Diminished value is the lost economic or market value of your car as a result of having been in a car accident. Even if your car is 100% repaired to its pre-collision state, future potential buyers will value your auto as worth less than the same motor vehicle with no accident history. With the rise of carfax and other car history report services, used car buyers can easily determine whether your car has been in a crash. Diminished value, sometimes called diminution of value, is a type of economic damage you can recover as compensation from an at-fault driver or their car insurance company under Colorado law. Learn more about Colorado diminished value laws and your rights after a motor vehicle collision.
What is diminished value?
Diminished value (sometimes referred to as DV) is a term used to describe the decrease in a vehicle’s market worth following its involvement in an accident and subsequent repair. Even if the repairs are executed with utmost precision, the mere fact that a vehicle carries a history of damage can significantly hamper its perceived value in the marketplace. Essentially, diminished value takes into account the notion that a previously damaged and repaired vehicle is deemed less valuable than an equivalent vehicle with an untarnished accident-free history.
Several factors contribute to the determination of diminished value, making it a complex and multifaceted concept:
Newer vehicles that have sustained substantial damage and undergone subpar repairs are more likely to experience higher levels of depreciation. This is due to the expectation that potential buyers will perceive such vehicles as carrying a greater risk and, consequently, assign a lower value to them compared to their undamaged counterparts.
The age of the vehicle is a key factor, as newer cars often suffer more substantial depreciation since they are perceived as having a longer future ahead. On the other hand, older vehicles may experience diminished value as well, but the impact may be comparatively less pronounced.
The severity of the accident also plays a pivotal role in determining diminished value. Vehicles involved in major collisions that require extensive repairs are likely to see a more significant reduction in their market value compared to those with minor damages.
Moreover, the quality of the repairs is a crucial aspect influencing diminished value. A professionally executed repair job that fully restores the vehicle to its pre-accident condition is more likely to mitigate diminished value. However, shoddy or incomplete repairs can exacerbate the perceived decrease in value, as potential buyers may harbor concerns about the long-term integrity and safety of the vehicle.
What is a diminished value claim after a car accident?
Typically after a car accident you will seek repairs to your vehicle to restore it to its pre-crash condition. After an appraisal, the insurance company involved in the property damage claim will decide whether to pay for repairs or declare the car a total loss. Colorado follows the fault law system, which makes the negligent driver liable for damages. If the car is repaired, you may pursue compensation for the lost market value of your vehicle from the insurance company as part of your property damage claim.
A diminished value claim works like other liability insurance claims after a car accident. You must present your Colorado diminished value claim to the insurance company. The adjuster will propose a settlement offer and you may negotiate the claim. If you cannot agree upon a value to settle your claim, then you must decide whether to accept the last offer on the table or file a lawsuit.
What types of diminished value claims can I pursue in Colorado?
Diminished value encompasses three primary categories: inherent, repair-related, and immediate. Inherent diminished value pertains to the negative perception associated with a vehicle having a history of accidents. Under Colorado law, you may assert a diminished value claim for one or more types of depreciation:
- Immediate Diminished Value: This refers to the difference in value between your vehicle before the accident and its current value, prior to any repairs being undertaken.
- Inherent Diminished Value: Even after repairs are completed, the fact that the vehicle has been in an accident can lead to inherent diminished value. Prospective buyers perceive the vehicle as less valuable due to its accident history.
- Repair-Related Diminished Value: If repairs are improperly executed, the vehicle’s value may diminish due to problematic, incomplete, or low-quality repairs.
Pursuing any form of diminished value claim in Colorado has the potential to bridge the gap between your vehicle’s pre-accident value and its current worth. Each state has its own personal injury laws for compensable claims after a collision, so let’s discuss Colorado law.
What is Colorado diminished value law?
Colorado diminished value law follows the majority of states across the nation. The state recognizes this form of loss as a compensable harm inflicted by the negligent driver. It is a general rule in the American legal system that depreciation of property is a recoverable harm in negligence claims and other torts. Under Colorado law, you may pursue a claim for all three types of DV as applicable to your circumstances.
Diminished value claims for motor vehicle collisions dates back to the advent of the automobile. The Colorado Supreme Court confirmed this category of damage 100 years ago in Larson v. Long, 74 Colo. 152 (1923). In 1948, Colorado’s highest court issued another important decision clarifying the measure of diminished value under Colorado law:
The measure of damage is the difference between its value immediately before its damage and immediately thereafter, together with any expense of reasonable efforts to preserve or restore it.Trujillo v. Wilson, 189 P.2d 147 (Colo. 1948)
Colorado, like most states, does not have a diminished value statute. The relevant state law, like these decisions, comes from case law like these two supreme court decisions. Some states use specific formulas to calculate diminished value amounts. The most well known court-issued formula is 17c which comes from a Georgia supreme court decision in Mabry vs. State Farm. (The 17c formula caps DV at 10% of the car’s value.) Although insurance companies in Colorado may use the 17c formula internally, it is not binding on a claim in Colorado. In Colorado, it is up to the claimant to present an amount of DV supported by evidence and a reasonable calculation method.
Third Party vs. First Party DV Claims under Colorado Law
One restriction that exists in Colorado diminished value law is that you can only pursue a claim against a liable third party. A third party claim is a claim against another party who caused your damages. For example, another driver negligently crashed into you. You could pursue a third party claim for diminished value against that driver. A first party claim is a claim against your insurance policy for harm you inflicted upon yourself or lacks a liable third party. For example, if you cause a collision, you cannot pursue a DV claim against yourself or your first party insurance coverage like collision or comprehensive coverage.
