Wednesday, April 21, 2010

Your car will never be the same after an accident 2

Insurers not liable for loss of value

Insurance policies in most states guarantee that a car will be repaired to pre-accident condition. Unless state courts mandate otherwise, they don't compensate for perceived loss of value."We do not believe that it is automatic or inherent that an auto's value diminishes after an accident if the proper repairs by a skilled professional are made as they should be," says Gary Stephenson, spokesman for State Farm Auto Insurance in Bloomington, Ill., one of the nation's largest auto insurers.
Courts in states including Texas, Maine, South Carolina and Delaware agree with State Farm. In past cases, they've ruled against the idea of diminished value. However, judges in several states, including Georgia and Kansas, have ruled insurers must compensate policyholders for any real loss of value from an accident.
Still others say it depends on who is at fault for the accident. In Louisiana, if you are at fault, the courts almost universally have said that diminished value does not come into play, says Don Beery, of Eustis Insurance and Benefits in New Orleans. "Third-party claims, on the other hand, depending on your company and your state, can be interpreted differently."

If someone hits you and his or her insurer picks up the bill, you might be covered, since some courts have decided that a loss includes lost value. But since lost value was not considered when the policies were being priced, insurance companies say, they would lose too much money if they were forced to pay these claims. "To expand auto coverage beyond proper repair to include payment for diminished value would add more costs and claims and would drive insurance rates upward for everyone," Stephenson says.Some insurers argue that some cars even gain value after they are in an accident. Take a car with a bum engine and 100,000 miles on it. It gets hit head-on and needs a new engine. If the insurer pays for all the repairs plus a new engine, that car is worth more than it was before the accident. In that case, the insurer could ask the owner to pay for part of the repairs.

What you can do

Owners of damaged cars trying to sell or trade in their cars are left with the choice of trying to hide the damage and hoping no one finds out; biting the bullet and accepting the lower price, or fighting their insurers. To do the latter, start by finding out how much the car would have been worth before it was damaged, either on the Internet or by checking used car sales in your area.

When keys can cost hundreds of dollars and headlights thousands, you can bet virtually any repair bill will be a shocker.
With an accurate price in hand, first try the insurance agent who sold you the policy. "If it is a dedicated agent who only sells one insurance company, you may have a hard sell. But if you went through an independent agent, they will be more likely to fight for you," Beery says. The next step is your state insurance commissioner. As a last resort, there are the courts -- obviously, an expensive alternative.Updated June 4, 2008

Your car will never be the same after an accident 1

No matter how beautifully your car was restored, its resale value never recovers from an accident. Whether you can collect on 'diminished value' depends most on where you live.

Your brand-new sports car is rear-ended at a stop sign. The other guy's insurance company pays for repairs using only original parts at the best body shop in town. It even paid for a luxury rental while your car was being fixed.

Are you happy?

Well, you might be if you plan to drive the car until the wheels fall off. Probably not if you think you may want to sell or trade the car in the next few years. Because one thing's for certain: No matter how well your car has been fixed, it's not worth as much as it was moments before the guy on the cell phone piled into you.
Why? Because your car now has a record of being wrecked that will follow it wherever it goes. And if any potential buyers check with any of several car-history services, they're not going to be willing to pay as much for it as they would have before it was in the accident, regardless how well it's been repaired.

It's your loss

The difference between what your car was worth before and after the car accident is called "diminished value." The difference, according to consumer organizations, can be as much as 18%.Most insurance companies and state insurance departments say insurers are not obligated to pay for diminished value. Others -- most notably the state of Georgia -- say they are. How successful you may be in making a diminished-value claim depends largely on what state you call home.

One company that built its business on the concept of diminished value is "Accident damage can affect both the safety and reliability of the vehicle, even after repairs have been made," says Scott Fredericks, vice president of CarFax, which maintains a database of damaged vehicles around the country.
No matter how well a car has been repaired, Fredericks says, consumers should be wary of any vehicle that has been in a serious accident. Frame repairs, flood damage and any accident that causes an airbag to deploy should get extra scrutiny.

When keys can cost hundreds of dollars and headlights thousands, you can bet virtually any repair bill will be a shocker.
"Naturally the level of concern will depend largely on how the vehicle was damaged and how well it has been repaired," he says. So, if you thought your vintage Mustang was worth $10,000, it might be worth only $6,000 after a storm blows a tree onto it -- even after it's expertly repaired. The markdown is because future buyers may be wary of hidden problems or damage that went unnoticed during the repairs.


The Actual Cash Value Policy does not insure the property itself but the VALUE of the property. When the insurance company chooses to 'Repair' the damaged insured property such an election DOES NOT relieve that insurance company of their contractual duty to restore the Pre-Loss VALUE of the motor vehicle. To whatever extent such repair's fail to restore that motor vehicles Pre-Loss VALUE , should be tendered to the policyholder in cash . This is rarely done however the failure to do so is nothing less than insurer fraud!
Items are sometimes repaired improperly or overlooked completely. Several of these typical repair related items could be: Poor quality repairs, improper welding, or flawed refinish operations.
'Diminished Value' is clearly owed and if a vehicle has not been brought back to it?s pre-accident function, appearance, safety, and value.


#1. Inherent Diminished Value: This is the automatic and unavoidable loss of market value simply due to the fact than a motor vehicle has been involved in an accident. It many cases it's mandatory that previous damage is made known to a prospective buyer.

#2. Insurance Related Diminished Value: This comes to pass due to oversights or omissions by the insurance company on their appraisal. And also, because of the use of 'Imitation Replacement' parts.

