It is pretty much common knowledge that accident free cars are worth more than those that have sustained damage. Even an expertly repaired car with no visible evidence will be worth less thanks to the proliferation of services like Carfax and Autocheck to tell the tale (which is a good thing). I actually have a client who was set to trade in a vehicle this summer and he was recently in an accident. I looked into our options to recoup the difference in market value before and after the accident and here is what I found. If you are in a similar situation, my hope is that this information is of value to you.
In all states except Michigan, if an accident is the fault of another driver, you would receive compensation for diminished value because legally the third party has an obligation to make the victim of the accident “whole” again; in other words, to restore the victim’s car to its pre-accident fair market value. This means repairing the vehicle and paying the difference in the car’s resale value before and after the accident, the cost of which is usually covered by the at-fault driver’s liability insurance policy.
Burden of Proof
When the law allows the policyholder to recover the amount by which the car’s value has been diminished, whether under the at-fault driver’s liability policy or under the policyholder’s own uninsured motorist or collision coverage, it is always the policyholder’s responsibility to prove the repaired vehicle is worth less than before the accident.
The oft-cited case State Farm Mutual Automobile Insurance Company v. Mabry, decided by the Georgia Supreme Court in 2001 said the insurance company not only has a contractual obligation to pay for diminution in value in first-party physical damage claims but also that it has a responsibility to establish a procedure for handling diminution of value claims. In response, State Farm developed a formula (“17c”) by which diminished value claims could be measured. Since then, insurers have used this as the basis for creating their own formulas.
South Carolina (our home state)
South Carolina is a diminished value state, which means you may be entitled to the diminished value of your vehicle after an auto accident. The statute of limitation on diminished value claims in South Carolina is 3 years so you need to file suit against the at fault driver within 3 years of the accident.
South Carolina does have uninsured motorist coverage for diminished value (meaning you can file against your own policy in the event of an uninsured motorist being at fault in the accident).
You can't submit a South Carolina diminished value claim if you were the at-fault party (either completely or partly) in an accident, or if the damage was caused by something other than a collision.
Determination of Value Destruction
Only one indicator can be considered relevant regarding automobile diminished value - how much less the dealer will offer for your trade-in as a result of a bad CARFAX report.
Diminished value appraisal figures should represent what the vehicle will encounter in the real world of used cars in South Carolina. Used car managers at dealerships provide the most realistic assessment of values because automobile dealers are the ones purchasing and re-selling the vehicles. An automobile diminished value appraisal that is compiled in this manner, listing each dealer, their estimation of how much less they would pay because of the bad CARFAX and any pertinent comments such as how different variables may have affected their decisions, carries the most weight.
Get a trade-in value letter from a car dealer stating that the lower value is due to previous damage done to the car, even though it has been repaired.
You can get a pre-accident private party value from online resources such as Edmunds.com or Kelley Blue Book.
A car worth less than $10,000 generally isn't worth filing a claim on or hiring a lawyer for. An expensive or almost-new car, though, may be worth the effort.
In some cases it may be necessary to actually sell the vehicle in its damaged condition in order to establish its post-crash market value or, at a minimum, engage an expert appraiser to provide a detailed report based on the criteria above rather than an algorithmic formula.
When an accident is the other party’s fault and a claim is made against that party’s insurance policy, it is called a third-party claim.
You will have to ask the other party's insurance company to be compensated for the diminished value. You may have to ask more than once. Don't expect your insurance company to help.
Some car owners file on their own, but others hire a private company to document the lower value (Collision Claim Associates, is a company that charges $300 to $400 to document a loss of value).
A Practical Way to Go About It
Start with an estimate from Carmax – they provide free estimates to purchase your vehicle. If possible, also get a trade-in value letter from a car dealer stating that the lower value is due to previous damage done to the car, even though it has been repaired. If not practical, compare the purchase offer and trade in value to those of kbb.com for a car in similar condition prior to the accident or the recommended market prices on cargurus.com for less common vehicles. If the pre and post-accident values differ significantly, proceed with diminished value claim.
Contact the insurance agent you are working with at your own carrier to see if they can be of assistance in your claim. If not, contact the at fault driver’s insurance company representative and present your claim; what you want and how you arrived at the figure.
If the insurance company replies with an unfair loss in value amount, consider spending $300-$400 to hire an independent appraiser to rebut their valuation.
You can also escalate the claim by contacting the South Carolina Insurance Commissioner.
Those unable to find satisfaction on their own or using an appraisal company may have to turn to the courts. Many claims may fall below the state's small-claims threshold ($7,500 in South Carolina), allowing you to present your own case saving the expense of a lawyer (which would make a claim impractical).