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Can You Sue Your Insurance Company For Diminished Value After Car Accident?

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Uninsured

If your car is damaged in an accident, you approach your insurance company to fund all the repairs needed to bring the car back to the condition it was in before the accident.

Yet a car that’s been in an auto accident never regains the market value of similar cars that haven’t ever been damaged. The loss of value that an accident causes that even repairs can never restore is called the car’s Diminished Value or DV.

Flood-damaged cars are a good example of such loss of value. Often, exposure to water can make a car’s electrical systems very unreliable. This damage can be hard to pin down and detect. Insurance companies usually only pay to bring these cars to reasonable working order. Flood-salvaged cars usually have electrical systems that constantly act up. Since flood-salvaged cars are entered in a national database, every used-car buyer out there will always be able to tell what’s happened to any car he considers. The flood-salvaged car becomes worthless on the market.

Consumer advocates want insurance companies to make up for the loss of market value on top of paying for all the repairs. It is their argument that the language used on comprehensive and collision coverage policies already commits insurance companies to such an obligation – if only someone will hold them accountable.

The car insurance companies don’t contest the assertion that the language used in their policies commits them to compensating car owners for diminished market value. They just protest that such compensation would be so expensive that it would force them to raise insurance premiums to such levels that insurance would quickly become unaffordable.

Consumers have at times tried to sue insurance companies into compensating them for diminished value. Mostly, the courts accept the insurance companies’ arguments that being held responsible for diminished value would make insurance unaffordable.

In some cases, though, a diminished value claim could work. If you are in an accident that is wholly attributable to the other party, you could conceivably sue the insurance company of the at-fault party for diminished value. If you have your own collision and comprehensive coverage, your own insurance company won’t pay for your diminished value claim. If you sue the at-fault party’s insurance company, though, you could have a valid claim. Third-party claims have much better chances of success than first-party claims.

While the supreme courts in most states have already decided that first-party diminished value claims are not allowable, a handful of states like Georgia and Maryland are not fully decided in the matter. In at least one case, the Supreme Court of Georgia has allowed a first-party diminished value claim. If you live in one of the states where diminished value claims are entertained, you could have a shot.

If you need to know what the legal position of your state is, you need to talk to an insurance company and a lawyer.

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