Getting Compensation for Inherent Diminished Value (Podcast)

Rob Mazow and Kevin McCullough of the Law Office of Mazow McCullough talk with John Maher about inherent diminished value (IDV). They explain how to calculate IDV. Then, they talk about why insurance companies need to cover IDV in the wake of a recent Massachusetts court ruling.

John Maher: Hi, I’m John Maher, and I’m here today with Rob Mazow and Kevin McCullough of the Law Office of Mazow McCullough. And today we are talking about getting compensation for inherent diminished value. Welcome Rob and Kevin.

Rob Mazow: Hey, John.

Kevin McCullough: Hi, John.

Who Can Make a Claim for Inherent Diminished Value After a Car Accident?

John: So who’s eligible to make claims for compensation due to inherent diminished value or IDV after an accident?

Kevin: The person that is eligible to present a claim for damages for inherent diminished value is the person that’s not at fault or was not the cause of the collision. So it is an important distinction. If you’re at fault for a collision or the result of damage to your vehicle, you just cannot recover inherent diminished value.

However, if you are someone who was a victim of a car accident, your car was hit, whether you were in it or not, simply the fact that your vehicle suffers damage due to someone else’s fault or negligence or responsibility, you are now eligible to not only get your vehicle repaired from the at-fault driver’s insurance company, but you can now also recover the inherent diminished value damages, which is in essence, the loss in value that your vehicle suffers as a result of that collision in those repairs.

How Do You Calculate Inherent Diminished Value?

John: Okay. And does a driver have to calculate the IDV themselves or does their insurance company help with that? Or how is that calculated?

Rob: So it’s interesting as we’re still trying to work through this relatively new law that Kevin actually helped to create. When a car has been damaged in an accident, there are certain companies like CARFAX who get notified of this accident and they put a value on the amount of damage that a car has suffered.

So one way to look and see to determine what the value might be is to look at the CARFAX for a vehicle that has similar age, similar mileage, similar amenities, and compare that car to one that has been in an accident. So one way to look at it is the difference between the same car that has not been in an accident and the same car that has been in an accident.

Another way to look at it is to go to a dealership, go to an auto dealership and ask them and say, “What would you give me for this car that has been in an accident versus what would you give to the same car that hasn’t been in an accident?” There are experts out there who are qualified, let’s say they’re former property damage claims adjusters who are qualified to look at these two vehicles, one that’s been in an accident, one that’s not been in an accident and give an estimate as to what they believe the value of that diminished value is. There are different ways in which we can establish that.

How Does Someone Make a Claim for Inherent Diminished Value?

John: Okay. So how does a driver go about making a claim for compensation due to inherent diminished value? They’ve been in an accident. It was not their fault. Their car was damaged. With those tools that Rob just mentioned, they’re able to figure out what the difference in value is that they lost in their car. What’s the next step? How do they make that claim?

Kevin: So someone who has suffered property damage because of someone else’s fault, they will need to make that claim to the at-fault driver’s insurance company. But it’s just a piece of an ongoing process and a process that existed for years. The inherent diminished value is just another component of damages that the property owner or vehicle owner has suffered.

And in your typical motor vehicle collision or motor vehicle accident case, the at-fault driver’s insurance company would reach out to the person whose car has been damaged. They would schedule a time to come out, to look at the car, to do what’s called an appraisal, to know what parts of the vehicle were damaged, to calculate the cost of the repair for that vehicle, and work with the body shop that the car owner goes to to get that vehicle repaired. With inherent diminished value, it’s different and separate from the actual physical damage to the car. It’s that loss in market value.

So the car owner needs to be mindful to present that additional component of damage at the time that the vehicle’s getting repaired to the at-fault driver’s insurance company. And as Rob had mentioned, there can be different ways to present or calculate those damages. Every vehicle is different. You can have an antique car, which is very old. You can have a brand new car that clearly suffers some loss in value as a result of an accident and repair, but there are different resources that you can go to as Rob mentioned like CARFAX.

