The law is pretty clear in most states that the owner of a vehicle can bring a claim for diminished value against an at-fault party, but this becomes a complicated issue for those who are leasing their vehicle. The issue of diminished value on a leased vehicle depends mainly on wording in the lease agreement and/or the policies of the lessor towards how they handle diminished value.
Insurance companies will tell you that you are not eligible for DV on a leased vehicle because you don’t own the vehicle. The owner/lessor is technically entitled to the claim because they are the registered owner of the vehicle; however different lessors handle diminished value differently. I have witnessed lessors occasionally allow the claim proceeds go to the lessee. It’s best to contact the lessor and discuss the issue with them as a wise adjuster will insist on payment to the owner/lessor unless provided with some written directions from the owner stating otherwise.
Usually the claim for diminished value would need to be pursued by the owner of the vehicle. To protect yourself, it is prudent to contact the leasing company and advise them of the situation in order to determine their procedures and give them a reasonable opportunity to pursue a claim now before it’s too late.
Since most insurers assert that the individual leasing a vehicle does not have the ability to assert a diminished value claim, the argument then becomes is it the lessee or the lessor who is actually hurt by the diminished value of the vehicle after an accident?
Some argue that the lessee is harmed for the amount they lose in payments because they are still contractually obligated to pay the same monthly lease payment subsequent to the accident and repair even though the car is now worth less. You keep paying lease payments based on the original retail value of the car, even though the car is now worth less than pre-accident. Keep in mind that the lease you signed is a contract. That contract sets the terms which state you make payments based upon the agreed value of the vehicle at lease signing. Once that contract is executed there is little that can be done to alter it. The vehicle depreciates over time due to mileage or wear and tear. You wouldn’t expect to pay less two years in to the lease because the car is now worth less due to high mileage would you? The same concept applies to a diminished value claim. If the value of the car actually becomes $100 for whatever reason, you still pay the same monthly amount according to your lease.
When the lease ends, you may be charged for the diminished value of the vehicle, so you should get the money from the responsible party/insurance company now right? Some point out that if you return the car damaged, the leasing company will charge you even for dings and scratches, so won’t they charge you for diminished value of the car? You may need to consult your lease for this, but they normally charge for excess wear and tear. Not usually for repaired collision damage.
The at fault driver in the accident, not the lessee or lessor is responsible for the diminished value. Since you were not responsible for the accident, you SHOULD NOT be responsible to the lessor for damages at the end of lease term. However, if you failed to previously notify the lessor, when you return a previously damaged vehicle at lease end, the lessor will probably hold you liable for the amount of the diminished value.
When the lease is up, the leasing company should have already been on notice regarding the collision, and will take that into account with all other damage, mileage overages, etc. in determining what the difference is between the car’s actual market value and previously assessed market value.
IF you allow a body shop to repair your car with aftermarket parts, you may be in for a big surprise at the end of your lease. Before your vehicle is repaired, make sure you have it in writing that all parts will be genuine new OEM parts. Assuming the repair brought the vehicle back to pre-accident condition, you shouldn’t be responsible for any additional charges. However, if the repairs aren’t up to dealer standards, ie non-OEM parts were used, you may be on the hook for that. Most leases are done through the dealerships which have body shops or at least approved shops. It is best to have a leased car repaired at the dealership or those shops since that may help diffuse the argument of substandard work, parts, etc.
You might want to have the owner/lessor evaluate the vehicle after repair and have a post-accident inspection done to make sure the repairs are satisfactory to the lessor. If they say it was poorly repaired, you should go back to the body shop and have this resolved. If they render an opinion that there will be diminished value and they plan to charge you for it at the end of the lease then you have a strong case to pursue a claim yourself.
An additional consideration is that of a lessee who intends to purchase the vehicle at the expiration of the lease term. A reasonable argument is that the lessee is harmed because the price to purchase the vehicle is predetermined and won’t take into account the diminished value resulting from an accident. Under the circumstances, it may be best not to purchase the vehicle at lease end if the lessor tries to hold you to the contract price and not the post-accident value. Many leasing companies are willing to negotiate a decreased buyout price due to the accident history, especially if they previously settled a diminished value claim. As long as you have the vehicle repaired to OEM specs before you turn it in, you may have leverage to buy it at lower than the contractual payoff price.
The bottom line is that if a third party damages your leased vehicle, it is important that you contact the lessor and discuss the issue of diminished value with them directly. I suggest you discuss two main things: Ask them how they handle DV payment and how the accident damage will be handled when you turn the vehicle in at the end of the lease term. Failure to notify and communicate with the lessor will surely result in problems for you down the line.