Collision and comprehensive insurance coverage only covers physical damage to the car. It does not cover other economic or non-economic damage caused by physical damage to your auto. You can pursue third party DV claims through insurance or a lawsuit because Colorado law treats this as a compensable damage for a tort like negligence.
How Long Do I Have to Pursue a Diminished Value Claim in Colorado?
In Colorado, you can pursue DV for the same length of time as any other compensable damages. In other words, your deadline for a DV claim is the statute of limitations for your car accident. For a car accident, you have three years from the date of the collision to pursue a claim.
Your auto may have experienced damage due to other circumstances, such as damage caused by a property condition or a claim related to a drunk driver accident pursued against a bar for overserving. These claims fall under a shorter statute of limitations. Additionally, if a Colorado state or local government entity is liable for your vehicle damage, you must act within 180 to satisfy the Colorado Governmental Immunity Act requirements to pursue a claim against a public entity.
It is in your best interests to deal with your claim promptly. If you do not resolve your insurance claim or file a lawsuit before the statute of limitations expires, you lose your legal right to pursue compensation for diminished value. Most people deal with the repair work on their car as quickly as possible after a car accident. It is often easier to resolve your diminished value claim as soon as you can after repair work finishes. The adjuster may close the property claim shortly after and it will be more difficult to get the adjuster on the phone as time goes on. If repairs did not completely restore the car to its pre-wreck condition, you should inform the adjuster immediately so they cannot argue that something else happened to your car.
What are my legal options if the insurance company denies my claim or refuses to make a reasonable offer?
Insurance companies are often hostile to diminished value claims. It is common for them to ignore the claim and hope you give up without paying anything. They also tend to deeply undervalue these claims if they will make an offer at all. In many regards, this is the same thing people experience when they handle bodily injury claims without a car accident lawyer. The insurance company knows most people do not know how to fairly value a claim and take advantage of your inexperience. They also know you are unlikely to file a lawsuit and if you do, you probably will not prevail against the experienced lawyers they will hire. As a result, they have very little incentive to take your claim seriously.
If you do not reach a fair settlement with the insurance company, you have three options under Colorado diminished value law:
- Accept the adjuster’s last offer and settle the claim.
- Present more evidence to support your claim and ask the adjuster to reevaluate.
- File a lawsuit.
Often people receive low offers from the adjuster because they do not present any evidence supporting their diminished value claim. Adjusters rarely take claims seriously in these circumstances. Obtaining a diminished value appraisal from an independent appraiser is an option to present evidence to support the value of your claim. If you present evidence to support your demand and the adjuster does not provide a satisfactory offer, your alternative is a lawsuit. Most diminished value claims fall within the monetary limit of the small claims courts in Colorado. You will need to present evidence of the value of your claim at trial. Note that if you also have a bodily injury claim, you should talk to a personal injury lawyer before filing a lawsuit to avoid creating complications for both claims.
Frequently Asked Questions about Diminished Value Law in Colorado
How is the amount of diminished value determined?
There is no specific formula in Colorado for diminished value. It is the difference between the market value of the car before the crash minus the market value after the accident. The loss in value may consider several factors such as: the age of the car, mileage, severity of damage in the accident, condition of the car, make and model, extent of repair and whether repairs successfully restored the vehicle.
Is diminished value negotiable in Colorado?
Yes, you can negotiate a DV claim like any other personal injury or property claim. The insurance company will negotiate but you will likely need to present evidence to get a serious offer. If you cannot negotiate to a satisfactory offer, you should consider filing a lawsuit.
How long does an insurance company have to settle a claim in Colorado?
An insurance company never has to settle a claim. Their duty is to settle legally valid claims on behalf of their insured within reasonable means. Under Colorado law they are expected to respond to any demand to settle a claim within thirty days, but that does not mean the response will be satisfactory. Most property damage claims, like diminished value, will settle within a few weeks to a few months. If you cannot reach a settlement, you must file a lawsuit or accept their final offer before the statute of limitations runs. Your case may settle after filing your lawsuit but before you go to trial.
Where can I find an appraiser for a diminished value claim?
There are many appraisal services online that offer to evaluate the claim and prepare a report with a valuation for a reasonable fee. You may also contact local body shops or car dealerships for recommendations on appraisers.
Can I pursue a DV claim if I have uninsured motorist property damage coverage?
Uninsured motorist property damage (UMPD) coverage applies when your car is damaged due by a third party who lacks liability insurance or enough liability coverage to pay for your property damage claims. You can pursue a diminished value claim through UMPD under those circumstances or if your car was in a hit and run and cannot find the negligent driver.
Can I handle a diminished value claim without a lawyer?
Yes, under Colorado law you are not required to hire a personal injury lawyer to pursue a claim. Most personal injury lawyers do not handle property damage claims so you may have to pursue your claim on your own. You can hire an appraiser, negotiate an insurance claim and file a lawsuit in small claims court without a lawyer. If you have a high value automobile, your claim may exceed the limits of small claims court. In that case, you should talk to a lawyer about your legal options.
Can I recover DV if my car was declared a total loss?
Generally, no. If your car was declared a total loss, you should receive the full market value of your car without any reduction for the accident-related damage. An insurance company declares a total loss if the repair costs exceed the value of the car. They will take possession of the car and send you a check for the market value.