#3. Repair Related Diminished Value: This is the amount which the motor vehicle was depreciated due to improper or incomplete repairs, poor quality repairs, and/or un-repaired items that were compensated for within the insurance appraisal.
Auto repair shops (even the most advanced) do not have access to that type of equipment and so it's impossible for them to afford such technology that a manufacturer can.
What is Dan talking about here' The answer to that one is very simple: "You're not going to be returned your car in the absolutely perfect value it was when it came off the assembly line"!

It's a fact of life that should a potential buyer discover the motor vehicle one is about to buy has been in an accident that it's going to be worth less money. Because of that almost every damaged motor vehicle will have some possible inherent 'Diminished Value' which can evolve into an actual loss to the consumer. This loss is owed by the insurer (due to their alleged promise in which they?ve implied to their insured within the confines of their insurance contact with them) that would be made ?Whole?.

PLUS THERE ARE MANY OTHER 'REPAIR PROBLEMS'. (The following are 4 of the most potential just bubbling and boiling - - under the surface):

#1. Most consumer's don't know what kind of parts they're getting. They assume their motor vehicle will be restored to its pre-crash condition.

#2. Too often the "Imitation Parts" don't match the car?s contours leaving an all too often impossible mess to correct.

#3. When it comes to fenders there are "Fit Problems". Some require widening the holes or using shims. Many don;t match the contour of the car and require significant reworking.

#4. Replacement bumpers often need to be re-drilled or widened leaving large gaps or uneven surfaces.
DISCLAIMER: This article "YOUR CARS AFTER-IMPACT DIMINISHED VALUE" is intended for background information only. Its purpose is not to make any guarantee of any kind whatsoever. Dan Baldyga, NOR Car Junky Web Team purport to engage in rendering any professional or legal advice, substitute for a lawyer, an insurance adjuster,claims adjuster, or the like. Where such professional help is desired IT IS THE 

Dan Baldyga's third and latest book, AUTO ACCIDENT PERSONAL INJURY INSURANCE CLAIM (How To Evaluate And Settle Your Loss) can be found on the internet at or This book reveals ?How To? successfully handle your motor vehicle accident claim so you won?t be taken advantage of. It also goes into detail regarding the revolutionary BASE (The Baldyga Auto Accident Settlement Evaluation Formula). THE BASE FORMULA explains how to determine the value of the "Pain and Suffering" you endured - - because of your personal injury.
Copyright (c) 2005 By Daniel G. Baldyga. All Rights Reserved

Dan Baldyga - Author
FAX: 1 (413) 731 8358
(How To Evaluate And Settle Your Loss) Or:

Diminished Value Heating Up or Going Away?

Proponents of diminished value - in essence, the decrease in the value of a vehicle after it has been in an accident - say they are gaining the upper hand. They point, as an example, to State Farm's recently-announced $250 million settlement after the Georgia Supreme Court's ruling in late November that State Farm must pay its auto policyholders for diminished value.
Insurers, on the other hand, like to point to a list of a dozen or more diminished value state court decisions in their favor; less than a month before the decision by the Georgia court, for example, Delaware's Sup-reme Court reviewed three insurance policies (including State Farm's) and ruled that diminished value did not apply.
Some shops see diminished value as the hammer the industry has needed to force insurers to pay for quality repairs; others see it as another factor likely to result in more total losses.
Some consumers proudly wave the check they received from their insurer based on a diminished value claim - not infrequently years after filing such a claim - while others see diminished value as yet another basis for premium rate hikes by insurers.
And some see diminished value as a "loser issue" all the way around, with no one - not shops, not insurers and not even consumers - benefitting much at all, with only one possible winner: class action attorneys.
Here's the latest on the diminished value battle, and a look at where it's likely to go from here.

Its rise from obscurity

First, a little background. Though nothing new, diminished value made it on to most collision repairers' radar screens only in the mid-1990s when a former shop owner began marketing a system that purported to establish how much a vehicle's value had declined following an accident and repairs.
Two types of diminished value are discussed. Inherent diminished value is that which occurs simply because the vehicle was involved in a wreck, regardless of how well it was repaired.
In other words, put two virtually identical cars next to each other on the lot and tell a consumer one was previously damaged in an accident; inherent diminished value, the type at stake in much of the current litigation, is based on the notion that the consumer won't be willing to pay as much for the one that had been wrecked, even if they can't tell which one it was.
Diminished value proponents also speak of repair-related or insurer-related diminished value. Insurer-related diminished value, they say, can result from the insurer's refusal to pay for necessary repair procedures, or the required use of poor quality parts. Repair-related diminished value can result from such things as failure to put on parts for which the shop was paid, mismatched paint, overspray, crooked stripes, poor welds, or poor sheet metal repair.
A few shops in many markets have latched on to the issue of diminished value as part of their fight against what they see as insurer wrong-doing. An insurer won't pay for a procedure you see as necessary? Don't do it and let the insurer end up paying more to the consumer because of added diminished value. Lose a job to a direct repair shop? Offer the consumer a post-repair diminished value evaluation that may cost the insurer and DRP shop some bucks and credibility.
Diminished value advocates more recently have even suggested definitions of seven levels of repair quality, that range from "true pre-loss condition" and "best of reasonable human ability," to "industry standard," "poorly repaired" or "unsafe to operate."
A number of shop owners promoting diminished value assessments say they believe they are being targeted for retribution by insurers. An Arkansas shop owner, for example, has received a cease and desist order from that state's insurance commissioner for "unauthorized insurance consulting activities," requiring him to change how the shop's website promotes diminished value assistance.

