Diminished Value & Total Loss Frequently Asked Questions

Diminished Value and Total Loss Questions Answered

Does every vehicle accident qualify for a diminished value claim?

In New Jersey, if you are not at fault for an accident you have the right to file a diminished value claim, but the amount of diminished value loss associated with your vehicle’s accident history is dependent on several factors. The resulting loss in value is dependent on the year/make/model of the vehicle, pre-accident condition, mileage, type of damage that has occurred, the repairs required, and if the vehicle has had any prior accident history. Consulting with a qualified professional with experience in diminished value will provide you with an appraisal of your vehicle’s loss in value so that an educated decision can be reached as to whether a claim will be worth pursuing.

Why does a car have a loss in value if properly repaired?

You need to ask yourself that if two like vehicles of the same make and model were offered for sale, both having similar miles, options and general condition, would you pay the same for both vehicles if one was known to have an accident repair history? The likely answer would be no. Once a vehicle has been damaged it can no longer be considered original.  Even when expertly repaired, new car manufacturers’ processes cannot be duplicated during repair by an independent auto body shop.  An MMI nationwide survey supports the concept of diminished value as it relates to the loss in resale value of a damaged and repaired vehicle. Close to two thirds (64.8%) of our survey respondents indicated that they would not consider the purchase of a car with an accident repair history, even with the knowledge that the vehicle was expertly repaired. For the smaller number of consumers that would consider the purchase of a car with an accident repair history, a discount in price is expected as a result of a car’s prior history. This expected discount in price is your vehicle’s loss in value.

What are the steps that are needed to file a diminished value claim and reach a settlement?

Once your vehicle’s diminished value has been determined with the assistance of an unbiased, independent appraisal expert, this reported value and all supporting documentation will need to be provided to the at fault party’s insurance company in the form of a diminished value claim. Discussion/negotiation with the insurer will be required to obtain your diminished value settlement. Refer to the diminished value claim process section of this website for additional information.

How long will it take to obtain a Diminished Value Report?

Once your vehicle has been inspected by MMI, it should take no longer than 5 business days for us to prepare your formal diminished value report for submission to the at fault party’s insurer. Our preference is to personally meet with you to review the completed report and the claim submission process prior to its submission to the at fault party’s insurer.  If an in person meeting is not possible, preparing you for the claim submission process will be performed remotely to accomodate your schedule.

How long will it take to obtain a diminished value settlement once a claim is submitted?

While we would like to say that an appropriate settlement offer will be provided immediately after the at fault party’s insurer receives your claim, that is not the case. Some of the tactics used by insurers to delay payment may be to initially deny liability for diminished value, indicating your car has not suffered diminished value as it has been properly repaired, or negotiate down your claim with an extremely low initial offer in the hopes that it will be accepted. Do not be discouraged if the process may be slower than you might expect. Remember, while the insurer will not be eager to make this payment, you have the right to recoup your vehicle’s loss in value.

Do I need to sell my car in order to determine its loss in value?

No, you do not need to sell you car in order to determine what diminution in value has occurred as a result of damages suffered during the accident. Having an evaluation by an independent, unbiased expert such as MMI is strongly recommended to determine and document the extent of your loss to the insurer.

If I have already sold my car, will this prevent me from making a diminished value claim?

If you want to file a diminished value claim after your car has been sold/traded-in that can be done as well. As you were more than likely asked to disclose your car’s accident repair history prior to it being privately sold or traded-in, this will certainly have had an impact on your car’s resale value. Additionally, internet sites such as Carfax® or Autocheck® may have also been used by your car’s buyer to confirm its accident history prior to sale, which again would have impacted its final resale value. The actual cash value your car sold for will be used to determine the appropriate diminution in value caused by its accident repair history.

Is there a time limit in submitting a diminished value claim?

In the State of New Jersey, the statute of limitations for lawsuit filing related to property damage is 6 years from the date your claim arises (date of loss), which means any legal action must be taken within that time period. Therefore, a diminished value claim should be filed with the at fault party’s insurer within this 6 year time limit should legal action be required to settle your claim.

Is there a standard way of determining diminished value?