There are a lot of adjusters without much experience and all they know to do is what their insurance company has trained or told them to do. Most have been taught to deny diminished value claims no matter how convincing the evidence. Here are the most common arguments insurance companies use in an attempt to refute diminished value and the reasons why they aren’t valid:
We aren’t responsible for that.
This response is becoming less frequent as diminished value becomes more popular, but some inexperienced adjusters still try to use it. Ask them to put it in writing and send or email to you promptly. Insurance adjusters are notorious for saying and denying things, but when you ask them to put it in writing or for legal justification, they refuse to respond. The fact is there is a Louisiana statute specifically addressing diminished value and here it is Louisiana Revised Statute §9:2800.17 .
The vehicle was repaired properly, so no diminished value is owed.
Regardless of how well a vehicle is repaired, the accident was probably recorded on the Autocheck or Carfax vehicle history. Whenever there is a history mentioning more than slight damage, the local used car managers we meet with depreciate the vehicle. Different dealers and different models depreciate differently which is why an appraisal is so important. For instance, most used car managers do not depreciate trucks as much as cars because many truck buyers are not as particular about minor accidents. Every vehicle has a different supply and demand situation in the local market, but only under rare circumstances does a dealership not depreciate when there is knowledge of an accident.
The vehicle has a prior accident on its history.
This may or may not be an issue depending on the vehicle history. The prior accident may have been less severe. Even if it is more severe, most used car managers will still deduct for both accidents. In Louisiana we have what is called comparative negligence and it is often necessary to proceed with an appraisal to determine how much each accident might contribute to the total depreciation.
We don’t recognize your methodology. That’s not how it’s done.
We hear this one a lot because most insurance adjusters are only aware of the 17C formula and only a few local appraisers actually take the time to meet with local used car managers like we do. The fact is that formulas cannot account for each individual vehicle’s supply and demand situation. The most accurate way to assess diminished value is to find out what’s going on in the local market. The Bureau of Certified Auto Appraisers indicates, “Using a formula only to determine the post repair value of a vehicle is not acceptable under any USPAP or BOCAA guidelines. To determine a post repair value, BOCAA guidelines require market quotes from dealers in the local market.” The bottom line is that many of the large insurance company defense attorneys agree with our appraisal methodology, and occasionally hire us on their litigated cases.
Diminished value cannot be determined until the vehicle is sold.
It is not necessary to sell a vehicle to pursue a diminished value claim. In Louisiana you only have one year to pursue a claim. It would be unfair to make the owner trade-in or sell the vehicle within one year from the accident. If you can provide sufficient documentation to prove that the vehicle has depreciated in value as a result of the accident, then you are entitled to diminished value effective the date of accident.
We’ve heard other excuses over the years, however these are the most popular. If an adjuster gives you a hard time or excuse, then feel free to give us a call and we’ll see what we can do to help.
Often times when speaking with a client, they tell us that a specific dealership will not provide them with diminished value figures. We’ve been doing diminished value appraisals for over seven years and have developed a large database of used car managers that will work with us. We’ve met with every used car manager in the area and our techniques often manage to get dealers that wouldn’t normally cooperate to do so. The reason is that sales managers know that we get assessments from multiple dealerships and average the amounts. Since we do it this way, there is less liability for an individual dealership and they transfer the risk to the appraisal company. Used car managers want to focus their time on selling as many vehicles as possible and not spending time in court testifying.
If our appraisal is based on assessments from 3 to 5 dealerships, then the insurance defense attorney should subpoena us as opposed to the multiple used car managers that we acquired our data from. Additionally, since our appraisals focus on inherent diminished value which is how much the vehicle is perceived to decrease in value based on the vehicle history, it wastes less of the used car manager’s time going through a detailed appraisal of a vehicle that the customer has no intention of actually trading in.
Insurance adjusters often try to argue that dealers jack the depreciation assessment up higher than they would actually charge in the real world; however it is not in the dealers best interest to provide a higher than actual amount for diminished value because most know that the client may ask who will provide them the highest trade-in value for the vehicle. Consequently, many dealers may actually state an amount that is slightly lower than they would charge in the actual market in hopes of getting the trade-in.
