Third-party claims for diminished value are steadily rising in Canada’s auto sector and needs to be addressed now, says the creator of a website designed to help drivers get back their lost value from insurers.
“I think the insurance industry is worried,” says Ed Grieve, president of Diminished Value of Canada. “Diminished value is not listed under the exclusions; but based on Tort law, you have to restore the value of the vehicle to what it was before the accident. Current insurance coverage doesn’t do that.”
Dealers routinely order vehicle history reports like CarProof or Carfax to determine if any structural damage has been reported, or if the airbags have been deployed. If either of those have occurred, the price is lowered to cover the perceived loss of value.
And that can add up to thousands of dollars for some luxury vehicles, and as insurers don’t normally cover the diminished value, the client is left looking for compensation. Several U.S. states currently allow car owners to claim diminished value from an at-fault party’s insurance company. And now Canada is following the U.S. lead.
In one case, the owner of a $200,000 Mercedes sports car won $16,000 in 2010 after successfully suing the Insurance Corporation of British Columbia when his car was damaged in an accident caused by a parking valet. (continued.)
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According to the judge, the plaintiff didn’t have to show the loss precisely by having sold the vehicle, but only had to establish a reduced value – which he did.
Grieve and his wife Donna started the website and business diminishedvalues.ca almost three years ago. On the website, there are a number of articles on the evolution of the legality of diminished value – including a CBC Marketplace report from February 28, 2011 entitled “Crash and Burned, What the car insurance industry doesn’t want you to know,” co-hosted by CBC’s Tom Harrington.
“Whether you call it perceived loss, inherent loss, or ‘stigma,’ it all means the same thing,” Grieve told Insurance Business, whose company offers a diminished value appraisal report for $695.
Another website, MyCarIsWorthLess.com, sells access to a diminished value calculator for $39.
The ICBC also paid out $5,000 to a truck owner in 2012 who used a diminished value calculator to show how much his 2008 Chevrolet Silverado had depreciated following an accident and subsequent repair. (continued.)
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Ontario auto insurers, already under pressure to reduce average premium costs by 15 per cent, aren’t eager to add diminished value coverage to existing policies, as it could raise costs. Currently, that province’s insurance regulator doesn’t allow diminished value coverage as an option.
But that is something that should be changed to the advantage of all concerned, argues Grieve.
“If the insurers could convince the provincial regulators to allow them to offer diminished value coverage, that would be fantastic,” says Grieve. “It would be a win-win for the industry and the driver.
“If they offered, say $30 extra on a policy a year on a first-party claim, that would cover drivers who don’t have an option,” he adds, pointing out that first party accidents leave drivers with no recourse to recoup a vehicle’s lost value.
