Ind. Court Allows Diminished Value Case to Proceed

August 13, 2004

The Court of Appeals of Indiana has allowed a class-action suit involving the concept of diminished value in an auto repair case to be heard in district court.

In the case of Allgood v. Meridian Security Insurance Co., the Court of Appeals reversed a lower court ruling dismissing the plaintiff’s suit. The appellate court held the trial court erred in granting Meridian’s motion to dismiss Allgood’s claim for damages for failure to pay for diminished value. Meridian petitioned for a rehearing and a number of insurance trade associations submitted an amicus brief. Upon considering the arguments, the court reaffirmed its decision and remanded the case to the trial court for further proceedings.

“The Court of Appeals is going against the national trend which has rejected the diminished value argument,” according to Robert Hurns, a lawyer for the Property Casualty Insurers Association of America (PCI). “The language of the contract clearly does not require payment for diminished value when a vehicle has been fully repaired. In addition, there is no objective way to determine diminished value. The role of auto insurance is to repair or replace a damaged vehicle to pre-accident condition, it was never intended to guarantee the value of a vehicle before or after a repair is made.”

However, the Court of Appeals did note 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.

“Regardless of who wins this case, going forward insurers should exercise that option and state explicitly that diminished value is excluded if they have no desire to pay for it,” Hurns said in a statement.

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