value that is found under the collision and comprehensive sections of the policy which states that diminished value is not covered. Collision and comprehensive coverage only pays the amount necessary to repair or replace the damaged vehicle and diminished value is not covered.

Uninsured Motorist Diminished Value Claims

If the at-fault driver was uninsured or didn’t have enough insurance coverage, you may be able to file a diminished value claim under your own insurance policy.

You’ll first need to check your policy to see if you carry uninsured motorist property damage coverage, UMPD. In some states it is mandatory to have UMPD, in some states it is an optional coverage, and in some states it isn’t offered at all.

Uninsured motorist property damage coverage (UMPD) helps protect you against damages caused by someone who doesn’t have insurance or is underinsured. This coverage can help cover expenses such as the repair costs, rental car, and diminished value.

Hit-and-run accidents where the responsible party cannot be identified are not normally eligible for diminished value claims.

Diminished value claims made under your uninsured motorist coverage are governed by contract law and the terms of your insurance policy. The policy language and state regulations should be examined to determine if coverage will be available.

How Diminished Value is Calculated

There are no state laws, statues, or insurance regulations defining how to calculate diminished value. The laws define what diminished value is and what you’re legally entitled to collect, but they don’t offer any specific guidance on how to calculate diminished value or how to prove it.

In most states, case law over the years will define it in two ways.

The general rule (immediate diminished value or gross diminished value): The difference between its market value immediately before and immediately after the collision (before repairs are made).

The alternative rule (inherent diminished value or residual diminished value):  The difference between a vehicle’s market value before the harm and its lesser value after the repairs have been made. Inherent diminished value is a result of the accident/damage history.

When the value of a damaged vehicle after repair is less than the vehicle’s worth before the damage, you may recover both the cost of repairs and the residual diminished value after repair.

Other methods used to calculate diminished value are formula’s, algorithms, online diminished value calculators, price guides, car dealers, auction data, independent diminished value appraisals, etc.

It’s the wild west out there and the methods are all over the board.

To properly calculate diminished value, the market for your specific vehicle should be researched and measured. After all, diminished value is about the difference in market value so it makes logical sense to measure the market. It’s recommended to engage the services of an independent appraisal company that specializes in diminished value claims.

Diminished Value Formula

You may be wondering, is there a diminished value formula?

There is, but it’s not a good one.

The most well known diminished value formula is the 17c formula. Created by State Farm in the Georgia class action lawsuit, Mabry v State Farm, the 17c formula is commonly utilized by insurance companies.

Although many insurance companies utilize it to calculate diminished value, it is not very accurate and not the best method out there.

The 17c formula can be completed in four easy steps:

Step 1: Determine the value of your car using a price guide such as N.A.D.A or Kelley Blue Book.

Step 2: Apply a 10% cap to the value of your car, this is known as the base value.

Step 3: Apply a damage modifier. You select a number ranging from .00 to 1.0 based on the severity of damage.

The damage modifier scale usually looks something like this:

1.0  Severe damage and structural damage

.75   Major damage and structural damage

.50   Moderate damage and structural damage

.25   Minor damage and structural damage

.00   Minor damage, no structural damage

Step 4: Apply a mileage modifier. You select a number ranging from .00 to 1.0 based on the mileage that your vehicle has.

The mileage modifier scale usually looks something like this:

1.0.        0-9,999 miles

.90   10,000 – 19,999 miles

.80   20,000 – 29,999 miles

.70   30,000 – 39,999 miles

.60   40,000 – 49,999 miles

.50   50,000 – 59,999 miles

.40   60,000 – 69,999 miles

.30   70,000 – 79,999 miles

.20   80,000 –  89,999 miles

.10   90,000 – 99,999 miles

.00   100,000 miles or more

17c formula example calculation for a $23,000 vehicle with 70,000 miles and moderate damage.

$23,000 x 10% = $2,300 base value x .5 moderate damage modifier = $1,150 x .30 mileage modifier = $345 diminished value per the 17c formula.

I don’t know about you, but $345 isn’t going to entice me to select an accident vehicle over an identical vehicle without an accident.

 The 17c formula has its flaws, starting with the 10% cap. It is an arbitrary cap meant to control claim payouts.

The damage modifier is another flaw due to its subjective nature. What I would consider major damage, someone else may consider moderate. In addition, there’s no evidence to support the notion that diminished value in the real world follows a linear mathematical scale relating to the severity of damage.

Most people would view an accident vehicle in the same light, regardless if the damages were $5,000, $7,000, or $7,700.

