Ill. Appeals Court Quashes Diminished Value Claim

An Illinois appeals court has rejected a plaintiff’s claim that its auto insurer breached its contract by refusing to pay for diminished value in an auto repair case.

“Although the appeals court decision doesn’t throw out the concept of diminished value, it upholds the fact that the insurer could not have broken its contract with the plaintiff since diminished value is not covered under the insurance contract,” said Laura Kotelman, regional manager and senior counsel for the Property Casualty Insurers Association of America (PCI). PCI filed an amicus brief in the case.

In its March 25 decision, the Illinois First District Court of Appeals agreed with the circuit court’s rejection of the plaintiffs’ class-action claim in Martin v. State Farm that the insurer violated its contract by failing to cover the allegedly diminished value of the repaired vehicle.

Plaintiffs alleged that State Farm had an oral contract with them to settle their property damage claim, both by repairing the vehicle and paying damages represented by the diminished value of the vehicle. However, they also alleged that they were unaware of their right to diminished value, a contradiction that helped determine the court’s final ruling.

“Although the court did not address the possibility of any future claims against the other insured directly for diminished value, it determined that plaintiffs’ charges of breach of contract were invalid because the concept is not covered under the insurance contract, and the insurance company was not obligated to pay,” Kotelman added.