Ind. OKs Diminished Value Auto Case

Ind. OKs Diminished Value Auto Case

NU Online News Service, Aug. 6, 3:15 p.m. EDT?In a decision that departs from the actions of most states, Indiana's highest court will allow a class action lawsuit, based on the theory of diminished value in automobile crash cases, to proceed to trial.[@@]

In Allgood vs. Meridian Security Insurance Co., the Indiana Court of Appeals reversed a lower court ruling dismissing the plaintiffs' suit. The plaintiffs, the suit alleged, were owed money because of their insurer's refusal to recognize that their property was devalued as a result of the accident.

The insurer, the Property Casualty Insurers Association of America and other insurance trade groups petitioned the court for a hearing, but were rebuffed.

According to a chart maintained by the Property Casualty Insurance Association of America, the decision is counter to the precedents and policies of 42 states and the District of Columbia. States sanctioning payments for so-called "diminished value" in some form include Texas, North Carolina, Massachusetts, Maryland, Louisiana, Kansas, Hawaii and Georgia.

The court did say in its opinion, however, that as a consequence of its decision, insurers might include exclusions in their policies that specifically state the insurer will not pay for diminished value.

Robert Hurns, counsel for the Property Casualty Insurers Association of America (PCI), said that as a result of the decision he will urge auto insurers in the state to explicitly include such language in contracts going forward. "Insurers should state that diminished value is excluded if [consumers] have no desire to pay for it," he said.

A major industry concern is that there is no objective way to determine diminished value. "The Court of Appeals is going against the national trend which has rejected the diminished value argument," Mr. Hurns said. "The language of the contract clearly does not require payment for diminished value when a vehicle has been fully repaired."

He added that the role of auto insurance is to repair or replace a damaged vehicle to pre-accident condition, but that "it was never intended to guarantee the value of a vehicle before or after a repair is made."