Detailed answer — how diminished value claims work in Michigan

What is diminished value? Diminished value is the difference between your vehicle’s market value immediately before an accident and its market value after repairs. Even when a repair shop restores your car to factory standards, buyers often pay less for a vehicle that has an accident history. That lost resale value is the diminished value.

Who pays for diminished value in Michigan?

• Third-party claim (against the at-fault driver’s insurer): You can generally pursue diminished value as part of a property-damage claim against the at-fault driver’s insurance. Their insurer is responsible for making you whole for losses caused by the accident.
• First-party claim (through your own collision coverage): Many insurers cover repairs and the diminished value only if you have specific policy language providing for it; most standard collision policies reimburse repair costs, not market loss. Check your policy language and talk to your agent.

Types of diminished value claims

• Immediate diminished value: Loss in value that exists right after the accident, before repairs.
• Inherent diminished value: Loss because the vehicle has an accident history even after high-quality repairs—this is the most common type claimed by owners.
• Repair-related diminished value: Loss caused by poor repairs, missing equipment, or visible defects after repair.

Step-by-step process (typical, under Michigan practices)

1. Immediately document the vehicle and accident: Take photos of pre-repair damage, the vehicle’s VIN, the odometer, repair estimates, and the repair invoices. Preserve any dealer records showing prior condition (optional but helpful).
2. Determine whether you have a third-party claim: If another driver caused the crash, their insurer is the primary target for a diminished value demand. If you used your own collision coverage, check whether your policy covers diminished value and whether subrogation may allow you to pursue the at-fault insurer afterward.
3. Get the vehicle repaired and retain records: Keep all repair estimates, receipts, parts invoices, and the final repair order. If repairs are incomplete or appear substandard, document defects with photos and, if possible, a repair-shop inspection report.
4. Estimate diminished value: There are three common approaches:
   • Market-comparison method — find comparable vehicles (same year, model, mileage) with and without accident history to estimate price difference.
   • Guideline or formula approaches — some appraisal firms use published formulas (these vary in reliability).
   • Independent professional appraisal — a certified appraiser or diminished-value specialist prepares a written report estimating the loss in market value. Many insurers pay more attention to a clear, well-documented appraisal.
5. Submit a written demand to the at-fault insurer: Include a cover letter, copies of repair bills, photos, the appraisal or market-comparison evidence, and a clear dollar demand for the diminished value. Tell them you are making a property-damage claim for diminished market value in addition to any repair costs already paid.
6. Negotiate: The insurer will investigate, may request more documentation, and often offers a lower settlement. Be prepared to explain your valuation method and provide comparables. Keep records of all communications.
7. If the insurer refuses or makes an inadequate offer:
   • Consider appraisal or independent evaluation if your policy contains an appraisal clause.
   • File a complaint with the Michigan Department of Insurance and Financial Services if you believe the insurer acted unfairly (consumer services can guide you on how to submit a complaint).
   • Consider small-claims court or civil suit against the at-fault driver or their insurer to recover diminished value if negotiations fail.

Practical considerations that affect outcomes

• Vehicle age and mileage: Newer, low-mileage cars lose more market value from an accident than older, high-mileage cars.
• Quality of repairs: High-quality, documented repairs reduce the amount insurers may accept as diminished value (but do not eliminate inherent diminished value).
• Documentation and expertise: A clear, supported appraisal increases credibility. Weak or undocumented demands are often denied or low-balled.

Timing and deadlines — Act promptly. Insurance companies may close files, and evidence (photos, repair records, market comparables) is easier to collect soon after repairs. If you intend to sue for property damage, Michigan’s time limits for bringing a claim are limited; consult an attorney or contact the court clerk promptly if a lawsuit becomes necessary.

When to consider hiring an attorney

• If the diminished-value amount is large relative to the vehicle’s value.
• If the insurer clearly refuses to investigate or negotiates in bad faith.
• If the case involves a complex valuation dispute, total loss, or possible subrogation issues with your own carrier.

Helpful hints

• Preserve evidence immediately: photos of damage, pre-accident condition (if available), repair orders, bills, and any dealer or service records.
• Get a professional diminished-value appraisal when the likely loss exceeds a few hundred dollars — it often improves negotiation results.
• Collect market comparables: used-car listings, trade guides (Kelley Blue Book, NADA), and dealer offers for similar cars with and without accident history.
• Ask your insurer for written explanations of any denial. Put your responses and demands in writing and save all emails and letters.
• If you used your own collision coverage and it paid to repair your car, ask about subrogation: your insurer may pursue the at-fault insurer and you may be entitled to any recovered diminished value.
• Consider small-claims court for modest diminished-value amounts; procedure is faster and costs are lower than full litigation. Check local court rules for limits and filing steps.
• Keep communications factual and concise. Insurers respond best to clear documentation and reasonable, supported demands.
• If an insurer’s conduct seems unfair or deceptive, you may file a complaint with the Michigan Department of Insurance and Financial Services (DIFS) for consumer assistance.