There’s Kelley Blue Book and NADA, those are two books that the insurance industry itself relies upon when they’re calculating the damage to the car. And it can certainly be relied upon to calculate that loss in value. And it also comes down to the condition of the car at the time of the accident. And as Robert mentioned, the mileage of the vehicle, the different options that the vehicle may have.

So there are ways to calculate and there’s ways to negotiate with the insurance company to get the full value of that inherent diminished damage and to be made whole. And that’s what the law now recognizes in full as a result of some recent rulings.

Accident Victims Couldn’t Make Claims for Inherent Diminished Value in the Past

Rob: I just want to be perfectly clear here though. The idea of inherent diminished value has always been a thing. It’s always existed. You ask anybody on the street what they’re going to pay for if they were given the option of two cars, one that’s been in an accident or the exact same car that hasn’t been in an accident, and every single time they’re going to choose the one that has not been in an accident.

What’s different now, though, through the McGilloway v. Safety case that’s come out is that the at-fault insurance company has to recognize that as a damage. So it’s always been out there as a thing. You just couldn’t get paid for it by the insurance company. Now you can if you’re armed with the right amount of information. So that’s the benefit to consumers that you can now make that claim to the at-fault insurance company.

Are the IDV Rules Expected to Change in the Future?

John: Okay. So do you foresee any changes or clarifications through this rule in the future? Where does this go now?

Rob: This is brand new. So this decision just came out… It’s brand new as far as an ability that’s recognized that you can get this paid for by an insurance company. So now what do you do? What shouldn’t you do?

First of all, a consumer needs to be educated that they can do this. When I say consumer, I mean the person who’s been damaged, who was not at fault for the accident now needs to understand that they can make that claim. So how do they do that? They do that by, first of all, contacting the at-fault insurance company, telling the at-fault insurance company that their driver was at fault, their insured was at-fault, and that they now owe some amount of money.

What is that? Well, then this is they have to go use those tools that we talked about through CARFAX, through talking to a dealer, through doing their own research. And then negotiating with the insurance company for that dollar figure. But you’re probably going to have to bring this up because the insurance company is probably not going to come to you and say, “Hey, by the way, we also owe you all this other money.”

Why Do Consumers Need to Be Proactive About IDV Claims?

John: Well, they generally don’t tend to invite that kind of information. So yeah, the consumer needs to be educated. We need to get it out there that they can do this. They can certainly contact us. We were the leaders of changing the way that this is being looked at. But it’s going to be the wild west for a while because insurance companies certainly aren’t going to notify consumers that they can do this. They are not going to be voluntarily making an offer. So the consumer needs to be armed with this information so that they can get paid.

Kevin: With issues like this, John, what we have seen in the past when the law changes the way that the McGilloway v. Safety Insurance Company has changed the law, is there are always fights and disputes that result, even after those decisions.

Insurance companies will try to come up with certain defenses to differentiate a case that gets presented to them in the future versus what the McGilloway case was. And what we anticipate is no different than what we’ve seen in the past. And the McGilloway case, in fact, was decided based upon the policy that was in place at the time of that accident when that case was handled. And that was the 2008 edition of the Standard Massachusetts Automobile Policy.

We fully expect that the insurance companies now because that policy is no longer used by the insurance companies, they use a different edition. It’s the 2016 edition, which is in essence the same contract, but it has some nuances to it that we fully expect the insurance company will say, “Well, it’s only the 2008 motor vehicle accidents versus the 2016 edition of the policy.”

That’s one fight that we expect and we’re ready for and we’ll deal with that. And we have a reason to show why they are in fact the same and why the damages should be paid. And we’ll fight that fight in the future if that becomes an issue.

So yeah, we don’t think that there’s anything that’s… They’re not just going to roll over and pay all these claims. There will be fights that will unfold from this. But it is critical to note that the case that was decided in October of this year, 2021, is a huge victory for consumers in that the highest court here in the state has said something that the insurance company for years has refused to acknowledge. And that is that these damages do exist. They can be calculated and they are covered under the Standard Mass Auto Policy.

John: All right. Well, that’s really great information, Rob and Kevin. Thanks again for speaking with me today.

Rob: Thanks, John.

Kevin: Thank you, John.