Pretend for a minute that you are driving your car in the Dallas Fort Worth area going west. You drive through Grand Prairie and Arlington and are on your way to Weatherford to enjoy the “First Monday” market. All of a sudden a dog runs in front of you and you swerve to miss it and hit a telephone pole. You are lucky in that no one is injured, but your car has $3800 worth of property damage. You are lucky again because you have collision coverage on your automobile and they repair your car and you are only out a $500 deductible.
Sounds ok so far, right. Well think about it for a minute. Your car was only a year old because you sell your car every two to three years and buy a new one. When you sell this one you will either have to disclose to the buyer the wreck or they will easily find out. So what does that mean? It means this: Your car is worth less because of the wreck than it would have been had it not been involved in a wreck. This is called the “diminished value”.
The nest question is: What can you do about it? This question was answered by the Texas Supreme Court in 2003. In 2003, the Court decided the case, American Manufacturers Mutual Insurance Company v. Schaefer. Maunufacturers was Schaefers insurance company. They fixed Schaefers car. Schaefer did not dispute the quality or adequacy of the repairs. But he did say that Manufacturers owed him an additional $2600 due to market perceptions that a damaged and subsequently repaired vehicle is worth less than one that has never been damaged. Again, this is called the diminished value and he expected Manufacturers to pay the extra money to compensate him for the lose.
In the Schaefer case, the Court got into a discussion about insurance polices and the ways to interpret them. This discussion dealt with the specific language in the policy talking about “repair or replace” and “value”. They also looked at the part of the policy dealing with “exclusions” from coverage.
The Court spent a great deal of time discussing what other courts in other States have ruled and about rulings in other Texas courts in the past. They even looked up definitions in Blacks Law Dictionary.
Their final ruling was that the policy did not cover diminished value even though diminished value was an actual loss. You would have to read the case to fully understand this final ruling.
What is important to keep in mind is that this claim was a claim made by Schaefer against his own insurance company under the collision portion of his policy. If this claim were being made against someone else’s insurance company, such as would be the case if another car had ran into him causing the damage, then the other person’s insurance would have had to pay for the diminished value. This issue was ruled on by the Texas Department of Insurance in its Commisioner’s Bulletin, No. B-0027-00 (April 6, 2002).
Diminished value claims are most applicable when you are talking about a newer model car. If you find yourself in a situation where you believe you are entitled to a claim for diminished value it would be prudent to seek the advise of an experienced Insurance Law Attorney to give you guidance. There are independent companies that exist which are able to establish the diminished value on an automobile.