The courts continue to rule

Anything that pits consumers and insurers at odds generally results in litigation, and diminished value is no exception. State court rulings on diminished value have been all over the map. The most recent decisions provide good evidence of this.
Last October, the Louisiana Court of Appeals rejected the diminished value argument. In the case of Campbell v. Markel American Insurance Cos., the plaintiff asked the insurer to pay for repairs to his motorcycle as well as the difference between the pre-damage value and the value after it had been fully and properly repaired.
"The Court of Appeals correctly reversed the lower court's ruling and found that Markel met its obligation under the contract in making full and adequate repair of the vehicle," said Laura Kotelman, counsel for the National Association of Independent Insurers (NAII).
The court concluded that the policy language capped Markel's liability at the cost of providing physical restoration of the motorcycle and that the policy did not require coverage for claims of diminished value. A lawyer for the plaintiff has asked the Louisiana Supreme Court to review the case but whether it will has not been determined.
Delaware's Supreme Court last November also gave diminished value claims a thumbs-down. The Court said, "A plain reading of the limits on liability in the policies in question unambiguously gives the insurers the option to choose between the cost of repair or the full value of the vehicle before the covered damage occurred... [T]he insurer is obligated to repair or replace vehicle parts only to the extent necessary to return the automobile to substantially the same physical, operating, and mechanical condition as before the covered incident."
But the Georgia Supreme Court came to a different conclusion in its review of the Mabry v. State Farm case, upholding the diminished value claim. Supreme Court Justice Robert Benham wrote that "value, not condition, is the baseline for the measure of damages in a claim under an automobile insurance policy in which the insurer undertakes to pay for the insured's loss from a covered event."
Georgia Insurance Commis-sioner John Oxendine subsequently stated that all auto insurers in that state must pay its auto policyholders for diminished value.
In early January, State Farm agreed to settle the class action suit in Georgia, providing $100 million to as many as 700,000 Georgia policyholders who've filed claims since December 1993.
The insurer also has agreed to provide $50 million for court costs and attorney fees, and as much as $100 million for diminished value in future claims over the next six years.
Meanwhile, two other class action lawsuits, one against State Farm and one against Allstate, and each covering policyholders in more than 30 states, are moving forward. Potential class members (which, in the State Farm suit, for example, could total more than 2.3 million current and former State Farm policyholders) are those who filed a first-party claim since 1996 if their vehicle was 6 years old or newer with less than 90,000 miles on it, and who had $1,000 or more in repairs.

The outlook

Despite these pending class actions, insurers and insurer groups point to their state court victories and insist that its only a matter of time before they have the legal decisions they need to avoid most diminished value claims
"The entire theory of diminished value is dubious because there is no way to accurately determine the exact value and condition of the vehicle at the time of the accident," argues James Taylor, southeastern regional manager for the NAII. "The role of auto insurance is to repair or replace a damaged vehicle to pre-accident condition; it is not designed or priced to guarantee the value of a car before or after the repair is made."
Diminished value advocates, on the other hand, say the cases they have lost were mostly those brought early on before attorneys had refined their arguments or learned to group plaintiffs advantageously. The Georgia ruling has done a lot to buoy their spirits.
But Bill Hardt, assistant vice president for property damage claims for State Farm, said he believes there's still more questions than answers surrounding the issue of diminished value. "Think about it: If it were you, how are you going to tell how much diminished value there is?" Hardt said. "The car's repaired to pre-loss condition."
At this point, who can say what the diminished value is - based on the quality of repair? More importantly, Hardt said, anyone who views the Georgia case as a victory for collision repairers isn't seeing the bigger picture.
"What's going to happen to [shops] if because of diminished value the cost of claims jumps by 15, 20, or 25 percent?" Hardt asks. "First of all, insurance premiums will go up. Second of all, shops will be fixing a lot fewer cars because we'll be totaling them."
But many see the court decisions as relatively unimportant either way in the longer term. Insurers, they believe, intend to eliminate diminished value claims in much the same way they are moving on the non-OEM parts issue: not through protracted legal battles but by simply making changes to the policies they offer consumers.
Evidence backs this view up: The Insurance Service Office over the last two years has filed diminished value exclusions in nearly every jurisdiction. That exclusion has already been approved in almost 40 jurisdictions; only eight declined to approve it.
As Brian Sullivan, editor of several insurance industry newsletters, said recently, expect diminished value to be a "noisy thing" over the coming months, but less likely a long-term issue.

The Bottom Line

The best defense against lawsuits, both at the shop and insurer level is a quality repair. A quality repair, however, is not a complete defense. It is becoming critical that the shop be able to document the quality of repair. For example, the use of computerized measuring systems provide before and after documentation of frame/unibody pulls.
In our judgment, a formalized quality control process will also be critical, and, in future articles, we will cover what needs to be included in such a program.