Some adjusters balk at the high amount of diminished value that results from severely damaged vehicles and try to argue that a dealer would not actually depreciate a trade-in as much as they state, but they have to understand that a dealer is in business to make a profit. Any reputable dealership is not going to want to try to sell a vehicle with a severe damage history on their lot. One reason is liability concerns. The other is that the consumer they attempt to sell the vehicle to will want such a large discount that the dealer can’t make a profit, so most dealerships have to sell a vehicle with a very poor vehicle history to an auctioneer. If they give the person trading the vehicle in too much on the trade, then they may experience a loss when they sell the vehicle to the auctioneer. This is why used car managers depreciate a vehicle with a severe damage history so much.
We’ve gained a lot of experience meeting with and learning from used car managers. Although a few are just too busy or uninterested in getting involved, most are very nice people and enjoy discussing the details of their activities. The vast majority are very happy to meet and speak with a diminished value appraiser because we assume a burden that they would prefer not to deal with.
Since our company’s inception we’ve been researching diminished value evaluation techniques and trying to improve on our methods. We regret that after six years of research we still have not managed to come up with a way to do appraisals quickly. Our research indicates that the most accurate way to determine diminished value in the local market is to average the assessments of local used car sales managers for the particular make of vehicle.
We’ve evaluated every possible alternative. We’ve studied various formulas and although some local sales managers use similar formulas, every dealership has a different way of determining diminished value. We purchased highly recommended software that was supposed to provide accurate numbers, but we found serious errors in the software upon thorough testing.
The majority of individuals that go to sell their vehicle do so with dealerships and the only way to know what is happening in the market is to meet with sales managers as they are the individuals actually purchasing and selling vehicles.
We’ve established a rapport with all local sales managers for each make of vehicle and created an extensive database of which dealers will cooperate and who will not. If you were to try to get several used car manager’s assessments of diminished value then you will find that many refuse to cooperate out of fear of litigation. We have managed to minimize this concern by explaining that we take assessments from multiple dealerships and average the results. We also do not provide the specific name of the individual in our reports, only if subpoenaed.
We had hoped that we could speed up the process by utilizing email; however this has been unsuccessful as many dealers are just too busy to read the messages while some are apprehensive that email records provide easily discoverable evidence.
We will continue attempts to speed up the appraisal process, however at this time it appears that accuracy takes time. Sales managers can be very busy people that are difficult to meet with. By bringing them doughnuts and learning how to work with their schedules we’ve become pretty good at keeping them happy and getting the necessary results. Regrettably, our process takes patience. We cannot provide a report overnight and depending on the circumstances; it can sometimes take up to two weeks for us to get all of the data necessary to provide a report.
We’ve been doing research into why so few attorneys pursue diminished value. The largest response we get is that they just don’t see much money in it. We completely understand this, but unfortunately it plays into the stereotype that attorneys are only interested in the money, and not what’s best for their client. The interesting thing about diminished value is that it puts a substantial amount of money into the hands of the client in the early stage of a claim. Most attorneys are interested in the significant return on bodily injury claims, yet their client has to treat for several months before a return can be realized. By recovering money for the decrease in value a vehicle sustains in the beginning of a claim, they can put significant funds in their client’s pocket early on. One to a few thousand may not seem like much to an attorney, but it’s a lot to their client. The bottom line is that for an individual who has a vehicle less than five years old with moderate or more damage, they are losing out by not pursuing a claim. When they attempt to trade in their vehicle they are going to find that it’s worth much less, so it’s best to recover the money now. Our appraisal reports provide the proof necessary to successfully pursue a diminished value claim. Feel free to contact us for a copy of a sample report so you can see the quality of our appraisals.
It’s best as early as possible in the claim to discuss the issue with your adjuster to get an idea of their attitude on the matter. Let them know at the onset that you intend to pursue a diminished value claim. If their attitude is fine and they ask you to present evidence of your claim then you might not have too much trouble from them. If they make an offer early on, then you might want to consider investigating an accurate amount for your vehicle’s diminished value because insurance adjusters are skilled at paying as little as possible. If their attitude is negative from the onset and they say something like you have to sell your car to experience diminished value, then you know you’re going to have problems from them.
After you have an amount for your diminished value, the first step in pursuing a claim is to make a formal demand by presenting your information to the insurance company and informing them that you anticipate their paying your damages. You’ll need to send something in writing to the adjuster specifically addressing how much your diminished value is, and demanding payment. One of the best ways to do this is via email because there is a specific time and date stamp associated with electronic communication. The next best way is to send a fax and make sure you keep the confirmation page. The third method is to send a letter via mail. If you must mail the letter, it’s best to track its delivery certified with return receipt requested to make sure they received it. If you like to be meticulous, you can use all three methods, just be sure that the documentation doesn’t deviate from one method to the next.
