Diminished value claims have to be looked at from two different standing points. In Texas, whether you are in Dallas, Fort Worth, Arlington, Grand Prairie, or out in Weatherford, the same rules to go by are going to apply.
Diminished value would be the difference in the value of your car after a wreck, even though it has been repaired, and the value your car would have had, if the wreck had not occurred. A good example of this is as follows: You bought a new car 3 months ago for $30,000. Let’s say the car is now worth $28,000. Your have a wreck. The car is repaired. Now, because the car has been in a wreck, the car is only worth $23,500. The reason it is worth less is because anyone buying the car will not pay as much for it, knowing it has been wrecked, than they would pay if it had not been wrecked. In our example, the car should be worth $28,000. This $4,500 difference is the “diminished value”.
The first standing point, when making a diminished value claim, is when you are going to make a claim against another driver / insurance company. In making the claim against someone else who caused the damage to your car, they are responsible for the diminished value of your vehicle that was harmed in an accident. There are companies whose business purpose is to help people with these claims.
The second standing point, is when making the claim against your own insurance company under your own insurance policy. Depending on the wording of the insurance policy, most of the time the insurance company is not going to have to pay diminished value.
The case that deals with this issue is, American Manufacturers Mutual Insurance Company v. Schaefer. This is a case decided in 2003 by the Texas Supreme Court.
In this case, the Court sided with American Manufacturers Mutual Insurance saying that the policy’s plain and unambiguous language did not require payment for diminished market value when a vehicle had been fully and adequately repaired. The Court noted that a carrier’s obligation to compensate its insured for a loss was circumscribed by the policy’s “limits of liability” section, which stated in relevant part that the insurance company’s liability was limited to the damaged vehicle’s actual cash value or the amount needed to repair or replace the vehicle, whichever was less. The Court stated that the concept of “repair” described something tangible, like removing dents or fixing parts, this being the ordinary meaning of “repair”, and did not encompass compensation for diminished market value. The Court went on to say that because the policy provided that the insured was entitled to the lesser of actual cash value or the amount necessary to repair or replace the vehicle, incorporation of diminished value into the “repair or replace” provision would render the “lesser of” wording a nullity.
Wording in an insurance policy is important. More important, is understanding the wording. An experienced Insurance Law Attorney should be consulted whenever issues arise about the meaning of the words in an insurance policy.
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