The mileage modifier is an additional flaw. Mileage was already accounted for when you determined the value of the car. Assessing a mileage modifier is accounting for it a second time, a double dip. 

Why? To lower the claim payout even further.

The 17c formula doesn’t take into account vehicle class or the wording in the Carfax report.

Those two factors that can have a huge impact on the amount of value that a vehicle may lose.

A structural damage notation on Carfax would cause more diminished value than a simple accident reported notation.

Minor paint work on a Hyundai would not have the same impact on value as minor paintwork on a Lamborghini.

Vehicle class and Carfax notations are major factors that the 17c formula is unable to address.

There are other formula’s and algorithms that people have created, however, none of them have been tested for accuracy and because of that, would have a hard time holding up in court.

Using a diminished formula is a simple method for calculating diminished value, however, using a formula to settle or prove your diminished value claim is not ideal.

How to Prove Your Diminished Value Claim?

If you’ve been in a car accident, it’s up to you to prove your diminished value claim.

So you want to know the best way to get an insurance company to pay a diminished value claim?

Submit a diminished value appraisal prepared by a licensed independent appraiser.

This is the most effective way to prove your claim. An independent appraiser is disinterested in the outcome of your claim, they are unbiased, and they aren’t trying to make a profit by selling your car.

They can also be a valuable expert witness if you ever need to take legal action.

Another method of proving your diminished value claim is by getting information from car dealers. Getting the sales manager to do a quick write up for you or getting some written cash offers can shed light on how much value you’re losing.

The problem though with getting information from car dealers is that the insurance companies don’t put a lot of weight on car dealer evidence. They consider car dealers to be an interested party because they are planning on selling your car for a profit.

Insurance companies will say that car dealers are just trying to rip you off. That their business model is to buy low and sell high. That they don’t owe for dealer profit margin.

Getting documentation through car dealers can be good supplemental evidence. However, it’s not the kind of documentation that you want as the foundation of your claim.

Proving a diminished value claim is serious business and not all diminished value appraisal reports are created equal.

There are a lot of poor quality appraisals that contain unsupported opinions or automated software reports offered for sale online.

Insurance companies are looking for a high quality independent appraisal performed by an industry expert with the highest qualifications and experience. They want appraisals that contain market data and facts.

That’s exactly what you’ll get with a DVCHECK appraisal. The insurance company will see a report created by a licensed appraiser who is loaded with credentials. An appraisal that contains real market data and facts to support your diminished value claim.

We’ll guide you through the claim process, help you overcome the insurance company defenses, and help you build up your documentation so you can be successful.

Pick the wrong appraisal company or submit the wrong documentation and you could be in for a long, drawn out process.

How to File a Diminished Value Claim?

So now that you’ve got your documentation put together, the next step is to file a diminished value claim.

In most states, you can file a diminished value claim when you’re not at fault for an accident. You’ll need to submit your documentation and demand letter to the at-fault insurance company.

You can do this by either emailing your demand or mailing it to the at-fault company. The demand letter should specify the exact amount of diminished value that you’re claiming and set a time frame for a response.

You may be wondering when to file a diminished value claim. The ideal time is right after you get your vehicle repaired.

Every state has a statute of limitations (amount of time you have to make the claim). In most states, you have at least two years to file a diminished value claim, but you don’t want to wait to the last minute.

The sooner you file your diminished value claim, the better.

The market comparable vehicles are fresh just after the accident and it makes it easier for you to prove your claim.

How Long Does It Take to Settle a Diminished Value Claim?

A typical diminished value will take anywhere from two to six weeks to settle. Some claims will settle even quicker.

The more you follow up with the insurance company, the quicker the process will go.

If your claim is dragging on and the insurance company isn’t being responsive, try filing a complaint with the department of insurance. Every state has an insurance department that handles complaints and regulates the insurance industry.

The department of insurance can hold them accountable and force them to respond to your claim.

What to do if your Diminished Value Claim Gets Denied or Under Paid?

If your diminished value claim is denied or if you receive a low offer, you’ll first want to negotiate.

When you receive a low offer, you should make a counter offer. Sometimes by coming down on your initial demand, the insurance company will increase their offer as a gesture of good faith.

Haggle and negotiate until they get firm with their offer. At that point, you’re most likely at the top end of their settlement range.

If the offer is still too low or if your claim is still being denied, you’ll need to take legal action. Most of the time you can take the at-fault driver to small claims court. Let the judge decide what is fair and then the insurance company will owe you whatever the judge awards you.