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Q

Does Michigan allow/exclude payment to a first party for a vehicle's diminished value after a collision?


A

As you are likely aware diminished value has to do with the fact that a car that has previously been in an accident and repaired tends to fetch less money at the time that it is sold then a motor vehicle that has not been in an accident or had repairs due to dents, scratches, etc.

Consumer advocates have held the belief that policyholders are entitled to monies for diminished value from their insurers if they can document that their vehicles have not been returned to pre-accident condition.

Insurance Services Office (ISO), which provides insurance forms and data to insurance companies throughout the US, has authored policy language that insurers can now use in most states that allow for it (45 states and Washington, D.C. to the vest of our knowledge), that has the insurer exclude payments for diminished value claims.

State laws and court rulings on diminished value are on-going however from our latest research the ISO's exclusion for diminished value has NOT been approved in Georgia, Hawaii, Kansas or Maryland. Massachusetts has not adopted ISO policy language, but in 2002 the Massachusetts department of insurance stated that diminished value was not covered under collision policies in MA.

So the first way to see if diminished value is available to you as a first party claim is to read through your policy and see if it lists specifically an auto exclusion endorsement that lists language that allows your insurer to deny diminished value claims.

While you have a contract with your own insurer and thus they can exclude your request for diminished value, if someone else hit you and damaged your car so that you could make a third party claim and request monies for the diminished value of your vehicle.

The ISO's diminished value exclusion form applies only to first party physical damage claims, not to third party liability claims. Also, in tort claims, the measure of damage is generally calculated as the difference in value before and after the loss, sometimes making diminished value a viable claim. However, there is still a wide variation among state case law in pinpointing when a third party claimant is entitled to diminished value.

Of course while this option may be available in most states, since Michigan does not require property damage liability, in the normal sense, and instead PPI can only be used for parked cars or you sue for the $500 mini-tort amount getting diminished value from a third party claim would be very unlikely.

Hopefully the above information gives you a better understanding of diminished value and how it is regarded in general. As we mentioned earlier state laws and statutes as well as case law help determine what individual states allow. We contacted the Michigan Office of Financial and Insurance Services, the insurance regulator for the state. The representative we contacted stated that Michigan statute does not provide for a diminished value settlement. So MI laws do not allow for you to request payment for diminished value after your car has been damaged in an auto accident.

If you want specific case law or the Michigan statute that does not allow for diminished value settlements contact the MI insurance regulator.


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