diminished value

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PostPosted: Tue May 26, 2009 6:43 pm   Post subject:   

Here is the Georgia 17C formula that most insurers and independent appraisers hired by insurers use. You can calculate what they will offer based on it. A diminished value appraiser would not use this formula because of it's inherent flaws and would take each vehicle and judge it according to various elements based on knowledge and expertise of the collision repair process and how it would affect the resale value, trade in value, private party values.



Here is the actual formula and explanation:

ELEMENTS OF LOSS OF VALUE FORMULAS

ACV - For purposes of our calculations, we will use the NADA retail value, including additions and

subtractions for options and mileage. The NADA edition applicable at the time of loss of value claim is

presented should be used.

BASE LOV - As is the case in most loss of value formulas, we will use 10% of the ACV as a starting point

in our formula.

DAMAGE SEVERITY MODIFIER - This is the subjective decision which must be made by the adjuster.

The nature and extent of damages should be based on the actual physical damage sustained by the vehicle,

without using the cost to repair as a basis. The modifier can be from 0.0 to 1.0 with 1.0 reflective of

extensive damages. It should be stressed that in some minor accidents the 0.0 modifier is appropriate as no

loss of value would have been sustained. A basic guide for the damage severity modifier is as follows:

MODIFIER EXTENT OF DAMAGE

1.0 Severe damage to the structure of vehicle.

0.75 Major damage to structure and panels.

0.50 Moderate damage to structure and panels.

0.25 Minor damage to structure of vehicles.

0.0 No structural damage and replaced panels.

As this is subjective decision, the modifier can be adjusted as necessary to fit the damages. (EXAMPLE 1 -

No frame damage, a replaced bumper and repaired body panel may call for a modifier of 0.1.

EXAMPLE 2 - Heavy frame damage to the front with moderate additional damage to the rear may call for

a modifier of 0.85.)

MILEAGE MODIFIER - Generally, when a vehicle reaches 100,000 miles, it no longer has a realistic

market value. There may be some cases where that is not so, but for most cars this figure should be

accurate. The modifier is a factor of the actual mileage of the vehicle and the mileage where the vehicle no

longer would be considered for retail resale by a dealer. The modifier can be from 0.0 to 1.0 reflective of

zero miles. A basic guide for the mileage modifier (based on 100,000 mile limit) is as follows:

MILEAGE MODIFIER

0 1.0

20,000 0.8

40,000 0.6

60,000 0.4

80,000 0.2

100,000 0.0

The modifier should be adjusted to reflect the actual mileage based on the following:

MODIFIER - MAXIMUM MILES FOR RETAIL SALE - ACTUAL MILES

MAXIMUM MILE FOR RETAIL SALE



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PostPosted: Tue May 26, 2009 11:13 pm   Post subject:   

I saw a formula like that the other day. It was on a blackboard in a documentary about the Manhattan Project.



Here's what Little Birdie tells me: State Farm will not, based on the language of the comp and collision coverages, entertain first-party claims for "dv." They will raise the potential of a "dv" claim "up front" only under the umpd coverage.


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PostPosted: Wed May 27, 2009 9:58 am   Post subject:   

Actually in most states 3rd party DV is easier to get...no policy language to the contrary...clearly something has 'happened' in the great state of Texas that is requiring the reps to mention this...don't think for a second that was not a part of the required script...(somebody must've got themselves into some trouble Wink )....



I'll be anxious to hear what their offer is...also happy for you re: the a/m parts....I'll have to try and keep in the old bean that TX too is a 'permission' state regarding same...



Let us know how it goes Flint....



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PostPosted: Wed May 27, 2009 10:12 am   Post subject:   

Mike no offense, but I hope MO never adopts 1st party DV, all that 'mathy' stuff makes my pretty little head hurt.. Rolling EyesWink (ok ok I have other reasons too Wink )



Quote:
They will raise the potential of a "dv" claim "up front" only under the umpd coverage.
and there we go! i knew there had to be something that was required...I don't know if TX allows first party (other than UMPD) dv or not....interesting logic however...although it's still truly 1st party (your policy)...since it's actually a liability coverage...that must shift it to '1st-3rd party' necessitating the info...interesting.


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PostPosted: Wed May 27, 2009 4:58 pm   Post subject:   

Here's another can of worms: I'm examining, literally under a magnifying glass, the fine print in my Enterprise rental agreement. I quote: Damages for which renter is also responsible include. . .diminishment of value. . . .



There's a discussion of this by one Jim Hunt of Bell-Anderson Insurance, What You Don't Know about Renting a Car Can Cost you!, (3-30-08.) Mr. Hunt comments, with respect to "diminished value" claims, "Those few companies still covering damage to a rental car under the liability section of the auto policy may be obligated to pay the entire bill. However, when coverage is found only under the physical damage section, most insurers will not accept responsibility."