U.S. judge sets newly merged Toyota suits in motion

(Reuters) - The federal judge handling scores of lawsuits against Toyota Motor Corp over cars that raced out of control has set the first court hearing on the combined litigation for next month.
Lawyers for Toyota will face off May 13 before U.S. District Judge James Selna in Santa Ana, California, against attorneys representing over 100 lawsuits consisting of consumer fraud class actions and personal injury claims against the Japanese automaker.
Some lawyers estimate Toyota faces potential civil liability of more than $10 billion as it struggles to contain an auto-safety crisis that has tarnished its public image.
The recent addition of demands for full refunds to U.S. owners of recalled Toyota vehicles as part of consumer protection cases filed in 12 states could raise the legal stakes even higher for the car company.
Selna also designated counsel for the initial phase of the proceedings, naming three prominent trial lawyers and their firms with experience ranging from big tobacco litigation to the Enron Corp bankruptcy and claims arising from the Exxon Valdez oil spill.
Steve Berman of the Seattle-based firm Hagens Berman Sobel Shapiro as well as Marc Seltzer of the Los Angeles firm Susman Godfrey and Elizabeth Cabraser, a founding partner of Lieff Cabraser Heimann & Bernstein in San Francisco were named co-lead counsel by the judge.
While Selna said "these temporary designations are not a precursor of future appointments," the lawyers' selection for the first phase sets them apart from dozens of others expected to apply for permanent lead roles in the litigation.
"It definitely demonstrates the court has respect for them," said Richard Arsenault, of the Louisiana-based firm Neblett, Beard & Arsenault, who co-chaired a legal conference on the Toyota litigation last month in San Diego.
Arsenault said judges presiding over major consolidations of complex legal claims typically name five to 20 lawyers to manage the plaintiffs' case.
Contenders were given until April 30 to apply, and Selna planned to make additional appointments at the May 13 hearing.
April 30 is also the deadline for lawyers to submit a preliminary report outlining a proposed organizational structure for the legal teams, the basic facts of the case, key issues in dispute and main subject areas for discovery.
Selna also named defense attorney Cari Dawson of the Atlanta firm Alston & Byrd to head up Toyota's legal team.
The process of consolidating lawsuits is another step for the U.S. legal system in confronting a torrent of civil litigation in federal courts related to the problems with unintended acceleration in Toyota cars, trucks and SUVs.
Complaints of runaway automobiles and other safety issues have led to the recall of more than 8.5 million Toyota vehicles worldwide, most for repairs of ill-fitting floor mats and sticking gas pedals the automaker blames for surging engines.
Many of the lawsuits suggest the problem is rooted in an as-yet unidentified electronic glitch, which Toyota has vehemently denied.
Unintended acceleration alone has been linked to more than 50 crash deaths and dozens of injuries in Toyota and its luxury Lexus vehicles under investigation over the past decade.
By one count presented in court last month, at least 138 federal lawsuits had been filed against Toyota, but Arsenault said the number was now approaching 200. Many more were brought in various state courts and are not part of the consolidated federal litigation.
The bulk of federal cases are class actions on behalf of consumers seeking compensation for diminished resale value of their cars as a result of the recalls.
Such cases filed in 12 states by Berman's law firm have been updated during the past month with new claims that owners of recalled Toyota vehicles are entitled to full refunds based on breach of warranty and other misdeeds alleged against the automaker.
Berman said the refund claims "absolutely" would be included the combined consumer litigation going forward.
The case is: In re: Toyota Motor Corp Unintended Acceleration Marketing, Sales Practices, and Product Liability Litigation, U.S. District Court, Central District of California, No. 10-ml-02151.
(Reporting by Steve Gorman, editing by Leslie Gevirtz)

Auto Insurers Begin Process of Recouping Losses from Toyota

Insurance companies are gearing up to recoup from Toyota money they paid for claims in crashes involving sudden acceleration, the subject of major safety recalls by the Japanese automaker. It could also mean money back for some drivers who paid deductibles.
At least six major insurers, including State Farm Insurance Cos., Allstate Corp. and Geico, have begun examining past claims involving the recalled vehicles, which number about 6 million in the U.S. and 8 million around the world. Insurers can request that Toyota pay them for the claim if a vehicle defect is proven to be a key factor in a crash, a long-standing industry practice known as subrogation.
Many insurers have begun notifying Toyota Motor Corp. that they will do just that.
"We're seeking to have them share in some of the financial liability, because part of it is their fault,'' said State Farm spokesman Phil Supple.
The move could repay some Toyota owners their out-of-pocket costs due to crashes but probably wouldn't have much of an impact on the premiums drivers pay. And it would mostly involve crashes in which people weren't seriously injured, because those cases frequently find their way into lawsuits.
Insurance companies typically refund deductibles -- the amount a policyholder must pay before the insurance takes over -- to their customers when they are repaid in such cases, officials of several companies said this week. None would release any financial estimates or the number of potential crashes, but given the sheer size of the Toyota recalls the liability could be in the millions of dollars.
State Farm has sought reimbursement from Toyota in cases where cars have sped out of control on their own at least as far back as 2007, according to a letter the company provided to federal regulators. The letter, dated Sept. 18, 2007, sought a formal Toyota investigation into a crash involving a 2005 Camry that surged forward at a stop sign and hit another car.
"We are aware of several complaints to your company of unexpected or sudden acceleration involving the Toyota Camry,'' the letter says. "Please accept this letter as notification of State Farm's rights of recovery for the damages we paid to both vehicle owners.''
Toyota issued a limited floor mat recall in 2007, but it didn't cover the 2005 Camry at issue in the State Farm letter. In the past few months, the automaker has issued two unwanted acceleration recalls for several of its popular models, one to fix floor mats the company says can jam floor pedals and one to repair what it calls a problem with pedals that can stick. Prius hybrids have also been recalled for brake issues.
A Toyota statement declined comment on the insurers' attempt to recoup claims but added it was "a common practice in the automotive industry,'' which was echoed by Allstate spokesman Mike Siemienas.
"This is business as usual for Allstate,'' he said.
Experts say most insurers have agreements with automakers to negotiate a confidential settlement over defect-related claims -- and automakers such as Toyota usually have insurance to cover most of the costs. Toyota declined to comment beyond its statement.
"It will be a whole bunch of small claims. What you have here are the fender benders,'' said Mark Bunim of the mediation firm Case Closure LLC in New York. "The major claims, where someone's a paraplegic, they will not be part of that group.''
Not every accident in a recalled Toyota can be blamed on a defect like sudden acceleration, said Insurance Information Institute spokeswoman Jean Salvatore.
"Just because you drive one of the cars that was recalled doesn't mean the accident was caused by the faulty accelerator,'' she said. "It would have to be determined that the cause of the accident was because of the defect.''
That can take a great deal of time, particularly with such a large volume of recalls. The paperwork for each potential claim is painstakingly reviewed on a case-by-case basis before the insurer submits it to the automaker for possible reimbursement.
Salvatore also said vehicle recalls by themselves usually have little impact on whether a driver's insurance premiums will rise. She said there are so many other factors, such as a person's driving and credit history, the car's safety record in crashes, whether the vehicle is frequently targeted by thieves, and so on.
"So, it's very difficult to say that rates will go up or down because of this,'' she said.
The National Highway Traffic Safety Administration has linked 52 deaths to claims of sudden acceleration in Toyotas, and more than 100 wrongful death and personal injury lawsuits have been filed against the automaker around the country. Those are being consolidated before a California federal judge for pretrial matters along with more than 130 lawsuits filed by Toyota owners claiming their cars have lost value since the recalls. An initial hearing is set for May 13.
Despite the lawsuits, Toyota reported March sales of new vehicles rose 41 percent compared with February numbers. Toyota has mounted an aggressive advertising campaign to counter the negative impression left by the recalls and offered sweet deals such as 0-percent financing, cheaper leases and free maintenance for some customers.
Many of the lawsuits contend problems with Toyota's electronic throttle control are the true culprit in the sudden acceleration cases, but the company has insisted electronics are not to blame.

