diMINISHED VALUE IS A TERM USED TO DESCRIBE A SPECIFIC LOSS IN MARKET VALUE TO A VEHICLE DUE TO COLLISION OR OTHER DAMAGE CAUSED BY ANOTHER PARTY’S NEGLIGENCE.
The goal of a diminished value payout is to bridge the gap between pre and post ACCIDENT value BUT THE INSURANCE COMPANY WILL routinely SUBMIT LOWBALL offerS WHICH ARE a fraction of what is considered a fair settlement- relying on the “17c formula” to formulate a quick payout.
NOTE: IN GEORGIA, AN INSURED PARTY CAN CLAIM DIMINISHED VALUE WITH THEIR OWN CARRIER EVEN IF SAID INSURED PARTY CAUSED DAMAGE TO THEIR OWN PROPERTY.
17c formula
The origin of this formula dates back to a 2001 class action lawsuit known as “mabry vs. state farm”. with over 25,000 claimants, the 17c formula was deemed acceptable by a judge in order to efficiently process the cases in a reasonable period of time.
it is important to note that the 17c formula albeit not 100% accurate was “allowed” at that time as a means to an end for that particular class action lawsuit, yet some insurance companies still try to utilize this formula today as a stand alone calculation in order to minimize diminished value payouts.
the primary flaw with this formula is that it uses 10% of the vehicle’s value as a baseline with mileage and damage modifiers also factored in to reduce the severity of the claim. appraisers across the nation have issues with this.
first, mileage is being used to arrive at the vehicle’s book value so on slightly higher mileage vehicles, when it’s factored a second time as an independant multiplier, the reduction is technically a double-dip.
second, the damage modifier can range from mild to severe structural damage. just because the repairs performed on your vehicle were considered to be minor doesn’t mean the pristine, accident-free status of your vehicle should be ignored. it’s common knowledge in the auto industry that any type of repair performed on a vehicle disrupting thE vehicle’s original factory fit and finish and/or oem parts content equates to a considerable reduction in value.
after all, if you were shopping for a new car and stumbled across identical vehicles at different dealerships priced the exact same, wouldn’t you prefer the accident free vehicle ?
ACTUAL CASH VALUE (ACV)
ACV IS DEFINED AS the amount equal to the replacement cost minus THE depreciation of a damaged or stolen VEHICLE at the time of the loss. INSURANCE COMPANIES GENERALLY UTILIZE ACV IN FORMULATING TOTAL LOSS SETTLEMENTS .