Disturbingly, Mr. Hunt claims that rental companies, reluctant to return repaired cars to the fleet, will typically dispose of damaged cars as salvage, and try to whack you for the difference between pre-accident acv and salvage value.


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PostPosted: Wed May 27, 2009 8:08 pm   Post subject:   

I have a friend who owns and operates a Hertz rental business. He shared with me that when Ford supplied their vehicles, they had an automatic buy back provision for trade ins on new upgrades. That value went out the window and they would not offer to buy back cars with accident histories. Sorry see u later, no dice, no dealio. Selling it on the open market became the only option or dealer auctions. Most of the program cars dealers use to sell were returned rental purchases that had service records and no accident histories so they could sell them certified.



The public perception has always been that a wrecked vehicle would never be as good as it was before. I think there was a time in the 80's pre front wheel drive era when most shops acquired frame repair equipment that became old history. But as vehicles have emerged with new technology and precise fitting parts and unibodies, the public has a new perception that the technology has surpassed the average shops or techs ability to repair to preloss condition additionally hampered by third party interference that is looking for cheaper and faster repairs. Not always the case, but too many repairers are cutting corners while insurers are cutting costs and it is the consumer that is harmed unless they monitor their repairs and contractual promises, in my opinion.



Hence many things contribute to the loss in value of used cars that have accident histories. I believe one solution would be third party certified inspectors that have the experience and training to ascertain that the car has been contractually repaired per contract of insurance to as near pre-loss as humanly possible and to grade the quality of the repair.



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PostPosted: Wed May 27, 2009 11:04 pm   Post subject:   

Quote:
I'm examining, literally under a magnifying glass, the fine print in my Enterprise rental agreement. I quote: Damages for which renter is also responsible include. . .diminishment of value. .
. .

They typcially want (or contract will say) 'loss of rents' as well..which is different...



ERAC and Hertz (IMO and area) are two totally different animals, although in the same biz....If I could I'd thru ERAC out of the state and let Hertz take their place...in my area anyway ERAC has got too big for their britches and have totally forgot about customer service, on the other hand (again in my area, I realize local management makes a difference) Hertz couldn't be better....



.
Quote:
I believe one solution would be third party certified inspectors that have the experience and training to ascertain that the car has been contractually repaired per contract of insurance to as near pre-loss as humanly possible and to grade the quality of the repair
Any idea's who might apply for that job Mike? Wink Who would pay them? Then if you graded the repair let's say an A+ (A-F scale)...then would that mean no DV claim? And if an 'F-' would the shop be responsible for any of the DV claim? (assuming the owner chose the shop and not a drp of course)? I'm not argueing with you I might apply for that job too.. Wink Just wondering how far out you have thought this out is all.


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PostPosted: Wed May 27, 2009 11:24 pm   Post subject:   

They're cutting you off at the pass, Mike:



To clarify that actual cash value does not include market value reduction, at least 38 states. . .have approved policy language that expressly excludes coverage for diminution of value (Janet L. Kaminski, Associate Legislative Attorney, Insurance Claim for Car's Diminished Resale Value, OLR Research Report, 1-3-07.)


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PostPosted: Thu May 28, 2009 12:10 am   Post subject:   

That's on first party ONLY flint...(of course)... Wink doesn't stop them from being forced (in many/most instances and states) to consider, then pay (albeit not as much at most claimants want Rolling Eyes ) DV claims to third party claimants.



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PostPosted: Thu May 28, 2009 12:58 am   Post subject:   

Quote:
Any idea's who might apply for that job Mike? Who would pay them? Then if you graded the repair let's say an A+ (A-F scale)...then would that mean no DV claim? And if an 'F-' would the shop be responsible for any of the DV claim?




Just a notion and a thought.



I would apply for that job! The inspectors should have a minimum of twenty years actual hands on experience repairing vehicles with regard to all aspects of the repair process. I have been led to believe that the courts consider a person an expert in their field if they have been functioning in that capacity for at least twenty years.



As far as who would pay for it, I would submit to you that a sales tax apply to collision repair parts and a tax collected in the sale of every insurance liability policy sold in the state to contribute to the inspectors salaries and expenses. The inspection stations should be put out for bid by those who qualify just as drivers license and tags renewal offices are.



As far as who sets forth the qualifications, a commission made up of licensed shop owners, technical instructors, certified welders and paint manufacturors should comprise a portion of the panel and a balance of attorneys and insurance people to consider the legal and contractual obligations only and members of a consumer advocacy group to complete the commision panel to set forth the criteria.



