Automobile Damages – Actual Cash Value And Diminished Value

Insurance lawyers trying to help client with automobile property damage will find they need to understand and be able to explain the damages in two ways.  Actual Cash Value (ACV) and diminished value.

“Actual cash value” is the value of the vehicle, less depreciation.  The limitation of “actual cash value” has been upheld and found to be reasonable cash market value of the vehicle before the loss.  This is discussed in the 1968, Texas Supreme Court opinion styled, Superior Pontiac Co. v. Queen Insurance Company.

Even after a vehicle is fully repaired, its value may still be diminished, but the insurer is not liable to pay for this diminution of value.  This is discussed in the 20023, Texas Supreme Court opinion styled, American Manufacturers Insurance Co. v. Schaefer.  Keep in mind this is in the context of your own insurer, not the other guys insurance company.  The other guy’s insurance can be held responsible for diminution of value.

There is a way of settling disputes that arise in automobile property damage situations.  The auto policy contains an appraisal provision in the event there is a disagreement between the insured and the insurer regarding the valuation of the loss.  The policy provides:

If we and you do not agree on the amount of loss, either may demand an appraisal of the loss.  In this event, each party will select a competent appraiser.  The two appraisers will select an umpire.  The appraisers will state separately the actual cash value and the amount of loss.  If they fail to agree, they will submit their differences to the umpire.  A decision agreed to by any two will be binding.  Each party will: (1) pay its chosen appraiser; and (2) bear the expenses of the appraisal and umpire equally.

An appraisal award under this provision is binding and enforceable, unless the award was unauthorized or the result of fraud, accident, or mistake.  This is made clear in a string of cases starting with the 1996, San Antonio Court of Appeals opinion, Toonen v. United Service Automobile Association.

It is important to note that the appraisal is limited to determining the amount of damages only.  Coverage questions cannot be resolved under this contractual provision.  This was made clear in the 1996, Dallas Court of Appeals opinion, Wells v. American States Preferred Insurance Co.

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