Source Insurance Journal

Toyota Now Facing Lawsuits over Shrinking Resale Values of Cars

Added to a wave of personal injury lawsuits stemming from Toyota's massive recall, the automaker faces a growing number of consumer class-action cases -- more than 40 so far -- over the shrinking resale value of its cars.
Consumer lawsuits seeking economic damages for diminished value or lost use of a recalled Toyota vehicle have been filed in at least 30 states, mostly in federal court, and could end up costing the car maker over $2 billion, Tim Howard, lead counsel for a team of law firms handling about half the cases, estimated.
All the federal suits would be consolidated into a single class action in the next three to four months, following a hearing before a panel of judges set for March 25 in U.S. District Court in San Diego, Howard said.
Toyota Motor Corp.'s U.S. operations are based in California. A company spokesman declined to comment.
Litigation against the cash-rich Japanese automaker has mounted quickly in the weeks since it began the biggest recall in its history for repairs to ill-fitting floor mats and sticking gas pedals it blames for instances of unintended, sudden acceleration in its vehicles.
This week a separate recall was announced for braking flaws reported in Toyota's top-selling hybrid car, the Prius, and U.S. regulators say they are reviewing dozens of complaints of potential steering problems in new Toyota Corollas.
Toyota has recalled some 8.5 million vehicles.
Lawsuits related to injuries and death are the most obvious cases being brought against Toyota. Up to 19 U.S. crash deaths over the past decade may be linked to accelerator-related issues at Toyota, congressional officials have said. An unknown number of injuries also are likely to spur legal action.
A class-action suit was filed in Los Angeles on Monday on behalf of U.S. shareholders accusing Toyota of misleading investors.
Howard, a Northeastern University law professor, said the consumer class actions are based on the premise that for Toyota car buyers "if you went to sell your car today, it's worth a lot less than it was two weeks ago.''
Major automobile valuation services like Edmonds and Kelley Blue Book have downgraded the resale value of Toyotas by as much as 3.5 percent, and further decreases up to 6 percent can be expected, Howard said.
Toyota has long boasted one of the industry's highest resale values for its vehicles, as well as a superb record of reliability and safety -- all major factors in the company's success in the U.S. market .
Class-action lawsuits are predominantly a U.S. phenomenon, involving a large group of plaintiffs who bring similar claims to court collectively.
Toyota is not the first car company to face such legal actions. In 2008, Ford Motor Co. agreed to payouts of up to $500 per plaintiff, in the form of discount vouchers, to settle a diminished-value case on behalf of 800,000 customers after a tire recall prompted concerns about potential rollover crashes in its Explorer sport utility vehicle.
(Reporting by Steve Gorman, Editing by Dan Whitcomb, Leslie Gevirtz)

Indiana High Court Rules Against Dimunition of Value

The Indiana Supreme Court last month ruled that insurance policies are not obligated to compensate damaged property for decline in value of the property after adequate repairs have been made. The insurance industry views the ruling as a major clarification of the ambiguity and confusion that has surrounded the diminished value issue for years.
The Insurance Institute of Indiana, the American Insurers Association and other industry groups participated in the case by submitting an amicus brief, arguing that policy language clearly states that diminished value is not included as a "loss."
The class-action suit, Allgood v. Meridian Security Insurance Company, was brought by a policyholder claiming Meridian Insurance should have reimbursed her for the decline of value of her repaired car after its damage. The trial court ruled in favor of the insurer, but the Indiana Court of Appeals reversed the decision.
The Indiana Supreme Court denied transfer on Oct. 27, finding "that an insurance policy that provides coverage for loss limited to the lesser of the actual cash value or the amount necessary to repair or replace the property with other property of like kind and quality does not obligate the insurer to compensate for diminution in value of the property after adequate repairs have been made." All five justices voted to deny transfer of the case.
The ruling is a clear victory for contractual language and another stake in the heart of the diminished value concept, said David Snyder, vice president and assistant general counsel for the AIA. Since 1999, 23 appellate and Supreme Court decisions have rejected the diminished value concept, with only three upholding the concept, including the lower appellate court in Allgood, Snyder said.
Because on average, 50 percent of an auto premium involves collision, a trend of recognizing the diminished value concept would have a detrimental effect on rates, he noted. "We understand why there's pressure to find diminished value as covered, but we are appreciative of courts pretty universally rejecting the concept. It's a trend that will ultimately benefit consumers in terms of auto insurance cost, consistent with what people realistically expect that their car will be repaired and function well, but the value may be different."