While third party diminished value would not be affected, issues of bad faith, and poor repairs could be addressed and if it can managed to be ran without graft and corruption by either side, maybe the public's faith in the repair process could be restored so that in the consumer's knowledge all was being done to restore vehicles to as near pre-loss as contractually and humanly possible further reducing the notion that the perception of a wrecked vehicle's value might not be so diminished.


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PostPosted: Thu May 28, 2009 1:52 am   Post subject:   

Well, until we get a New World Order here, I can't see third-party being lucrative enough to quit a day job for.



Let's say your shop has completed repairs. They won't release the car without being paid. The adjuster won't make payment without a release agreement. He also lets you know that you need to return the rental car by 1:00 pm. You protest that you have a right to the rental car pending resolution of the "dv" claim. (Maybe you need time to work up a settlement brochure.) He says sorry, but he's not authorized to do that. Or maybe he throws in $100 or so. Whaddayagonnado?


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PostPosted: Thu May 28, 2009 2:42 am   Post subject:   

If you selected the repairer then your contract is with the shop, you owe the shop the cost of repairs. The insurer owes you or indemnifies you for loss and reasonable cost of repairs unless they take control of repair, take liability for repair, and guaranty the repairs and pay the repairer for the repairs that they authorized as per their private and possibly unethical, illegal agreements.



You can not prove the shop has not fulfilled contract for repairs, and you can not hold the insurer liable unless they fail to pay all reasonable costs of repairs until you can obtain another professional expert opinion and inspection of the repairs to either invoke your appraisal clause or sue in court for the difference or the amount necessary to re-repair and make you whole under the insurance contract of repairs.



You should be able to sign the release under protest to avoid any storage fees that could legally accrue and be charged to you. Not sure in Texas but I am not aware of any release unless a third party claim is underway. You have statutory and contractual limits of time to remedy any poor repair or bad faith issues.



If you can prove, without taking possession of your vehicle via pictures and inspection on the premise of the repairer, you may be able to avoid the storage issue if you feel you can prove the shop has not fulfilled the contract of repairs. Too many shops believe it is the insurer that they have to please and not the vehicle owner who should be made whole and the repairer should be the advocate for a proper and complete repair and not an extension of the insurer.



An attorney would probably go after the shop for negotiating your insurance contract with the insurer rather than contracting with you all without benefit of a legal license to do so. Negotiating on behalf of vehicle owners could land a shop owner in hot water with exception of Massachusetts that requires shops to negotiate on behalf of vehicle owners as I understand it.



As far as the car rental, I would look to my policy and see if there were a limitation on the number of days rental use is allowed or any exclusions. I've never seen a policy of insurance that limits the number of days allowed for rentals based on the number of days an insurer feels is required for the repair process. It's always based on an amount for rentals per occurence or an amount per day allowed until the maximum is reached.



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PostPosted: Thu May 28, 2009 2:48 am   Post subject:   

Quote:
As far as who would pay for it, I would submit to you that a sales tax apply to collision repair parts and a tax collected in the sale of every insurance liability policy sold in the state to contribute to the inspectors salaries and expenses. The inspection stations should be put out for bid by those who qualify just as drivers license and tags renewal offices are.





Great idea Mike. Shocked



Obama already owns two car companies and is going into the direction of telling me what type of car I have to drive, and now you want them to put an additional tax on my policy that I legally by state law have to purchase?


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PostPosted: Thu May 28, 2009 2:59 am   Post subject:   

Who would you propose to be the party that should pay for the inspections. The state mandates liability coverage for driving on it's highways. They require or mandate vehicle coverage by statute. Perhaps the vehicle owner could anti up and if the inspector finds fault then the guilty party pays, repairer or insurer who failed to pay for proper and complete repairs. Those who determine the costs and limitations of repairs should be liable for the inspections in my opinion. Rolling Eyes Ultimately it will be the consumer who pays because insurers either pass on the costs to policy holders or seek concessions from repairers to reduce repair costs and expenses.



In actuality, the insurer should provide upon request by the vehicle owner, an inspection to ensure proper repairs and accept some liabilty. It is they by contract language who now deem themselves the expert at determining the amount necessary to restore to preloss based on prevailing rates and industry accepted data bases. Have you read a policy language lately with regard to the amount paid by an insurer for a collision loss from a multitude of insurers policies? They seem to have been allowed to co-mingle options (take control of the repair or pay for repairs) and dump all the liability on the repair shops by stating we have determined the amount necessary by virtue of skippy who may possess a whole two weeks of training and expertise, while advising shops on what should be repaired and for how much.



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PostPosted: Thu May 28, 2009 4:29 am   Post subject:   

Goodness, Mike. I thought we had narrowed the discussion to third-party claims. Your background is property, right?


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