If you utilize a diminished value appraiser then they should be able to provide you with a sample demand letter. If you don’t have a professional working with you, then you can find sample demand letters online. It’s important to include all information the company will require and be certain that your demand is clear and concise. It’s also good to include a deadline date in all of your demands. This helps to prevent the adjuster from dragging things on. Also, If you have to incur additional expenses and your cost goes up, for instance you have to litigate the matter, then you don’t want the adjuster going back to the amount in your outdated demand letter. A week from the date received is a good customary deadline because adjusters can be very busy people and might not have a chance to respond earlier than that.
After the demand you may need to follow up for a response. It’s best at this point to limit your communication to requesting a written response to your demand. You want to avoid getting into a discussion about diminished value as the adjuster may be better equipped or downright belligerent. If you can communicate by email then by all means do so because everything is time and date stamped. Otherwise, wait a couple days after the deadline and make a follow up call. Try your best to speak with the adjuster in person, but if you absolutely have to leave a message then consider periodic follow-up calls. Remember to limit your verbal communication on the matter unless you consider yourself to be a skilled negotiator. Try to be courteous and it’s important that you avoid an attitude with the adjuster. This almost always results in an adversarial situation where the adjuster will be difficult to deal with.
If you receive a written response, then it should either be a settlement offer, a denial, or a request for additional information. If there are no issues regarding disputed liability, then adjusters are supposed to respond in good faith within 30 days. If they don’t do so you may wish to contact their supervisor or notify the Department of Insurance.
If they make an offer, then you must decide if you will take it or not. If you don’t like the offer, you need to evaluate what you are willing to accept and try to negotiate a settlement by making written counter offers until you come to an amicable resolution.
If they request additional information then try to provide the information they requested or you may need the assistance of a professional. Many adjusters will require an unbiased third-party report.
If they deny your request then you may have to utilize a professional to assist you. Feel free to give us a call and we’d be happy to discuss your situation. Sometimes you’ll have to convince the adjuster. We’ll be happy to go over your claim and may be able to provide suggestions. Ultimately depending on the circumstances you may need to seek legal remedy.
Many times a diminished value claim will be lower than the small claims court threshold of $5,000. In that case you can file with a local justice of the peace. The insurance company has a duty to prevent judgments against their insured so this may prompt the insurance company to increase their offer. This can be risky though because insurance companies have significant legal resources and you may find yourself up against an attorney. Often times insurance companies see the economic reality that it costs more to pay an attorney to defend a diminished value case than it does to settle, but the insurance company could have in-house attorneys they pay a set salary to.
It has been recognized in Louisiana for more than sixty years that an injured party is entitled to diminished value. See Day v. Roberts, La.App., 55 So.2d 316 (2d Cir. 1951) “It was recognized in Dupuy v. Graeme Spring & Brake Service, Inc., 19 So.2d 657, Appeal from First City Court of New Orleans; W. Alexander Bahns, Judge. Suit by Aaron B. Dupuy against the Graeme Spring Brake Service, Inc., for damages to .. at page 659: “We realize that an automobile which is damaged in a fire or in an accident may sustain a depreciation in value in addition to specific physical damage and that even though all physical damage may be repaired, there may still remain a depreciated value merely because the car has been in a fire or in an accident, and we have said, as have other courts, that the depreciation represents an item of damage or loss for which suit may be brought.
Most recently in 2010 specific legislation was developed to directly address the issue. The 2010 LA Revised Statute §9:2800.17 directly addresses liability for the diminution in the value of a damaged vehicle and provides that:
Whenever a motor vehicle is damaged through the negligence of a third-party without being destroyed, and if the owner can prove by a preponderance of the evidence that, if the vehicle were repaired to its preloss condition, its fair market value would be less than its value before it was damaged, the owner of the damaged vehicle shall be entitled to recover as additional damages an amount equal to the diminution in the value of the vehicle. Notwithstanding, the total damages recovered by the owner shall not exceed the fair market value of the vehicle prior to when it was damaged, and the amount paid for the diminution of value shall be considered in determining whether a vehicle is a total loss pursuant to R.S. 32:702.
