Dealing with the repair or replacement of your car or truck after a collision can be a very frustrating experience. Having a basic knowledge of the elements of damage to which you are entitled, however, can relieve at least some of that frustration and simplify the process. Significant collisions often result in damage to your car or truck – damage that is either repairable, or damage to the extent that the vehicle is “totaled.” So, just what are you entitled to in each of these situations?
To answer that question, you must first be familiar with some basic terms.
1. Fair Market Value is the price a willing buyer would pay a willing seller for your car or truck in the condition it was in just prior to the collision. Insurance companies often use industry publications such as National Auto Dealers Association (NADA) guides or similar publications to determine fair market value.
2. Diminution of Value is the decrease in market value once repairs have been made. Stated plainly, a car that has been wrecked and repaired is worth less than a car that has never been wrecked. The difference between the market value of the car that was wrecked and repaired and the car that was never wrecked is the diminution of value.
3. Loss of Use generally encompasses car rental expense incurred while the vehicle is being repaired.
4. Duty to Mitigate is the duty placed on the owner of the car or truck to limit or lessen, as reasonably possible, the amount of damages arising from the collision. For example, an owner would not be entitled to reimbursement for storage fees for storage beyond a reasonable period of time following a collision.
This brings us to two options:
1. The Damaged but Repairable Vehicle. When the car or truck will be repaired you are entitled to the following elements of damage:
- Towing expense.
- Reasonable costs of repair. It is always prudent to have the repairs approved by the insurance company responsible for the repair before having the work done. Often times insurance companies suggest designated repair shops and guarantee the work performed. This is something you will want to discuss with the adjuster handling your claim.
- Loss of Use. You are entitled to rental expense incurred while the vehicle is being repaired. The duty to mitigate damages, however, requires that you rent a vehicle of value similar to yours. You will likely not be fully reimbursed for renting a Cadillac if your damaged vehicle is a Ford.
- Diminution of Value. In addition to your out-of-pocket expenses for towing, rental, and repair, you are entitled to compensation for the value lost as a result of the collision and repair. Although insurance companies often suggest 10% of the repair cost as a reasonable figure for diminution of value, there is no established rule. Perhaps the best way to determine the diminution of value is to obtain an opinion from a dealer regarding the fair market value of your repaired automobile versus the fair market value of an identical automobile that had never been wrecked.
2. The Totaled Car or Truck. When your car or truck is totaled as a result of a collision you are entitled to the fair market value of the vehicle just prior to the collision. It is important to note that the fair market value has absolutely nothing to do with the sales price paid by you for the car or truck. People often find themselves in trouble because they owe the bank much more than the vehicle is worth. Unfortunately, if you are in this situation and your car or truck is totaled, you will remain responsible for the difference between the fair market value of the vehicle and the amount owed.
In addition to the fair market value of the vehicle, you are entitled to reimbursement for towing expenses, as well as rental and storage expenses incurred by you for a reasonable period of time while the insurance company determines the extent of damages and the settlement offer to be made.
Having your car or truck damaged as a result of someone else’s negligence is an experience we all hope to avoid. When placed in such a situation, however, it will be less stressful knowing the elements of compensation to which you are entitled.
Blog post by partner Wes Kissinger. Click here to read more about Wes.
The posts on this website/blog are published as a service to our clients and friends. They are intended to provide general information only and should not be construed to be formal legal advice regarding any specific situation and should not be construed as forming an attorney-client relationship. Success in the past does not indicate the likelihood of success in any future representation.