There is no accepted standard formula for calculating diminished value. As every vehicle is different and therefore loses value differently, be advised that no accepted formula exists. The vehicle’s age, make, model, mileage and condition as well as the extent of damage suffered all play a part in determining the diminished value of a damaged vehicle. Having an evaluation by an independent, unbiased appraisal expert such as MMI is strongly recommended to determine and document the extent of your loss to the insurer.

What is the difference between 1st party and 3rd party claims?

A 1st party claim is made against your insurance company under your own policy. Your policy is a contract between you and your insurer, and your entitlements are listed within your policy. In the majority of states insurance policies exclude 1st party diminished value claims. A 3rd party claim is made against the at fault party’s insurance policy. Since you do not hold a policy (contract) with the at fault insurance company, you have different rights than those of the policy holder. These rights include seeking compensation for diminished value. Filing a diminished value 3rd party claim is governed under tort law. Tort law deals with situations where a person’s behavior has unfairly caused someone else to suffer loss or harm. A tort is not necessarily an illegal act but causes harm. The law allows anyone who is harmed to recover their loss (e.g. automotive diminished value).

Do I need an attorney to file and obtain my Diminished Value settlement?

Diminished value claims can be filed and settled without the assistance of an attorney. Legal action to reach a settlement may not be necessary. If an insurance company does not negotiate to your satisfaction and you do not reach an agreed settlement, the use of an attorney would be an option. While the thought of legal action is sometimes unsettling and causes some to re-consider filing a claim at all, keep in mind that you have the right to a diminished value settlement. MMI will gladly be able to recommend an attorney with experience in settling diminished value claims, and present as an expert witness in support of our diminished value assessment of your vehicle if/when needed.

What are my chances of recovering a diminished value claim?

While no guarantee can be made that an acceptable settlement will be reached through the submission of a  3rd party diminished value claim with the at fault party’s insurer, past New Jersey court opinion is documented supporting 3rd party diminished value claims.

Will filing a diminished value claim affect my insurance rates?

As you are filing a diminished value 3rd party claim through the at fault party’s insurance company, your insurance rates will not be affected by filing this claim and reaching your rightful settlement.

Do I have to accept an Insurance company’s estimate for damages to my vehicle?

No. Many insurance policy holders may not be aware that as part of their policy, they have the right to seek an independent appraisal should they and their insurance company not agree on the amount of loss associated with their damaged vehicle as part of a 1st party claim. Review your policy’s section related to coverage to your damaged vehicle to confirm the presence of this “Appraisal” clause. Use of this Appraisal Clause can be used in a 1st party vehicle repair or a total loss situation. Consider an expert such as MMI when choosing your independent appraiser or umpire.

Am I required to bring my car to an insurance company body shop or “drive-in” shop for an estimate of damages?

No. While the insurer has the right to inspect your vehicle’s damages prior to repair, the vehicle should be made available for inspection at a place and time reasonably convenient for the insured. This includes an inspection at any licensed auto body repair shop. Do not let the insurance company control the inspection or repair process for your car.

Do I need to use an insurance recommended auto body shop to repair my damaged vehicle?

You as the insured may use any repair facility of your choosing. If you will not be using a repair facility recommended by an insurance company, they will notify you in writing that by law, any auto body shop used for your repairs must be duly licensed, and they are prohibited from negotiating, adjusting or settling an automobile damage claim with an unlicensed facility.

What is a total loss threshold?

In establishing when a damaged vehicle should be considered a total loss, an insurer will establish a total loss ratio (cost of damages/actual cash value) for that vehicle. Certain States have pre-determined when a damaged vehicle should be considered a total loss by establishing a specific total loss threshold (total loss ratio converted to %). States such as New Jersey have no pre-determined total loss threshold, but rather defer to an insurance company’s judgment to establish when a vehicle will be considered a total loss. MMI offers total loss appraisal services to assist you in reaching the proper total loss settlement.

When is a vehicle considered to be a total loss?

Although New Jersey does not have a pre-determined total loss threshold, insurance companies will more commonly consider a vehicle a total loss when the cost of repair reaches between 70% and 80%, or more, of the vehicle’s actual cash value. When the insurer feels that the total loss threshold is reached, they will generally pay the actual cash value of the vehicle instead of paying to repair it. Upon reaching a total loss settlement, the insurance company will usually take possession of the car, obtain a salvage title and sell the car at auction.