Diminished value claims in North Carolina

Claims against the at-fault driver

In Smith v. White (2011), the North Carolina Court of Appeals applied the rule from the state Supreme Court's 1942 decision in U.S. Fidelity & Guaranty Co. v. P. & F. Motor Express: the measure of damage to a car is the difference between its market value immediately before and immediately after the injury.

The court held that repair cost evidence is admissible to help prove that drop in value, even when the repairs were already finished and paid, and it upheld a new trial on diminished value because that evidence had been kept out.

The appraisal process for lost value

North Carolina writes diminished value into its auto liability statute. When liability for property damage is not in dispute and the claimant's and insurer's estimates of the drop in fair market value differ by more than $2,000 or 25 percent of the car's fair market retail value, whichever is less, either side can demand an appraisal in writing (N.C. Gen. Stat. 20-279.21(d1)).

Each side picks a competent and disinterested appraiser within 20 days of the demand. If the appraisers disagree, they choose an umpire, and if they cannot agree on one within 15 days, either side can ask a magistrate to pick. Either side has 15 days from the filing of the report to reject it. Each side pays its own appraiser and the umpire's cost is split equally.

State rules define diminution in fair market value as the difference between the car's value immediately before the accident and its value after the repairs are completed (11 NCAC 4.0425), and require the two appraisers' written reports to be exchanged (11 NCAC 4.0421(d)).

Signing a release for the repair

If you sign a release or accept full payment for the repair from the at-fault driver's insurer, North Carolina's claims rule says that does not bar a later claim for diminution in fair market value caused by the accident that could not be determined or known until after the repair (11 NCAC 4.0421(b)(5)).

That later claim must be brought within the period in N.C. Gen. Stat. 1-52(16).

Claims under your own policy

The appraisal statute and the release rule above are written for claims against a liability policy. No North Carolina appellate decision was found on lost value under an owner's own collision coverage after a proper repair, so that question is unsettled and the policy wording controls.

When an insurer chooses to repair the car itself, the Supreme Court of North Carolina held in Pierce v. American Fidelity Fire Insurance (1954) that it is bound to restore the car to its former condition, and the owner recovered the difference between the car's value before the damage and after the faulty repair.

Filing deadline

North Carolina gives three years for an action for injuring any goods or chattels (N.C. Gen. Stat. 1-52(4)).

For physical damage to property, the claim does not accrue until the damage becomes apparent or ought reasonably to have become apparent, with an outer limit of 10 years from the last act giving rise to the claim (N.C. Gen. Stat. 1-52(16)). A North Carolina attorney can confirm how this applies to your dates.

How diminished value claims tend to go in North Carolina

North Carolina's unfair claim settlement statute lists practices an insurer may not commit often enough to be a general business practice, including attempting to settle a claim for less than the amount a reasonable person would have believed he was entitled to (N.C. Gen. Stat. 58-63-15(11)(h)). The Commissioner of Insurance enforces it.

Once a claim is settled, the payment must be mailed or delivered within 10 business days (11 NCAC 4.0421(b)(1)).

The appraisal process applies only when liability is not in dispute and the two sides' estimates of the drop in value differ by more than the statutory threshold.

Many insurers answer a diminished value request with a formula rather than a market study. The best known is the 17c formula, which came out of the Georgia class actions over first-party claims that followed State Farm v. Mabry; its name comes from paragraph 17(c) of an injunction in one of them. It starts from a capped share of the car's value before the crash, then reduces it with damage and mileage modifiers. A law-firm survey notes it was built for that class action and has not been formally adopted for general use.

Adjusters commonly ask for proof that the repaired car is worth less, not only proof that it was damaged. Records that tend to matter: the final repair invoice and photos, the estimate showing any structural or frame work, the vehicle history report entry, and written market evidence such as dealer quotes or listings for the same car with and without an accident history.

Lost value is easiest to show once repairs are finished, because the value after repair is what gets compared with the value before the crash.

If you have a complaint about claim handling

The North Carolina Department of Insurance takes consumer complaints about how an insurer handled a claim, and its consumer line is toll-free at 855-408-1212. File with the North Carolina Department of Insurance.

Next steps

• How Reclaim's diminished-value check works
• Estimate a figure with the diminished value calculator
• How to file a diminished value claim
• Diminished value claims in Virginia
• Diminished value claims in South Carolina
• Diminished value rules in every state