Dallas

So what is Diminished Value (DIV)?

How is it accurately measured? Who is entitled to it?
These are the questions that we will address. We
will break down and examine many false
presumptions that insurance companies use to
mislead the public.

First, let us examine what is DIV.

If you are in an accident and you have your vehicle repaired, you will suffer a loss
of value. Even assuming that the repair is perfect, most states require you to
reveal the accident to anyone who wishes to purchase your vehicle. The
knowledge of the accident will cause a loss of value. If you trade the vehicle into
a dealership, they will easily spot even the best repairs.

If you are the victim of the accident, then you are required by law to be “made
whole,” or be compensated for any loss you suffer as the result of the accident.
Everyone knows that you are able to have the vehicle repaired by the responsible
party. What 99% of people do not know is that they are able to claim this DIV, or
loss of value.

There are many
myths about the
process of
establishing DIV
amounts. We
need to look at
these, and find out
why they are not
accurate:

It is usually acceptable in a court room to
present any method that can be explained and
used reasonable by a purchasing authority,
such as a car dealership. However, insurance
companies use several methods that are
inaccurate to determine a value that is much
lower than you deserve. Let’s examine these:

METHOD 1: 17C, or “The Georgia Rule”

Let me quote an article by E. L. Eversman
(which can be found in its entirety by clicking
the button above marked “The Law”.)

appropriate initial vehicle value and that 10%
of that NADA value will appropriate initial
vehicle value and that 10% of that NADA value
will represent the maximum decrease in value
suffered. Often there are no NADA values for
particular vehicles, especially in the
beginning of a vehicle's model year.
Additionally, the 17c formula provides no
explanation substantiating why 10% of the
NADA value is an appropriate base figure for
the decrease in value. Then, there are
multipliers and discounts and subjective
determinations as to how severely a vehicle
has been damaged, none of which have any
real relationship to the actual change in fair
market value of the particular vehicle.
change in fair market value of the particular
vehicle.

Insurers using this "formula" are, in many
instances, paying diminished value for
vehicles, which have not truly suffered any
decreased value. Likewise, the actual
diminished value suffered on other vehicles is
significantly greater than as calculated under
the 17c formula, and consumers are not being
properly compensated for the decrease in
value. As a result, how will any insurer be
able to project future diminished value claims
with any degree of accuracy?

Additionally, consumers are often falsely led
to believe that the 17c formula is the only
applicable method for determining
diminished value, when this is simply not the
case. For those who contest the 17c-
determined amount, insurers also place the
responsibility on their insureds to "disprove"
the 17c amount, which leaves claimants
uncertain of their rights. Under the Mabry
decision, however, the burden is on the
insurer to establish that its valuation method
is an "appropriate methodology and
procedure". It is important for consumers to
know that they have the right to a second
opinion and do not simply have to accept the
dollar value resulting from the 17c formula.
Nor should they, because it is almost never
correct.

METHOD 2: Basing DIV on the amount paid
for repairs.

We have found a surprising number of
insurance companies who base the DIV
amount on the cost of the repairs. This is
completely inaccurate. The cost of the repair
does not determine whether the vehicles
intended function has been impacted, nor if
the repairs can be noticed by a purchaser of
the unit. How does the price of a bumper
determine if there is lost value?

METHOD 3: Basing DIV on the simple opinion
of the adjuster.

We do not practice law. We are not formally
educated or licensed to do so. Likewise, a
claims adjuster does not have the knowledge,
training, or background to determine the
effect of the market on used or damaged
vehicles. The opinion, without factual basis,
of an adjuster has no bearing on the loss of
value a vehicle suffers after an accident.

THE CORRECT WAY TO DETERMINE DIV

The proper way to determine DIV is to assess
the vehicle with the same process a used cars
manager would. First determine the value of
the vehicle, in excellent condition. Then list
the repairs that will be noticed on a typical
“walk around,” or visual inspection. This
includes any and all paint work, frame
damage, core support damage, body filler, and
airbag deployment.

Once you have determined the initial value of
the unit, and the areas that are listed above,
devalue the unit based on a percentage for
each of these areas. It is important to avoid
two key areas that are claimed by
inexperienced adjusters: Do not devalue for
quality of work, as the body-shop warranty
will cover this; and do not devalue for
mechanical repairs, as these are not typically
considered by a used car manager. The final
result of your devaluation should then be
cross checked with current market data to
verify the loss is with range of the market.

So how is DIV to be measured?
Well, there are no set
standards.

MYTH 1: Your lost value
cannot exceed the amount of
the repair.

REASON: First of all, you
suffer the greatest loss of
value from discernable
repairs. This includes paint
and body work, frame
damage, core damage, and
airbag deployment. On
mechanical repairs, such as
a new engine, little to no
value is lost. Therefore, the
cost of the repair has no
bearing on the DIV.

The location and nature of
the repair need to be
factored in. A prime
example: A 2003 Chevrolet
Tahoe with 30,000 miles
suffers a rear collision. The
bumper is slightly bent. This
bumper is attached to
extended frame rails that are
shown to be bent. To fix this
Tahoe and straighten the
frame tips would run about
$780. However the fact that
the frame was damaged, and
that the towing capability of
the vehicle is impacted, the
DIV can be as great as $3500.

MYTH 2: Your car has not
lost value if the repairs were
done correctly.

REASON: Look, whether
you are a customer
researching DIV, or you are
an Insurance Agent
researching our company,
let’s be reasonable. If you
are going to purchase a
vehicle and you find out that
it was in a wreck, YOU WILL
NOT PAY THE SAME PRICE
as you would for an
undamaged vehicle. And if
you think that an insurance
company can convince a
court that you do not lose
value, you are wrong. In the
history of the Texas Legal
System, there has not been a
single case were a court
agreed that a vehicle did not
lose value after experiencing
an accident. They have
agreed that the first party, or
person at fault for the
accident, could not collect
the DIV, but the third party,
or victim, has always been
able to collect it.

MYTH 3: The insurance
company will happily send
you a check for DIV, so you
don’t have to go through the
hassle of establishing it
yourself.

REASON: Did you let the
insurance company repair
your vehicle, or did you take
it to a local body shop? Of
course you took it to a body
shop, people who would look
out for your best interest and
make sure the proper repairs
were done. Now, why would
you trust those nice
insurance people to give you
everything you deserve?
They are in business to make
and save money. You need
an expert on your side to
insure you get what you are
entitled to receive.

MYTH 4: We are the BIG
INSURANCE COMPANY, and
you don’t stand a chance!

RESPONSE: Did we mention
that it is a requirement of
Tort Law to pay Diminished
Value in third party cases?

Diminished Value Auto Professionals, LLC

Office: 972-886-5445
Cell: 972-407-1666
Fax: 866-929-1960

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