How to get cash after crash from at-fault driver

Published in The Toronto Star, Business, Written by Ellen Roseman, 2014-01-06

You can claim compensation for your car's decreased value after an accident by asking the driver at fault to pay up. Here's how to do it. You can go after an at-fault driver for the diminished value of your car after an accident.

Your car is damaged in a collision caused by another driver. After repairs paid for by the insurer, you think you're in good shape.

But when you try to sell the car, you may find it's worth less than others of the same make, model and year - simply because it's been in an accident.

Dealers order vehicle history reports, such as Carfax or CarProof, to see when structural damage has been reported and airbags have been deployed. Then, they lower their price to cover the perceived loss of value.

The difference can add up to thousands of dollars, depending on the age and initial cost of the vehicle. Since Canadian insurance companies don't usually cover the diminished value, you have to fight for compensation.

Raymond Signorello owned a $200,000 Mercedes sports car that was damaged in an accident caused by a parking valet. He won $16,000 in 2010 after suing the Insurance Corporation of British Columbia (ICBC)

Signorello didn't have to show the loss precisely by having sold the vehicle, a judge said. It was enough to establish a reduced value, as he did.

In 2012, Ken Leboe sued ICBC for the diminished value of his 2008 Chevrolet Silverado truck caused by another driver. He won $5,000 in court.

He used a diminished value calculator to show how much his vehicle had depreciated, even after being properly repaired. He also used a free step-by-step guide on how to claim for diminished value.

Viraf Baliwalla, owner of Automall Network in Toronto, does a lot of work with the insurance industry. He's set up a website, MyCarIsWorthLess.com, where he sells access to his diminished value calculator for $39.

In the United States, many states allow car owners to claim diminished value from an at-fault party's insurance company. Baliwalla wants to help Canadians recover money, too.

Is it worth pursuing? You have three options: (1) Drop the matter and absorb that cost as your own. (2) Look for a friendly settlement with the other party at a mutually agreeable value. (3) Try to get a legal resolution.

"Your diminished value can amount to several thousand dollars," he says in the guide. "However, for a very old vehicle or one in poor condition or with very high mileage, the amount of diminished value may be negligible."

With the calculator, you can see how much diminished value you incurred and decide whether it's worthwhile to seek compensation.

Baliwalla is not talking about inferior parts or poor workmanship by garages after an accident. He's referring to the inherent diminished value caused by public perception that a previously repaired vehicle warrants a lower price.

He provides a template for sending a demand letter to the other driver requesting payment. This is the next step after informal attempts to settle have failed.

"The accident occurred as a result of your negligence," you write and add a reason, such as going through a red light or making an unsafe turn.

"As a result of your negligence, my vehicle sustained damage, which is being repaired by the insurance company. My vehicle has also sustained diminished value as a result of the accident.

"That loss is not covered by my automobile insurance policy and therefore I am looking to you to compensate me for that loss."

Threaten to start a lawsuit if you don't get a satisfactory offer within a certain period, he advises. And if the demand letter has no effect, support your claim by gathering trade-in prices before and after the accident.

In Ontario, auto insurers have been told to reduce average premium costs by 15 per cent. They're not keen to add diminished value coverage, which could raise costs.

In my view, luxury car buyers may pay extra to be protected against loss of value in an accident. I wouldn't be surprised to see companies introduce it as an option if Ontario's insurance regulator agrees to allow it.