Ohio Court Ruling Could Impact Auto Damage Claims

An Ohio couple whose vehicle was wrecked are entitled to more than just the money it will cost to repair it, according to a state appeals court ruling that found the couple also should be compensated because the accident reduced the value of their vehicle.
Consumer advocates say the ruling could help other drivers in Ohio who have seen the value of their vehicles reduced by an accident.
Duke and Cheryl Rakich bought a GMC Yukon for $49,000 in 2003. Several months later the sport utility vehicle was broadsided.
Nationwide Insurance paid $8,000 for repairs, but when the Rakich's decided to resell the car, fearing the car was no longer safe, they received offers about $6,000 less than if the car had not been through an accident.
The July 24 ruling by the 10th Ohio District Court of Appeals in Columbus said the Rakich's could seek more than the repair costs, and could ask Nationwide for the car's "diminished value.''
The ruling requires Franklin County Common Pleas Court Judge Eric Brown to hold a hearing to figure out how much the Rakiches are still owed.
Scott Smith, attorney for the couple, said the ruling should have implications statewide, and could mean millions of dollars for consumers. Insurance companies have for years fought against paying diminished value, and many people haven't realized they could claim more than just repair costs, he said.
"This is a windfall the insurance industry has received over the decades,'' Smith said. "The insurance industry has been unjustly enriched for not paying what they should have paid.''
Nationwide spokeswoman Nancy Stelzer said Friday that she couldn't comment on pending litigation. The company has until Sept. 8 to appeal to the Ohio Supreme Court.
If the Supreme Court upholds the appeals court's ruling or refuses to hear the case, other Ohio lawyers could use it to seek payments for diminished value.
But Dean Fadel, vice president of legislative affairs for the Ohio Insurance Institute, said the ruling did not represent a major change in state policy.
Some insurance companies already pay the diminished cost by compensating owners for a car's market value, based on sale prices of similar vehicles in their communities, he said. And the only effect the ruling might have is if it inspires a number of lawsuits, which would then drive up premiums for all motorists, Fadel said.
The Ohio Department of Insurance is waiting to see if Nationwide appeals to the state Supreme Court before issuing an opinion on the appeals court ruling, Department Director Mary Jo Hudson said.

Alliance Argues Against Iowa Diminished Value Bill

A pending Iowa regulation that would regulate the way insurers settle automobile claims is flawed and should be changed, according to the Alliance of American Insurers.
"In its current version, IAC 191-15 would force insurers to pay third-party claimants for diminished value," said Bill Schroeder, vice president of the Alliance's Midwest region, in testimony submitted today to a departmental hearing on the subject. "There is no contractual requirement to pay anything to a third party. As such, payment of diminished value is a tort claim and a matter of negotiation.
"In addition, the regulation appears to place the burden of proving diminished value on the insurance company, in direct contravention to existing case law, which clearly places the burden of proof on the claimant."
The Alliance, an industry trade group that represents 340 property/casualty carriers, instead is advocating an amendment to the proposed regulation that would permit a claim for diminished value "if the third-party claimant proves that repairs did not fully restore the vehicle to its pre-accident condition as measured by market value. Each insurer shall maintain a system of supervision and control to ensure compliance with this rule."
"Courts of law in no fewer than 12 states have failed to uphold the concept of alleged diminished value," added Kirk Hansen, Alliance director of claims. "A vehicle that is properly repaired generally does not lose value, even if it has been in an accident. Though there are well over 60 million automobiles in the country that have been repaired as a result of accidents, none of the price appraisal guides, such as the NADA Official Used Car Guide or Kelley's Blue Book, consider prior accidents when publishing the value of used cars. In addition, there are no used car dealers that sell a class of 'diminished value' cars.
"The changes in claim settlement practices that would be mandated by this regulation in its current iteration will only increase insurers' claims costs with no corresponding improvement to the process for claimants."

Georgia: No Single Formula for Insurers Handling Diminished Value Claims

Georgia Insurance Commissioner John W. Oxendine has issued a directive informing automobile insurance companies in Georgia about the proper handling of diminished value claims.
Oxendine ordered all auto insurance companies to cease using any language that implies that the Georgia Insurance Department has endorsed or approved a particular formula for determining diminution of value in physical damage automobile claims.
Diminished value refers to the loss of value in a vehicle that has been damaged and repaired. Oxendine issued a previous directive in 2001 regarding the Georgia Supreme Court ruling that set precedent for diminished value claims. Now he said he wants to be sure that companies understand there is no single formula for determining the amount of diminished value to be paid in a particular claim.
"There seems to be some misunderstanding in the industry that a particular formula exists for diminished value," Oxendine said. "I want to clarify the matter by reminding insurers that my office has never issued any regulation requiring the use of a specific formula for determining diminished value, so each claim should be evaluated on its own merits."
Source: Georgia Insurance Department

Ind. 'Diminished Value' Class-Action Case Could Set Dangerous Precedent, Insurers Argue

