Diminished Value Washington
Every time a vehicle is in an accident a loss of value occurs. Some of that loss of value is recovered after the vehicle is repaired to its pre loss condition, but even after the repair, the vehicle is worth less than it was prior to the accident. This concept is known as diminished value and it is affecting millions of vehicle owners every year in the State of Washington and around the United States.
Simply put, diminished value is the inherent loss of value of a vehicle because of its prior damage history.
There is a difference between diminished value and depreciation. Depreciation is an anticipated reduction in value sustained over time due to reduction of the useful value of the vehicle because of age and wear. Diminished Value is a sudden and unexpected loss of economic value due as a result of a particular event.
Would you pay the same for a vehicle that had been in an accident as one that has not been in accident? Probably not.
Who is responsible for paying diminished value in Washington State?
There are two primary types of insurance claims; first party and third party claims. A first party claim is when the insured is making a claim against its own insurance company. This type of claim is governed by contract law because there is a contract (insurance policy) between the insurance company and the insured. Diminished value is not recognized as a valid claim in most first party actions because insurance policies typically exclude coverage for diminished value.
Third party claims are claims made by a party against an at-fault party’s insurance company, not their own insurance company (again, that would be a first party claim). The origin of a third party claim is based in tort, not in contract. Accordingly, a vehicle owner can pursue diminished value against a party who because of their negligence has caused them a loss. Diminished value claims are recognized in the State of Washington when they are pursued against an at-fault party.
What to expect from Washington State Insurance Companies
When you call the at fault party’s insurance company to make a diminished value claim, you can expect to deny the claim or offer a nominal amount and say the following:
- There is no such thing as diminished value
- The state of Washington does not recognize diminished value
- You have not incurred any diminished value because you have not sold your vehicle and as such, you have not incurred a loss
- Your vehicle is worth the same or even more than before the accident because your vehicle was repaired with new parts
It is very important to realize that none of these are legitimate reasons to deny your diminished value because diminished value is a compensable claim in Washington State that you can collect from the at-fault party or their insurance company. Further, there is no requirement that you sell, trade or otherwise dispose of your vehicle to have a diminished value claim. The loss occurred at the moment of impact and now you own a vehicle that is worth less as a result of someone else’s negligence.
How do I calculate my diminished value claim?
In the State of Washington, diminished value is determined by finding the difference between the value of the vehicle prior to the accident and the value of the vehicle after the accident after it has been repaired properly. Put differently, the diminished value is simply the difference between the vehicles pre-loss value and post loss value.
In a “Fact Sheet” prepared by the Washington State Insurance Commissioner, Diminished Value is defined as: “The difference in the dollar amount of what your car would have sold for without damage, and the amount it will likely sell for with the repaired damage.”
Tax Deduction for Diminished Value - It is possible to get a tax deduction for diminished value in the State of Washington. Please contact your accountant or financial planner to learn how to claim this deduction.