DIMINUTION IN VALUE
RESERVE ESTIMATE CALCULATORS
In State Farm v. Mabry, the Georgia Supreme Court ruled "that there is a potential for a diminution in value loss in every event of loss, and that diminution of value can occur even when a vehicle is properly repaired." They also ruled that the Personal Automobile Policy provision requiring the insurer to "pay for loss to your car" is sufficiently ambiguous to include the obligation to pay for diminution of value in cases other than a total loss. Thus, the Supreme Court mandated that this is a first party coverage under a Personal Automobile Policy.
A Commercial Automobile Policy Declaration Page normally states the insurer will pay "actual cash value or cost of repair, whichever is less." The insuring agreement says we will pay "direct and accidental loss or damage." Thus it could be argued that there exists no such ambiguity that would create an obligation to pay diminution of value under a Commercial Automobile Policy. The question of owing diminished value on a liability claim has never been addressed by the Georgia courts.
Note: Most of the insurers in Georgia have developed their own methods for calculating Diminution in Value. The calculators used by the various companies are proprietary information, so it is inappropriate to attempt to publish such information in this forum. Below are three generally used methods of calculation.
If mileage is unknown, The Georgia Insurance Department has instructed us to base mileage on 10,000 miles per year. Except for "high value" vehicles, when a vehicle reaches 100,000 miles, it is generally considered to have "basic transportation" value only; thus no further diminution of value can occur.
The amount used in the attached worksheets should be an indicator of the proper reserve to be considered pending a detailed analysis of the proper Diminution in Valve calculator used by a particular insurer.
DO NOT CONFUSE THESE AMOUNTS WITH A PROPER CALCULATION OF THE AMOUNT OWED A POLICYHOLDER!
A. COMPLICATED CALCULATOR
1. Enter the full ACV of the involved vehicle:
$ __________
$ __________2. Multiply Line 1 by 10%
10%3. Enter Amount [which is 10% of ACV] $ __________
$ __________4. Enter Severability Factor as Percentage: __________%
__________%25%Minor damage to panels and structure50%Moderate damage to panels and structure75%Major damage to panels and structure100%Severe damage to panels and structure5. Multiple Line 3 times Line 4 and enter amount: $ __________
6. Divide vehicle mileage by 100,000 and enter as percentage:
__________%7. Subtract Line 6 from 100% and enter result: __________%
__________%8. Multiple Line 5 times Line 7:$ __________
$ __________B. SIMPLIER CALCULATOR
1. Enter ACV of the involved vehicle$ __________
$ __________2. Enter Amount of repairs $ __________
$ __________3. Add Lines 1 and 2 $ __________
$ __________4. Multiply Line 3 by 2.5% to 5%
2.5% to 5%5. Enter Amount $ __________
$ __________C. VERY SIMPLE CALCULATOR
1. Enter Amount of repairs to involved vehicle $ __________
$ __________2. Multiply Line 1 by15%
15%3. Enter resulting amount $ __________
$ __________4. Divide vehicle mileage by 100,000 and enter as percentage:
__________%5. Subtract Line 4 from 100% and enter result: __________%
__________%6. Multiple Line 3 times Line 5:$ __________
$ __________