In my state of Washington, not the first in which a DV claim was won, King County Superior Court records include a 1920 case (MADDEN v. NIPPON AUTO CO.) in which a verdict was reached in favor of the vehicle owner based on reliable testimony that "immediately prior to the accident the value of the automobile [in question] was between $4500 and $4800, and that, immediately after the accident, its value was between $2500 and $2750… [the loss in value based on the fact that] an automobile injured in an accident and repaired has not the same value in the eyes of an intending purchaser as one not so injured, even though there may be no visible marks of injury on the automobile."

 

I first heard the term Diminished Value over ten years ago when a well-versed man told me before we started repairs that, because the at-fault driver had subsequently died from injuries received in the accident, this claimant's wife was having a hard time dealing with it. Though their car wasn't totaled, it would be traded for another as soon as we finished repairs and a "diminished value" assessment had been completed.

The future of independent collision repair has, in my opinion, become somewhat clouded by a growing number of roadblocks to business-as-usual. Insurers have indicated they intend to own 50% of the repair market within the next 5-10 years and are busily accomplishing that end. Few states' courts have made any effort toward deciding if insurer ownership/consolidation of shops makes for a happy marriage with consumers (voters) interests. So, to make up for lost shop revenue, DV has become a "get even" tool wielded by shops that have had work steered away by insurers for their non-DRP stand or status. Not being caught up in a diminished value lawsuit may be your key to survival.

Diminished value is generally divided into three categories.

Repair-related DV is any repair-related procedures done or not done on the vehicle that cause it to fall short of same state and shape condition, that potentially could cause it to react in a subsequent collision different than it did in this one. This might include lack of 3-dimensional measurement/improper structural alignment, lack of proper corrosion protection, seam sealing, improper welding, improper sectioning, structural components that should have been replaced rather than repaired, and the like. Repair quality is not judged by comparing your work to that of other shops; nor can it be defended by a "that's the way the industry does it" mentality. The measure of repair-related DV is the cost to properly repair the vehicle, which can oftentimes exceed the cost of the original repair.

Insurance-related DV is any needed repairs that were not paid for, or denied, by the insurer. The measure of insurance-related DV is the cost to properly repair the vehicle back to the same state and shape as it was before being damaged, so it performs the same way in the next collision as it did in this collision, and is cosmetically correct.

Inherent DV is a projection of the loss of value of a subject vehicle after a collision. Inherent DV is based on the assumption that repairs were done completely and correctly (it doesn't include repair-related DV [improper/incorrect repairs] or insurance-related diminished value [needed items for a proper repair that the insurer didn't, or wouldn't, pay for]). Inherent DV is the amount of money that would need to be taken off the retail selling price of the vehicle for its stigma of having been damaged and repaired.

Staying out of court

We all know a collision damaged vehicle can't be put back together in exactly the same condition it formerly was; we might be able to make it better, or worse, than factory, but it's impossible to reconstruct it exactly the same as it was. Therefore, in the eyes of the law you can't restore the vehicle to true pre-loss/pre-accident condition. And if you can't truly return vehicles to pre-loss condition, advertising that you can do so will eventually get you into DV hot water.

Whether or not you believe in diminished value is immaterial. All across the country courts are deciding DV cases against repairers and/or insurers based on quality of repairs, fraud, and the like. Neither can you wish diminished value away. But you can lower your chances of becoming the target of a DV lawsuit through doing whatever it takes to bring each vehicle you repair back as close as possible to that mystical "pre-accident" condition that many shops advertise.

Which brings us to one of Olson's many emphatic suggestions; that we eliminate the phrase "pre-loss" or "pre-accident" from our verbal and written word-track, especially from all our paperwork. We might substitute it with something along the line of "to the best of our ability and years of experience" or something similar, but dump the "pre-loss/pre-accident" misnomer before it drags you into court.