What is diminished value, and how do I get it?

When your car is damaged in an accident, the repairs may not fully restore its original market value. This drop in resale value, even after perfect repairs, is called “diminished value.” It is a real financial loss that you can potentially recover. This article explains the concept and outlines the steps for making a claim to be compensated for this loss.

Types of diminished value

There are three main types of diminished value:

• Immediate diminished value. This is the loss of value immediately after an accident, before any repairs are made.
• Inherent diminished value. This is the most common type of claim. It is the loss of value that exists even after your vehicle has been fully and properly repaired. The vehicle now has an accident history, which makes it less desirable to potential buyers.
• Repair-related diminished value. This is the loss of value due to incomplete or poor-quality repairs. This can include cosmetic flaws or structural problems that were not properly fixed.

The challenge with diminished value claims

Insurance companies often resist paying for diminished value. The Society of Collision Repair Specialists (SCRS) provides a "Guide to Complete Repair Planning" which lists over 1,000 operations that may be necessary to restore a vehicle to its pre-accident condition that are not included in standard estimating system labor times.¹ They may also argue that any loss in value is speculative. Legal battles over insurance practices are common. For example, the case of *Avery v. The Illinois Supreme Court case Avery v. State Farm Mutual Automobile Insurance Co. concerned a national class action lawsuit alleging that the insurer breached its contracts with policyholders by specifying the use of non-original equipment manufacturer parts for vehicle repairs.² While the plaintiffs won a large verdict at trial for breach of contract and consumer fraud, the Illinois Supreme Court later overturned it. In a landmark 2001 decision, State Farm Mutual Automobile Insurance Co. v. Mabry, the Supreme Court of Georgia established a consumer-favorable precedent by holding that an automobile insurer's liability is not limited to the cost of repairs but also includes compensation for the loss of the vehicle's market value.³

Calculating and proving your total damages

To build a strong claim, you must document your loss. A key piece of evidence is a diminished value appraisal from a certified professional who specializes in these reports. This expert will assess your vehicle and provide a detailed report on the value lost. You can also gather repair records that show the extent of the damage and the work performed. Another step is to collect sales quotes from dealerships. Ask for two quotes: one for your car's hypothetical trade-in value if it had never been in an accident, and another for its value with the accident history. The difference helps establish your loss. The 17c formula, a method for calculating a vehicle's diminished value, was developed by State Farm as a result of the 2001 Georgia Supreme Court case State Farm Mutual Automobile Insurance Co. v. Mabry.⁴

Filing your claim

Once you have your evidence, you can file your claim. The process generally involves these steps:

1. Submit a demand letter. This is a formal letter to the insurance company. You will state the facts, explain why the other party is at fault, and demand a specific amount for diminished value. Include copies of your appraisal, repair bills, and other proof.

2. Negotiate with the adjuster. The insurance adjuster will review your claim and will likely make a low initial offer or deny it. This is standard practice. Strong documentation and persistence are important. The non-profit consumer advocacy group United Policyholders advises insurance claimants to be polite, prompt, and persistent throughout the claims process.⁵

3. Consider small claims court. If you cannot reach a settlement, small claims court is an option. This path is designed to be accessible, with low filing fees, and you typically represent yourself. For instance, in 2026, the base court filing fee in New York City for a case over $1,000 is $20, though you should expect additional costs for things like serving papers.⁶ An appeal is usually a brand new trial (a trial de novo), not simply a review of the first case.⁷

First-party vs. third-party claims

Your ability to claim diminished value often depends on whether you are filing a first-party or third-party claim.

A first-party claim is against your own insurance company, typically under your collision or comprehensive coverage. Most auto policies explicitly exclude coverage for diminished value in first-party claims.

A third-party claim is against the at-fault driver’s insurance company. Third-party claims for diminished value are generally more successful. This is because the other driver’s insurance has a duty to make you whole. This duty includes compensating for the reduced value of your property.⁸ Consumer-focused legal and insurance information sources explain that a first-party insurance claim is filed with one's own insurance company, whereas a third-party claim is filed against another person's insurance, a distinction that determines who handles the claim and which legal standards apply.⁹

Final thoughts

Recovering diminished value requires preparation and persistence. Insurers are professionally skeptical, so your claim needs to be professionally presented. By getting a credible appraisal, documenting your loss, and understanding the process, you increase your chances of being fairly compensated for the entire loss you’ve suffered.

general information, not legal advice.

Sources

1. California Code of Civil Procedure § 338(c) - https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CCP&sectionNum=338

2. Avery v. State Farm Mut. Auto. Ins. Co., 216 Ill. 2d 100 (2005) - https://www.leagle.com/decision/2005416216ill2d1001394

3. State Farm Mut. Auto. Ins. Co. v. Mabry, 274 Ga. 498 (2001) - https://caselaw.findlaw.com/ga-supreme-court/1127793.html

4. State Farm Mut. Auto. Ins. Co. v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (2001) - https://caselaw.findlaw.com/ga-supreme-court/1113494.html

5. New York City Civil Court Act § 1803(a) - https://www.nycourts.gov/courthelp/pdfs/SmallClaimsHandbook.pdf

6. New York State Unified Court System, Filing Fees - NYC Civil; District Court, City Court - https://ww2.nycourts.gov/forms/filingfees.shtml

7. How Courts Work, American Bar Association - https://www.americanbar.org/groups/public_education/resources/law_related_education_network/how_courts_work/appeals/

8. Judicial Council of California Civil Jury Instructions (CACI) No. 3903F, Damage to Real Property (Economic Damage) - https://www.justia.com/trials-litigation/docs/caci/3900/3903f/

9. National Accident Claims Authority - https://nationalaccidentclaimsauthority.com/general/first-party-vs-third-party-accident-claims/