Each year, there are more than 300,000 car wrecks in Georgia. In 2006, the number reached over 340,000. While this number encompasses all types of crashes, from minor fender-benders to major collisions, these accidents often result in serious damage to the vehicles involved.
Even though some people may decide to pay for the damage to their vehicles out-of-pocket rather than go through the hassle of dealing with an insurance company, many more will have no choice but to file a claim with their insurer or the at-fault party's insurance company in order to have their vehicles repaired.
Mabry and Diminished Value
What many people are not aware of, however, is that under their Georgia auto insurance policies, they may be entitled to recover not only repair costs, but also for the diminished value of their vehicles after repair.
In a 2001 Georgia Supreme Court case, State Farm Mut. Auto. Ins. Co. v. Mabry (274 Ga. 498), the court stated that an insurance company's obligation to pay for loss includes the duty to pay for the vehicle's lost value, otherwise referred to as "diminished value" or "diminution in value," so long as the vehicle was not a total loss. The court recognized that even if a vehicle that has been damaged in an accident is perfectly repaired, the value of the car may not be the same, particularly when the car owner attempts to sell or trade the car at a later date.
Once an accident is reported, companies like CarFax attach information to the vehicle identification number (VIN) alerting anyone who accesses the public site that the car has been in an accident. It is routine for auto dealerships to pull up CarFax and similar reports before buying a used car or taking a trade-in - and lower their offers based on the information in the report. Depending on the make, model and age of the vehicle, some cars may diminish in value by as much as 25% after an accident; luxury vehicles may lose up to 50% of their value.
Thus, in Mabry, the court held that the difference in the car's pre-accident and post-accident value is part of the loss calculation insurance companies must determine. Insurance companies should determine this loss at the time they assess the damage to the vehicle and the cost of repairs. If it is determined that the car's value has been diminished by the accident, the insurance company is required to compensate the vehicle owner for this loss as part of the property loss claim.
Georgia Penalties for Failing to Pay Claims
While the Mabry court gave Georgia policyholders the right to recover the diminution in value of their vehicles after an accident, the court did not announce any standard formula the insurance companies are required to use to determine the loss in value. This has resulted in some insurance companies' offering pennies on the dollar for diminished value, cheating vehicle owners out of the money they are entitled to receive under their insurance contracts.
However, insurers who offer low settlement amounts or who fail to pay anything for the diminution in value do so in violation of the law. Georgia imposes heavy penalties on insurance companies that do not uphold their legal obligations. Part of these legal duties includes settling claims with policyholders fairly, promptly and in good faith.
Under Georgia law (OCGA ยง 33-4-6), once a policyholder makes a demand for payment of a loss that is covered under the insurance policy, the insurance company has 60 days to either pay the claim or provide a legal basis for refusing to pay the claim. If the insurance company's refusal to pay the claim is in bad faith, the policyholder may be entitled to receive:
- $5000 in penalties or 50% of the diminished value of the vehicle (whichever is greater)
- Attorney fees
The same penalty applies whether you make a demand for payment with your own insurance company (a "first party" claim) or with the insurance company of the person at fault for the accident (a "third party" claim).
Regardless of the penalties they face for violating the law, many insurance companies continue to offer lowball estimates for diminished value. For this reason, policyholders should not automatically accept the insurance company's appraisal of their vehicle's loss in value.
Protecting Your Rights to Compensation for Diminished Value
Contacting an attorney is one of the best ways to protect your rights and help you receive fair compensation for the diminished value of your vehicle.
The attorney can consult independent sources to determine your vehicle's true loss in value. Then the attorney can enter into settlement negotiations on your behalf with the insurance company.
Georgia is one of the few states in the country to recognize a policyholder's right to recover for diminished value. Do not let the insurance company get away with paying you less than you are owed under your insurance contract.