Indiana Supreme Court justices should carefully consider the impact that a class-action case regarding compensation for the diminished value of a vehicle could have on numerous insurance policies and premiums and ultimately reject the lawsuit, according to an amicus brief filed this month by a coalition of insurance industry lobbyists.
In Christina Allgood v. Meridian Security Insurance Co., the Court of Appeals held that Meridian's auto insurance policy requires Meridian to pay not only the cost of repairs, but also an additional amount for the "diminished value" that damaged vehicles allegedly may suffer even after being completely and properly repaired.
However, insurers argue that Meridian's policy language explicitly limits its liability to either the vehicle's actual cash value or the amount necessary to repair or replace the vehicle's damaged parts with repair parts of like kind and quality, whichever is less.
The Des Plaines, Ill.-based Property Casualty Insurers Association of America, in conjunction with the Insurance Institute of Indiana and other industry trade groups, filed an amicus brief in support of Meridian because the Court of Appeals' decision "not only creates unnecessary, cumbersome new law in Indiana, but also contradicts the strong national trend rejecting 'diminished value' claims," according to the brief.
Diminished value is the difference between the market value of a car before it has been in a collision and its value after it has been repaired.
"Only 10 states recognize the concept of diminished value, and Indiana shouldn't take that route," said Robert Hurns, PCI counsel and legislative database manager, in a statement. "There is an overwhelming trend reflected in recent court decisions around the nation that diminished value is not recoverable under policies limiting insurer liability to the cost of repairs. In the past three years, six state supreme courts have rejected coverage for 'diminished value,' and the Indiana Supreme Court should do the same."
Meridian's clear policy language regarding insurer's liability in repairing damaged vehicles is also very similar to many other carriers' auto policies. Therefore, the court's decision is likely to have a far-reaching impact on insurers who offer auto coverage in Indiana and on the premiums they charge to policyholders, Hurns said.
"This case could set dangerous precedent by conceivably forcing insurers to pay diminished value damages for past claims even though they have not received premiums to account for such payments," Hurns said.

Allstate Wins Class Action Suit on Diminished Value

After a three-week trial, a St. Clair County, Ill. Circuit Court jury returned a complete defense verdict last Thursday, April 29 for Allstate Insurance Company in a 30-state class action involving diminished value claims in auto insurance.
The plaintiffs in the case had charged that Allstate should have paid for the "diminished value" of automobiles involved in accidents. They alleged that the insurer should be responsible for paying the amount a vehicle loses in value after full repairs have been made. The plaintiffs, who were represented by both local and national class action law firms, sought nearly $400 million in damages.
"We are delighted that the jury agreed with our evidence that Allstate complied with all of its obligations under the policy," stated Margo Weinstein, counsel for Allstate and a partner in the Chicago office of Sonnenschein Nath & Rosenthal LLP. "We are not aware of any other multistate class action jury trial in which a corporate defendant prevailed."
The law firm's announcement also noted that "the case was unusual in that it was one of the few multistate class actions that has ever gone to trial. It covered some 387,000 Allstate policyholders from 29 states and the District of Columbia."
In addition to the Sonnenschein firm Allstate was also represented by Kerr & Wagstaffe LLP of San Francisco and the Edwardsville law firm of Burroughs, Hepler, Broom, MacDonald, Hebrank & True LLP.

Courts Continue to Reject Diminished Value Concept in Class Actions

In spite of an ongoing influx of litigation, U.S. courts continue to reject class-action lawsuits involving diminished value, a concept referring to the difference between the value of a vehicle before and after it was involved in an accident.
"Courts across the country have continuously rejected the diminished value concept as a legal theory, and the trend is growing," said Robert Hurns, counsel for the National Association of Independent Insurers (NAII). "Since 1999, courts in more than a dozen states have summarily kicked out these cases, underlining the fact that insurance companies don't owe policyholders an arbitrary amount of 'value' on top of the cost of auto damage repairs."
The language used by the courts in dismissing many of these cases is "dramatic and unambiguous," Hurns added. "It's clearly stated that diminished value, particularly those in class-action cases, are a waste of time and resources. We're confident that this tenor will carry over to cases that are still pending."
NAII's most recently compiled chart indicates that diminished value cases were dismissed in the following states:

