Are you familiar with diminished value? If you are a plaintiffs attorney or insurance defense attorney, you will hear about it soon from one of your clients.
Diminished value is a growing area of practice within the legal community. Simply stated, diminished value, or DV, is the market value lost by a vehicle as the result of an accident. This lost market value is separate and additional to the cost of mechanically repairing the vehicle. DV claims can be complex and difficult to prosecute or defend without experience and familiarity with applicable state law.
While diminished value has recently come into the lexicon of clients and consumers, its legal establishment dates back nearly seven decades. In 1944, the Connecticut Supreme Court opened the door to diminished value claims by its ruling in Littlejohn v. Elionsky, 130 Conn. 541. Littlejohn defined the measure of DV damages in automobile cases to be the “difference in value between the property before and after the loss, with interest from date of loss.”
And while the court conceded that the defendant offered evidence that the car in question was restored to a sound state, it found that this fell “short of a claim that the repairs had put the car in substantially the same condition as before the collision. For example, a new car may be badly damaged and be repaired so as to put it in a sound or good state, and yet be worth much less than before the collision.” The April 2014 Superior Court case of Sheldon v. Soucy sustains the Supreme Court’s 1944 position, stating that “merely restoring a vehicle with severe structural damage to its pre-accident condition does not restore it to its pre-accident market value.”
Another recent Superior Court case decision, Chenevert v. Turek (Nov. 20, 2013), provides a good illustration of the principle of diminished value. The plaintiff’s 2005 BMW 325 CI convertible was valued at $16,475 before the accident. Even fully repaired, the postaccident appraisal was $12,192, far less than its original value. The $4,283 difference between its pre- and postmarket value is its diminished value, the amount of value the car lost as a result of the accident. The court awarded damages to the plaintiff based on the principle of diminished value.
Despite the precedent of Littlejohn, the law was little used until the last few years. The reason for the renewed interest is the advent of vehicle history reports in the 1990s. These reports allow consumers to view a vehicle’s history and make an informed decision about a purchase. For the consumer whose vehicle has been in an accident, the reports will most often detail the vehicle’s damage. As a result, purchasers avoid buying that vehicle or pay less for it than they would for a vehicle that was not in an accident.
You may recognize the names of some of the larger companies that provide vehicle history reports, such as CARFAX and AutoCheck. In addition to these companies, several automakers have their own vehicle history reports on the vehicles they build. These reports are helpful not only for older cars but for purchasers of brand-new vehicles. It is a good practice for purchasers of new vehicles to request a vehicle history report and to ask questions about body work and repair that may have been done prior to the first sale. Vehicles are sometimes damaged in transport, and those damages may not readily be disclosed to the consumer, especially by a dealership eager to sell the vehicle.
Vehicles involved in such presale accidents and on a dealership lot may be eligible for a diminished value claim filed by the dealership. In addition to a DV claim, if a dealer sells a vehicle but does not disclose a prior accident, the plaintiffs bar should be aware that additional federal and state consumer laws may apply to significantly increase the value of the case.
While sedans or sports cars are most commonly thought about in diminished value cases, SUVs, pickup trucks, heavy construction equipment, tractor-trailers, collectible and classic cars can all be subjects of diminished value claims. In fact, all personal and real property that has been negligently harmed has the potential for a DV claim. This includes houses, boats, jewelry, etc.
In Simerlein v. Gonzalez (Jan. 24, 2014), a 2008 Ford Escape wagon was involved in an accident. The preaccident fair market value was $17,333 and the postvaluation was $14,214, for a diminished value of $3,119. The court awarded the plaintiff the full $3,119, plus costs.
Diminished value can also work in ways that are not readily apparent. For instance, dealerships and car rental companies can pursue a DV claim when a vehicle they own is in an accident, whether during a test drive or out on loan. A dealership can also recover lost profits while the vehicle is being repaired and cannot be sold.
In addition, if a vehicle being delivered to a dealership suffers damage during transport and requires repair prior to being sold, the dealership should file a claim for the vehicle’s lost market value. My experience has shown that there are many more cases than one might expect involving brand-new dealership vehicles that were in accidents prior to being sold, and many of these vehicles had less than 10 miles on them. We’ve learned some foreign automakers importing vehicles into the U.S. have large auto body facilities near the ports where the vehicles are delivered. Their sole purpose is to fix body damage incurred while the vehicle was in transport. Diminished value claims, among others, can be filed in these instances.
One of the more common misconceptions of diminished value is that it applies only to higher-end vehicles; while higher-end vehicles may lose greater value as a result of a crash, vehicles with low to moderate value can and do suffer a significant DV loss. This was shown in Massaro v. Eyler (Dec. 10, 2013) in which a 2009 Honda Accord, a car with moderate value, suffered damages in an accident. The plaintiff was awarded $3,529, plus costs, for its diminished value.
Other common misconceptions include: 1) a consumer has to sell the vehicle, or have intent to sell it, in order to pursue a DV claim; 2) a vehicle has to be less than a year old in order for a DV claim to be filed; or 3) that diminished value applies only to classic or collectible cars. These are false statements. In fact, diminished value claims can be pursued in each of these situations.
One of the largest misconceptions is that if the vehicle is mechanically repaired, then a DV claim cannot be filed. At question is whether the plaintiff is entitled to recover both the vehicle’s diminished value and the cost of its repairs. In Golebiewski v. Carroll, 56 Conn. Rptr. 820 (Sept. 24, 2013), the court answered this question in the affirmative. The court found “credible facts … were introduced at trial, and through subsequent argument by counsel, that some measure of damage beyond cost to repair may be inferred from the particular facts.”
Diminished value law continues to mature in the courts today and contains intricacies not discussed in this article, including third-party releases, assignment of claims, accord and satisfaction, among other issues, which an experienced practitioner must take into consideration. DV is an important concept for Connecticut vehicle owners to know about and most especially for attorneys handling vehicular accident cases to understand.•