Generally, diminished value is calculated by determining a vehicle's value before a collision and subtracting the vehicle's value after the accident and repairs. The difference equals the vehicle's diminished value. Insurance companies, rarely pay this value in property damage claims. Hence, when an insurer repairs your vehicle, it doesn't completely make you whole given that your car - post accident - has lost value compared to a similar car with zero accidents. This is due to the fact that once an auto dealer or any buyer looks at a CarFax report and discovers that it was been in an accident, they will offer you much less on the trade in value for your car.
For this reason, Maryland law allows the victim either (1) the cost of repairing the vehicle and the loss of value of the vehicle because of the accident, or (2) the fair market value of the car if it is a total loss. You can imagine that after driving a brand new car off the lot and it its seriously damaged in an accident, it is usually in your best interest for the insurance to declare it as a total loss which will save you the headache of filing a diminished value claim due to the material reduction in the resale value of the otherwise new car post-repairs. Hence, the claimant hopes for one of two favorable outcomes: diminished value judgment or total loss judgement.
Under Maryland law, compensation for diminished value is required under the "basic principle that the injured party should, insofar as possible, be restored to his original position before the accident.” Specifically, if a "plaintiff can prove that after repairs his vehicle has a diminished market value from being injured, then he can recover in addition to the cost of repairs the diminution in market value, provided the two together do not exceed the decrease in value before the repairs.” That how to calculate diminished value on a car.
The first step, and it’s a critical one, is to work with an independent auto appraiser professional who will provide you with a diminished value appraisal, which serves as proof of your claim. Once the appraisal is complete, you will submit a written copy to the insurance company, who will use this document to process your claim. In many cases, insurance companies try to negotiate a settlement, so it’s in your best interest to have a professional on your side. In the event that an amicable settlement is not reached, the final step will be to file a lawsuit. If the amount being sought is under $5,000, you can file it as a small claims suit which saves on litigation costs.
Maryland Diminished Value Law
Fred Frederick Motors, Inc v. Krause, 12 Md. App.62 (1971), The general rule on tort damages, including motor vehicle torts, is easily stated: the damages should compensate the injured person for the wrong which has been done to him. If the vehicle is completely destroyed, the plaintiff receives the market value. For repairable vehicles, if the plaintiff can prove that after repairs his vehicle has a diminished market value from being injured, then he can recover in addition to the cost of repairs the diminution in market value, provided the two together do not exceed the diminution in value prior to the repairs.
SUMMARY - Maryland Law on Diminished Value Claims
A diminished value claim is permitted in Maryland if the sum of the diminution in value plus the repair costs is less than the difference between the vehicle's pre-accident value and its post-accident salvage value. Accordingly, a Maryland plaintiff can claim the smaller of: (a) the sum of the repair costs plus any decrease in value of that vehicle after the repairs, and (b) the difference between the vehicle's value before the car crash and its value after the accident before any repairs (the salvage value). In support of the diminished value claim, the victim should consider gathering necessary documentation including the purchase or sales agreement, cost of repairs, salvage value estimate, car auction or blue book value and any warranty documents.
Therefore, notwithstanding that Maryland law allows plaintiffs to bring a diminished value claims, the practicality of success is relatively prohibitive due to the inherent litigation cost restraints especially in cases that do not involve personal injury claims. Hence, for most diminished value accident claims, victims are usually not willing to hire an expert and file a lawsuit which explains why most diminished value claims are not successful.