Detailed answer — how the diminished value process works if you do not own the car (Minnesota)

This section explains the legal and practical steps in Minnesota. It is meant to educate — not to provide legal advice. If the issue involves significant money or a dispute, consider consulting an attorney.

1. What is “diminished value”?

Diminished value is the reduction in a vehicle’s market value after it has been damaged and repaired. There are two common kinds: (1) “inherent diminished value” — the market discount a repaired car suffers because it has been in an accident; and (2) “repair-related diminished value” — value lost because repairs were incomplete or visible. In Minnesota, a diminished value claim is usually made against the at-fault driver’s liability insurer (a third-party claim), not the owner’s own collision coverage (though an owner’s insurer may advance payment under certain policies and then subrogate).

2. Who has the legal right to bring a diminished value claim?

• Titleholder / registered owner: The person or company listed on the title normally has the strongest legal claim to vehicle value and can directly pursue diminished value. Lienholders or lessors (leasing companies) often hold title interests that affect how payments are handled.
• Lessee (person who leases the vehicle): Many leases give the lessee certain rights and responsibilities (including responsibility for damage). Whether a lessee can recover diminished value against a third-party tortfeasor depends on the lease contract language and whether the lessor (titleholder) will allow assignment of the claim or will pursue recovery itself. If the leaseholder has required you to maintain insurance, you may be the insured but not the titleholder — check the lease and the insurer’s position.
• Driver who is not the owner: If you were driving a friend’s or employer’s car, you generally cannot personally claim diminished value unless the owner assigns you the right to pursue the claim or you have written authority. The vehicle’s owner is the usual claimant.
• Lienholder or finance company: A lienholder’s interest is usually limited to the outstanding loan balance on a total loss and may affect settlement proceeds; lienholders typically do not pursue diminished value for the equity element unless the titleholder fails to act.

3. Typical process steps when you do not own the car

1. Identify title and contract terms. Check the title, lease agreement, or loan documents to see who owns the vehicle and who controls claims. A leased vehicle often names the lessor as owner and the lessee as responsible for upkeep and damage claims per the lease terms.
2. Notify the insurer(s). If another driver caused the damage, notify the at-fault driver’s insurer that you (or the owner) intend to pursue diminished value. If you are not the owner, the insurer will usually want proof that the claimant has standing — typically the title or an assignment from the owner.
3. Get a market-value appraisal. Obtain one or more diminished value appraisals from qualified appraisers or use industry guides (Carfax, Kelley Blue Book, independent appraisers) to quantify the difference between the car’s pre-loss market value and its post-repair market value. Document condition before and after, repairs performed, and repair bills and photos.
4. Submit claim with documentation. The claimant (usually the owner or an assignee) sends a demand package to the at-fault insurer including proof of title/standing, appraisal, repair invoices, and photos.
5. Negotiate or use appraisal/arbitration. The at-fault insurer may accept, offer a lower amount, or deny. If the claim is denied, Minnesota law and the policy’s terms may give options such as appraisal clauses, complaint to the Minnesota Department of Commerce (insurance consumer assistance), or litigation.
6. If you are a lessee or non-owner: a lessor may insist that settlement checks be issued jointly to the lessor and lessee or to the lessor alone. Ask the lessor to assign the diminished value claim to you (in writing) if you expect to recover the difference — many lessors won’t assign unless required by contract or negotiation.

4. Practical examples

Example A — Leased car: You lease a 2019 vehicle. Another driver hits you. The lessor holds title. You are responsible under the lease for damage, but the lessor receives settlement checks. To recover diminished value, you should (a) notify the lessor and insurer, (b) request the lessor assign the right to pursue diminished value to you, or (c) let the lessor pursue and credit you per the lease. Read your lease — many require you to carry insurance and notify the lessor.

Example B — Borrowed car: You borrowed a friend’s car and it was damaged. The friend (owner) can pursue diminished value; you cannot do so in your own name unless the owner assigns the claim to you in writing.

5. What if the insurer refuses to pay diminished value?

If a claim is denied, options include: (1) providing better documentation and re-negotiating; (2) filing a complaint with the Minnesota Department of Commerce (consumer insurance assistance) — see: Minnesota Commerce Department — Insurance Consumers; (3) pursuing small-claims court or civil action if you (as claimant) have standing; or (4) requesting appraisal/arbitration if the policy has that option. If you are not the owner, you will likely need an assignment from the owner before a court will hear the claim.

6. Minnesota-specific notes

• Minnesota’s vehicle and title rules determine who is the legal owner for settlement purposes — check title/registration and any lien/lease entries on the title. The Minnesota Statutes and Revisor site provide the official statutory text for vehicle titling and registration: Minnesota Statutes (Revisor of Statutes). For practical consumer insurance help see the Minnesota Commerce Department link above.
• If an insurer pays diminished value to a party other than you (for example, to a lessor), ask for a written explanation and review your lease or loan contract to understand how proceeds will be applied.

Helpful Hints

• Always check the vehicle title, lease, and loan documents first — those documents determine who can legally assert a claim.
• Get clear, dated photos of the vehicle before and after repair, and keep all repair invoices and inspection reports.
• If you are a lessee, ask the lessor whether they will pursue diminished value or assign the claim to you; get any agreement in writing.
• Obtain at least one independent diminished value appraisal from a reputable appraiser experienced in Minnesota auto markets.
• Keep all communications with insurers in writing and send demand letters with return receipt or email read receipts when possible.
• If a claim is denied, consider filing a complaint with the Minnesota Department of Commerce: https://mn.gov/commerce/industries/insurance/consumers/
• Document who made payments or received settlement checks — if a lender or lessor is paid, ask how proceeds are applied to your account or lease obligations.
• When in doubt, consult a Minnesota attorney experienced in auto insurance or consumer law — especially before filing suit.