Your Insurer Does Not Have to Pay Diminution of Value after a Collision

Woodland Hills car accident attorney Barry P. Goldberg is regularly contacted by upset insureds because their nearly new vehicle was in a serious accident and their insurer refuses to declare the vehicle a total loss.  Instead, the insurer insists on repairing the vehicle without regard to the immediately loss in value.  Further, the vehicle will never be in the same condition “with respect to safety, reliability, mechanics, cosmetics and performance” and its future resale value will definitely be decreased. However, Your Insurer Does Not Have to Pay Diminution of Value after a Collision!

This problem has been repeatedly discussed by the California Courts of Appeal and the courts hold that it is really a matter of contract.  Most insurance policies allow the insurer to choose between paying for the damage to the vehicle or repairing it to its “pre-accident condition.” In Carson v. Mercury Ins. Co. (2012) 210 Cal.App. 409 the court found that that repairing a car to its pre-accident condition did not mean restoring it to its original condition “when it left the factory or showroom floor.”  (Carson, supra, 210 Cal.App.4th at p. 420.)  It reasoned that “no repair can ever restore a vehicle to its pristine factory condition,” and applying such a standard would mean “no vehicle could be adequately repaired.”  (Id.)  “In California, and the majority of other jurisdictions,” the court observed, “when the insurer elects to repair the car to its pre-accident condition, it is not also required to pay for any loss of value to the vehicle, which can occur after a seriously damaged vehicle is fully repaired.”  (Id.)

Further, the exclusion in most policies for “diminution in value” has been repeatedly upheld and found to be unambiguous and not against public policy.  An insured must understand that their insurance contract is simply not that great!

In many cases, our office recommends that the insured “stand over” the repair shop and make certain that the repairs are as professional as possible.  The insured should not be afraid to take the vehicle back even several times in order that the repairs be perfect.  If the fact that the relatively new car has been in an accident is still unacceptable, we encourage the insured to sell the car when all the repairs are fresh and newly completed.  Often, the perceived loss of value is a prime motivating factor for an insured to seek sufficient medical care and maximize the bodily injury recovery—-just to make up some of the property damage loss!