Davis Law Settles Diminished Value Claim

DAVIS LAW is proud to announce a resolution of a diminished value automobile claim. The diminished value claim involved a car being worth less money, even after a repair, because it was in a crash. The law firm represented a client that had purchased a pre-owned BMW from a Miami car dealership. The car came with a 14-day return policy. 4-days after buying the car, the client was rear-ended, and the car sustained $16,000 in property damage. There was no injury claim made. The client contacted Davis Law to see whether a claim could be made for loss of value to the vehicle following the repair. The client claimed that he took the vehicle for repair to the dealership where he purchased it. The dealership explained the two-week return warranty was now void because of the crash and, that even though the vehicle was restored to its pre-accident condition, it now was not worth the same as it was pre-crash. The dealership explained that a Carfax would disclose the crash and that a potential future buyer would not pay the same amount of money for the vehicle as one that had not been in an accident. The car now had “stigma” damage and market psychology had lowered the value.

The law firm researched Florida law and found that such a claim could be asserted against the at-fault party. At first, the insurance company for the careless driver denied the diminished value claim and said once a vehicle was repaired, they had no further responsibility. The law firm retained an expert witness in the field of auto appraisals. An automobile appraisal company can evaluate the minimum diminished value of a vehicle, following a crash. Typically, that analysis follows a detailed physical inspection of the vehicle, a review of all accident repair information and a comprehensive and thorough market analysis. The expert witness determines the minimum diminished value based on wholesale market pricing and the standard sliding scale established by the International Society of Automotive Appraisers or a fair market offer to purchase after the date of loss. Fair market value is the highest price on the date of the valuation that would be agreed to by a good faith buyer and seller. The replacement value of a vehicle is defined as the actual cost of exactly duplicating the vehicle as if it were subject to a total loss. The fair market value of the vehicle must be determined prior to the loss/crash and utilizes a method of valuation that involves current market data comparison supplemented by cost information.

Carfax and Autocheck, the nation’s largest vehicle history report providers, buy their data from a variety of sources including police departments, fire departments, vehicle auction, insurance companies, departments of vehicle agencies, car dealerships, collision repair shops, car rental companies, and replacement part suppliers. In today’s digital world, crash reports and insurance repair histories are almost always captured by these reporting agencies and serve to notify a potential buyer of the car’s history. With this detailed information available to the average buyer, dealerships are now routinely providing a vehicle history or Carfax with every car they sell to avoid subsequent accusations of incomplete disclosure.

Following a determination from the expert witness retained for our client, a significant loss of value or diminished value was placed on his BMW. The law firm then reviewed the state of Florida law and found no specific case, statute or rule that prevented the presentation of the diminished value case. The only cases which directly addressed such claims deal with people that are presenting a diminished value claim to their own insurance company. Most insurance policies do not cover their own insured for this type of loss. In the case of Rezevskis v. Aries Insurance Company, 784 So.2d. 472 (Fla. Dist. Ct. 2001), the appellate court determined that the insured (Rezevskis) could not recover damages for diminished value of his car following damage from hurricane Irene from his own insurance company, Aries. The court held that the insurance policy only had an obligation for repairs or replacement and not to restore the car to its previous value. This rule was similarly followed in Siegle v. Progressive Consumers Ins. Co., 819 So.2d. 732 (Fla. 2002), where the Supreme Court of Florida held that an automobile collision policy which provides that the insurer must repair or replace the damaged vehicle with other of like kind and quality, does not obligate the insurer to compensate the insured in money for any diminution in market value after the insurer completes a first rate repair which returns the vehicle to its pre-accident level of performance, appearance and function. These cases that prevent claims against one’s own insurance company (first-party claims) for diminished value also extend to prevent diminished value claims where a contract exists for repairs for real property. In Orkin Exterminating Co. v. Delguidice, 790 So.2d. 1158 (Fla. Dist. Ct. App. 2001), the appellate court reviewed the trial court’s decision in a case where a homeowner sued Orkin for the loss of value to his home that had repeated instances of termite infestation that Orkin failed to resolve. The homeowner had a contract with Orkin that provided for Orkin’s termite treatment guarantee. The homeowner had sued Orkin claiming that the repeat instances of termite infestation severely diminished the value of his home. The Court held that the homeowner was limited to the specific remedies set forth in the contract that he had with Orkin and that Orkin was not responsible for the diminished value.

These are first-party cases against companies where an insurance contract or other agreement exists. There is no such rule where the injury, loss or damage is caused by a third-party where no relationship or privity of contract exists.

In the 1982 case of McHale v. Farm Bureau Mutual Ins. Co., 409 So.2d. 238 (Fla. 3DCA 1982), the Third District Court of Appeal held that it is not necessary to present evidence of market value of a damaged vehicle to prove a compensable claim based on a cost of repair theory. The court in McHale discussed what is known as the Restatement of Torts which is a treatise issued by the American Law Institute that summarizes the general principles of common law in the United States Tort Law. Section 928 of the Restatement of Torts provides for, “due allowance for any difference between the original value and the value after repair”. The court noted that compensation for repairs is an alternative method of proving damages which purposes to restore the injured party to the same position he was in prior to the injury. The court gave further detail which likely forms the basis for diminution of value claims in Florida. They stated, “the proper interpretation of the Restatement of Torts rule is that damages are not limited to the cost of repairs actually made where Plaintiff shows that the repairs did not put the property in as good a condition as it was before the injury. In such cases, the cost of the repairs plus the diminution in value will ordinarily be the proper measure of damages, with the burden on the Plaintiff to prove in addition to the cost of repairs, that he suffered the additional damage of diminution of value by virtue of the vehicle having been involved in an accident.

That case doctrine allowed for the creation of the Florida Standard Jury Instructions in Civil Cases Relating to Property Damage (501.2h) which clearly allows for the Plaintiff to claim “the difference between the value of the vehicle immediately before the incident complained and its value immediately afterward”.

After a significant amount of litigation over whether or not the owner of the BMW had the right to assert a claim against the at-fault driver for the diminution of value of his vehicle*, the insurance carrier decided to pay 100% of the diminished value damages plus the costs of the litigation.

*(There was no argument about the quality of the repair which the insurance company had already paid for.)

If you are in an automobile accident involving a late model vehicle (less than 5-years old), your vehicle may still be worth less money because of the accident even with a first-rate repair job. Please contact Jeffrey R. Davis at Davis Law for a free consultation as to whether or not you have a diminished value claim for your vehicle. We are bilingual and available on a 24/7 basis. Our telephone number is (305) 577-3777 and our offices are located in Coral Gables, Florida; however, we handle cases throughout the state.