Not long ago, in 2004 the Louisiana Court of Appeals clearly stated in Defraites v State Farm, “Louisiana law provides that diminution in value of a vehicle involved in an accident is an element of recoverable damages. In a case involving damages to an automobile, where the measure of damages is the cost of repair, additional damages for depreciation may be recovered for the diminution of value due to the vehicle’s involvement in an accident. Davies v. Automotive Cas., Ins., 26,112 (La.App. 2 Cir. 127/94), 647 So.2d 419. The jurisprudence awarding damages for depreciation involves facts wherein a repaired vehicle decreases in value, despite a quality repair job, solely due to the fact that the vehicle was involved in a collision.
For additional historical cases on the issue, in Hamilton v. Dalrymple, La.App., 135 So.2d 536, (1961) “Depreciation is a proper item of damage as evidenced by decisions of this court in Day v. Roberts, La.App., 55 So.2d 316 (2d Cir. 1951), Green v. Heard Motor Company, Inc. et al., La.App., 63 So.2d 178 (2d Cir. 1953) and Baker et ux, v. Shreveport Railways Company, Inc., La.App., 68 So.2d 228 (2d Cir. 1953).” See also Baillio v. Western Casualty Surety Company, La.App., 189 So.2d 605, and the cases therein cited. Blevins v. Drake-Lindsay Co., Inc., La.App., 144 So. 257.
In Kinchen v. Hansbrough, 231 So.2d 700 (Ct Appl of LA, 1st Cir. 1970) (Reh’g Den.) the Court stated, “Considering plaintiff’s claim for depreciation in the value of his vehicle, our own jurisprudence is well settled that in a proper case depreciation is a recoverable item. See, for example, Foil v. Burge, La.App., 196 So.2d 567, and cases cited therein.
Louisiana’s appellate courts have established that a party may recover additional damages from a tortfeasor for the diminished value to an automobile only if “proof of such diminished value is made.” Please feel free to review the following links to view cases which address this issue:
- Defraites v. State Farm Mutual Auto. Ins. Co., 864 So.2d 254 (La. App. 2004)
- Orillac v. Solomon, 765 So.2d 1185 (La. 2000)
- Smith v. Midland Risk Insurance Company, 699 So.2d 1192 (La.App.2d Cir.9/24/97)
- Davies v. Automotive Casualty Ins., 647 So.2d 419 (La.App.2d Cir.12/7/94)
- Giles Lafayette, Inc. v. State Farm Automobile Insurance Company,467 So.2d 1309 (La.App. 3rd Cir. 1985), writ denied, 472 So.2d 911 (La.1985)
- Gary v. Allstate Insurance Company,250 So.2d 168 (La.App. 1st Cir.1971)
We hope you found this article to be informative. Although we have researched various laws and decisions on the matter, we are not legal experts. The case law content in this article should not be construed as the provision of legal advice. This information should not be used as a substitute for obtaining advice from an attorney authorized or licensed to practice in Louisiana.
If you’re the victim of an auto accident in the Baton Rouge area and need to file an insurance claim, then we should be able to help you to recover more money.
Most people are aware that the market value of a vehicle decreases after an accident, but few people are aware that you are entitled to be compensated for your vehicle’s loss of value in addition to the cost of repairs. It’s called diminished value.
The complicated part is determining how much your vehicle has decreased in value. Some insurance companies will attempt to make a settlement offer using a formula, but this is obviously inaccurate. The only way to get an accurate number is to meet with auto dealers near the Baton Rouge area.
We’ve handled hundreds of claims in the Baton Rouge area and make it a point to get to know all of the auto dealers in the Baton Rouge area that will cooperate with providing an opinion of diminished value.
Unfortunately, Louisiana law says that the victim has to prove their claim. Don’t waste money dealing with a website that provides an instant diminished value report. Most insurance adjusters in Louisiana go out of their way to reject those reports.
Typically a Baton Rouge attorney will have you handle the property damage claim and doesn’t bother to pursue diminished value because they’re in it for the big money they can get from a bodily injury claim. This is unfortunate because we meet with auto dealers day in and day out and find that the vehicle is often worth thousands of dollars less than it was before the accident.
We can provide an experienced licensed Louisiana Insurance Adjuster that will meet with several auto dealers in the Baton Rouge area and discuss the Carfax results directly with them, then provide a report that is accepted by insurance adjusters in your area.
Diminished Value Method, LLC specializes in Diminished Value Auto Claims only. If you or someone you know has been involved in an auto accident and weren’t at fault, then have them contact us for a free consultation. We can give you an idea if your claim is worth pursuing, and won’t ask for payment until after our report is complete.