• Arizona - In Kenger v. GEICO, CV 1999-001522, the plaintiff alleged that a single replacement radiator was not "like kind and quality" to a Honda radiator and pleaded breach of contract, violation of the Arizona Consumer Fraud Act, violation of the Arizona Civil RICO statutes, and violation of the Arizona Insurance Code. In November 1999, the court granted the defendant's motion for summary judgment, stating "a void of evidence" to support the plaintiff's contention the competitive part was inferior.
• Florida - So far, Florida courts in four separate jurisdictions have sustained the defendants' motion to dismiss in four separate cases: Morrison, et al. v. Allstate Indemnity, Siegle v. Progressive, Casas v. United Services Automobile Association, and Thames v. United Services Automobile Association. The courts were adamant about the lack of evidence against the inferiority of non-OEM parts, stating their use is expressly permitted in Florida state law, and in the Thomas case, rejected a request for a class action.
• Illinois - In Rios et al. v. Allstate Ins. Co., the court denied the plaintiff's motion for class certification.
• Indiana - In Vietez v. Meridian Mutual Insurance Company, the plaintiff asserted breach of contract and unjust enrichment. The court found that the contract language was unambiguous and that it did not provide for loss in value damages and granted a motion to dismiss in March 2000.
• Louisiana - In Graham, et al. v. Allstate Property and Casualty Insurance Co., et al., the trial court found that Allstate's contract clearly did not allow for diminished value and issued a ruling in favor of Allstate for no cause of action. The case was dismissed with prejudice in May 2000.
In Johnson v. Illinois National Ins. Co., the plaintiff sued for breach of contract and sought damages equal to the difference in value between the pre-damaged car and the value after the repair. The trial court ruled for the insurer, finding no coverage for diminished value in the policy. Johnson filed an appeal. NAII will file an amicus in the appeal case asking the court to uphold the trial court's ruling.
In Townsend, et al. v. State Farm Mutual Auto Ins., the plaintiff filed a class-action suit claiming the adjuster did not consider compensating him for purported diminished value. The court ruled in favor of State Farm, granting its motion for summary judgment in August 2000, stating the policy language is clear and unambiguous and does not cover diminished value.
In Entremont, et al. v. American Central Ins. Co., the trial court dismissed Entremont's diminished value lawsuit. Entremont is currently appealing in the first circuit.
• Massachusetts - In Roth v. Amica Mutual Ins. Co., the plaintiff alleged breach of contract, fraudulent misrepresentation, fraudulent inducement, negligent misrepresentation, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing. On Sept. 3, 1999, the court granted the defendant's motion for summary judgment on the issue of diminished value, finding the policy language clearly did not provide for it, and observed nothing in the policy precluded the insurer from using non-OEM parts. However, the court denied the defendant's motion for summary judgment on this point, stating there was an issue of material fact regarding the quality of the non-OEM fender.
• Missouri - In the class-action suit of Condez v. Amerisure Ins. Co., plaintiffs alleged that "under the policy Amerisure is obligated 'to pay its insureds the diminished value of their automobiles.'" The court, granting the defendant's motion for summary judgment, stated the plaintiff had not realized any damages reflecting diminished value and "whether a repair renders a vehicle less valuable than before the accident depends on the sufficiency and extent of the repair, not merely on the fact that repair was necessitated by a covered loss."
In Spellman, et al. v. Sentry Ins., the court granted summary judgment dismissing the case in December 2000.
• Ohio - In Goodman v. Grange Mutual Casualty Insurance Co., the court granted Grange's Motion for Summary Judgment and the plaintiff did not appeal.
• Pennsylvania - In Munoz v. Allstate Ins. Co., the plaintiff's claim was based on diminished value, suing for breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and bad faith. On Nov. 15, 1999, the court sustained the defendant's preliminary objections to the plaintiff's class action complaint, concluding the plaintiff could not reasonably expect the policy to provide for diminished value "in light of the current common practice in Pennsylvania." The Pennsylvania Superior Court heard the appeal of this case in July 2000 and ruled in favor of Allstate.
• Rhode Island - In Cazabat v. Metropolitan Property and Casualty Ins. Co., plaintiff's motion for class certification alleged that "Metropolitan uniformly failed to estimate and assess the inherent diminished value when conducting the initial inspection of the first-party property damage claims of its insured's vehicles" and failed to advise policyholders in Rhode Island, Louisiana, Arkansas and Georgia that coverage was included in the contract. The court denied the plaintiff's motion for class certification and concluded that "the possible individual questions involved in the present case lead this Court to the conclusion that class certification is not the best, most efficient method for adjudication. The number of mini-trials needed for this case renders the class action unmanageable and henceforth, not superior."
• Tennessee - In Murray, et al. v. State Farm Mutual Auto Ins. Co., et al., plaintiffs contended that non-OEM crash parts were insufficient to meet State Farm's obligation under the insurance policy, alleged breach of contract, violations of the Tennessee Consumer Protection Act, and fraudulent misrepresentation. The court denied the plaintiff's motion for class certification and concluded that the difficulties likely to be encountered in the management of the case (requiring "hundreds or thousands of mini-trials") would constitute an insurmountable burden on the court.
• Texas - In Carlton v. Trinity Universal Ins. Co., plaintiff contended Trinity was obligated to pay an additional amount for the "inherent diminished value" of the car, defined as the difference between the pre-loss value of a car and its value after proper repair. On Jan. 4, 1999, the court granted the defendant's motion for summary judgment, finding Trinity's policy did not provide for diminished value. This case is currently on appeal.
In Berry v. State Farm, an appeals court unanimously held that the Texas Insurance Code did not prohibit the use of like, kind and quality parts under the standard Texas auto insurance policy and that insurance companies were not required to pay for new OEM parts.
• Washington - In Schwendeman v. USAA Casualty Ins. Co., the court refused to accept the testimony of purported experts Paul Griglio and Charles Kendall Clarke. Plaintiff's Motion for Class Certification was denied on Oct. 20, 2000.

Source Insurance Journal

Texas Supreme Court Rules Against Diminished Value

October 24, 2003

In overturning a lower court ruling, the Texas Supreme Court has ruled that insurance contracts do not require an insurer to pay a
policyholder for the vehicle's so-called diminished value.
In the case of American Manufacturers Mutual Insurance Co., et al v.
Schaefer, Gary Schaefer filed a class action lawsuit against several insurance companies seeking a ruling that personal auto policies cover diminished value. The district court granted summary judgment in favor of the insurer, but the Court of Appeals for the Ninth Judicial District reversed that decision.
"The Texas Supreme Court correctly ruled that the contract language is clear-cut and does not require the payment for diminished value when a vehicle has been fully and adequately repaired," said Donald Hanson, southwestern regional manager for the National Association of Independent Insurers (NAII).

The court said that to expand the ordinary meaning of repair to include an intangible, diminished value element would ignore the policy's language or give the contract's text a meaning it never intended. In addition, the court took into account arguments advanced in an amicus brief filed by NAII that cited the Texas Department of Insurance bulletin as well as numerous other state court decisions that state an insurer is not obligated to pay for diminished value.
Within the last few years there have been numerous court decisions
supporting insurers on the issue of diminished value. State supreme and appellate courts in Alabama, Delaware, Florida, Louisiana, Maine, Missouri, South Carolina, and Wisconsin have recently addressed the issue and ruled that diminished value is not recoverable.
"Earlier this year the South Carolina Supreme Court rejected the diminished value argument. Now with this decision, Texas is in the mainstream regarding the issue. As in Texas, most of these cases have been dismissed based on clear, unambiguous policy language," said Hanson.
Source: Insurance Journal