Updated: 6:53 p.m. Monday, Feb. 11, 2013 | Posted: 1:30 p.m. Monday, Feb. 11, 2013

Appraiser says car insurance underpays diminished value claims

By Jim Strickland

ATLANTA —

The Georgia Department of Transportation reports more than 1,700 drivers crash in Georgia each day.
         
A crashed car is worth less in trade and the insurance company is supposed to pay to make up the difference. How much they pay is the $30 million question.
         
Laura Shaw admits her crash in 2009 was her fault.  State Farm paid to repair more than $5,000 worth of damage, and sent a separate check for what the crash could cost her at resale.  It's called diminished value.
         
"I said, 'What the heck is diminishing value?' I've never gone through any of this before," she recalled to consumer investigator Jim Strickland.
         
After a 1999 Georgia court decision called Mabry vs. State Farm, insurance companies have to pay for your crashed car's lost trade-in value. 

A new court challenge is brewing trying to prove the insurance companies are shortchanging on the payments.  Shaw plans to be the test case, after State Farm paid her $237.35  
         
"What am I going to do with a check like this?" she said. 
         
Independent appraiser Antoine Rached found her loss to be $2,020. Rached's firm, Diminished Value of Georgia, specializes in fighting the insurance companies' valuations.
         
"Most of the claims I get, people are getting offered $200 to $300 where diminished value should have been $2,000 to $3,000," said Rached.   "So it is tenfold, or they are paying 10 cents on the dollar."
         
The insurance companies use a formula approved by a judge in Muskogee County in 2000.

The maximum diminished value payment is 10 percent of a car's blue book value.  A $10,000 car starts at  $1,000 lost value, a figure which shrinks with lighter damage or high mileage.  If your car has more than 100,000 miles you don't get a check at all. 
         
Vivian Joyce wound up with $1.74 after a rear-end crash in her minivan.
         
"Who is going to buy a car and say, 'Stop. I'm going to pay you a dollar less because of this wreck!' Nobody does that," Rached said.  He figured her loss at $550.
         
"Knowing what I'm entitled to, of course I want to get that money back," Joyce said.
         
Attorney Alex Ngyuen said insurance companies count on most crash victims seeing the payments as free money.
         
"So for a regular consumer when they get this, 'Wow, this is great! My insurance company is doing the right thing,"" he said.
         
Ngyuen plans to file a class action lawsuit in Muscogee to rewrite the insurance industry's diminished value formula.
         
"It's about $25 million to $35 million for all of the consumers in Georgia who have insurance," he said.
         
A statement from State Farm, Georgia's highest volume car insurer, refers only to Laura Shaw's case and not the diminished value issue as a whole.  The company won a summary judgment in Gwinnett County, but may have to defend itself again in Muscogee County.
         
"In this case, the court found that State Farm’s assessment and payment of the diminished value claim, using the Mabry formula, was reasonable as a matter of law,” said the statement from State Farm spokesman Justin Tomczak.

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