17th Anniversary of Mabry v. State Farm
This week marks the 17th anniversary of the landmark Diminished Value case of Mabry v. State Farm. So what is the state of diminished value claims today?
DCI Solution’s Chief Valuation Strategist Bill Geen gives his thoughts on the subject:
The pendulum has swung the other way. Seventeen years ago the question was “does diminished value even exist?”. Nowadays insurance companies are trying to defend themselves against numerous claims and exorbitant dollar amounts for diminished value.
Why has the pendulum swung the other way?
The proliferation of vehicle history reports is a contributing factor. Yet, these reports do not describe or detail the nature of the damage or repairs. Additionally, the online marketplace today is overflowing with Diminished Value Experts that present consumers with false expectations as to what they may receive for a diminished value claim. To make matters worse, many insurance companies are simply paying the claims or settling for an amount much greater than the actual diminished value amount. Without a good answer to these claims and as the number of claims rise, the insurance companies need to find a solution.
What is the solution?
While I think most of us would agree that a vehicle which has been in an accident is possibly worth less than one that hasn’t, it is an opinion as to how much less. DCI Solution’s Diminished Value Appraisal service and methodology focuses on the specific vehicle in question and the specific damage that vehicle incurred. It does not compare general retail values to general wholesale/trade-in values (which doesn’t really make any sense whatsoever). Nor does it use the 17C formula, and trust me, I should know.
Just a quick note about 17C, this formula was used just for the Mabry v State Farm case because of the number of vehicles involved. The Georgia Department of Insurance later stated that it was not an approved method for Georgia, as they did not want to approve a method, there were some generalities in the formula and some duplication. This only applied to Georgia claims and cases. But the most important point, the case, and determination of diminished value did focus on the damage incurred.
At this time, no Department of Insurance in any state has come forth with an “approved” formula, however, DCI’s methodology has been proven to stand up in numerous court and arbitration cases. It is a matter of being reasonable, fair, consistent and unbiased.
The industry needs to take a stand on this issue before it gets too far out of hand. We do agree that diminished value exists but we firmly agree that it is based on the damage incurred to the vehicle. The pendulum needs to swing back the other way and stop in the middle.
Bill Geen is Chief Valuation Strategist for DCI Solution. Formerly, he was Executive VP for CCC Information Services. He was also an expert witness in the Mabry v State Farm case and has performed thousands of diminished value evaluations.
