Traffic fatalities reached an all-time high in Denver in 2021, with 84 people dying in traffic crashes. With serious accidents comes the inconvenience of dealing with insurance companies. They are almost always financially incentivized to pay you less than the fair value of your vehicle.
After an accident, insurance companies may declare your vehicle a total loss. A total loss occurs when the insurance company decides not to repair your vehicle. First, they need to determine if it’s financially worth it to repair your vehicle. If the cost to repair your vehicle exceeds the value of your car, they will most likely offer you a settlement for the “total loss” of your vehicle. Determining how much to pay you is called “total loss valuation.”
Knowing how insurance companies calculate this number before accepting any offer is essential. So, how do insurance companies calculate losses? And what can you do to ensure you get paid a fair amount if your car is totaled after an accident? In Colorado, if the other driver caused the accident, you also have the right to bring a diminished value claim.
Total Loss vs. Diminished Value
First, let’s discuss the difference between a total loss and a diminished value. A total loss will never have diminished value. Total loss is when the insurance company decides repair costs exceed the car’s market value. They will offer you a settlement check for the total loss. It is a loss, so there is no property to “value.” Diminished value, on the other hand, occurs when a car is repairable. The diminished value is the car’s value after the accident and repairs. Diminished value is money owed to you by the at-fault insurance company.
Calculating Total Loss Value
People often misunderstand the term “totaled” for a car that is not functional or undrivable. However, a totaled car is more of a term for how your insurance company will move forward. In other words, your car does not need to be completely wrecked to be considered a total loss. Instead, the cost of repairs must exceed a specific limit. In Colorado, that threshold is 100 percent.
Depending on your policy coverage, your insurance might sometimes pay for your vehicle’s damage. They would initially pay for the damage under first-party coverage and then pursue the at-fault driver’s insurance company for reimbursement. This is called subrogation.
Alternatively, the at-fault party’s insurance could resolve your property damage as part of your third-party personal injury claim.
Colorado law dictates how or if an insurance company can declare your vehicle as a total loss or not. Under C.R.S. § 42-6-102 (17)(C), a salvage vehicle is damaged in a collision, and the repair costs exceed the vehicle’s retail fair market value before the accident. So, while there is no exact formula for determining total loss value, if:
- The repair costs + scrap value = more than 100% of the market value of the car before the crash, it’s considered a total loss.
Insurance companies determine fair market value using industry-accepted sources. For example, they may use price books (like Kelley’s Blue Book), certified appraisals, dealer quotes, or computerized valuation services.
What Happens When My Car Is Totaled?
If an insurance company allows you to declare your vehicle a total loss, the insurer is required to pay you the current market value of the car. Although you may have spent $12,000 on your car, if it is worth $10,000 now, that is what you will get. You may have to use that settlement to finish paying off the loan on a car or put a down payment on a new car.
If you are still paying off a loan, your insurer may notify your lender and include them on the reimbursement check. Then, you will be responsible for paying the remaining loan balance.
If you or any passengers sustained injuries in the car accident, get medical treatment immediately. You may be eligible to receive coverage for your medical expenses under the at-fault driver’s policy or your own. In addition, the actual damages may be much higher than the cost of your totaled vehicle and initial medical treatment.
What Is Diminished Value?
Diminished value is the loss in value your car incurs due to the accident. It’s not simply the cost of repairs. Diminished car value also accounts for the fact that your car now has an accident history.
“Diminished value” is the difference between your car’s market value before and after the accident. If an insurance company decides to pay for your vehicle’s repair costs, it will not be worth as much as before the accident. The difference in your car’s value is the diminished value.
In Colorado, you can legally bring a claim for a diminished value. You would bring such a claim against the other driver’s insurance company.
Insurance policies typically include a clause preventing you from bringing a first-party diminished value claim against your insurance provider. However, under certain circumstances, insured drivers in Colorado can make a diminished value claim against the collision coverage in their policy. If you caused the accident, you could not recover compensation under a diminished value claim.
There are three different types of diminished value in Colorado:
- Immediate diminished value: this is the lost value immediately after an accident before any repairs are made to the car.
- Inherent diminished value: inherent diminished value is any loss of auto value after car reparations.
- Repair-related diminished value is any lost value from poor quality or incomplete repairs.
Insurance companies will assess and handle diminished value claims differently depending on their specific policies and procedures.
What Does Diminished Value Mean?
Even after repairs are done on your car, the value will be lower. Besides the obvious accident and repairs, many factors contribute to the diminished value. Some other factors that contribute to a diminished value include:
- Buyers may avoid warranties with a diminished value car
- Buyers are generally more hesitant to purchase vehicles with an accident history
- Dealerships are unable to sell the vehicle through a certified pre-owned program
- There is a risk that repairs were not incompletely or incorrectly
- Extensive damage can structurally compromise a vehicle that lasts even after repairs
- There may be undiscovered damage caused by the accident
Contact a professional auto appraiser or take your car to a dealership to find out the value of your repaired vehicle.
How to Calculate a Colorado Diminished Value Claim
To recover compensation on a diminished value claim in Colorado, you carry the burden of proof. In other words, it’s up to you to prove that your repaired vehicle value is less than it was before the accident.
You can use tools like Kelley Blue Book or a professional auto-appraisal. You may also be able to look at similar vehicles recently sold in your area. Once you have the exact value of your vehicle immediately before the accident, subtract that number from the value of your vehicle after complete repairs. Then you will have the amount for your Colorado diminished value claim.
For example, if your vehicle was worth $15,000 immediately before the accident and after only worth $12,000, your diminished claim value would be $3,000.
The at-fault driver’s insurance company may try to offer you a settlement immediately after the accident. Make sure you research and confirm your vehicle’s fair value before accepting any offers. Insurance companies often make a lowball offer immediately after the accident to pay as little as possible.
Generally speaking, accepting the initial settlement offer is not usually a good idea. Instead, research and speak with your attorney before agreeing to a settlement.
Why Do I Need a Denver Car Accident Lawyer?
Since most people are not car experts, they may not know the actual value of their car or what they deserve. An experienced Denver car accident lawyer will be able to help you assess your car’s value and make sure you get fair compensation.
Contact a Denver Car Accident Lawyer
To ensure you receive total compensation for damages, you need to consider injuries, damage to your car, and any other physical, emotional, or financial burdens you suffered. Again, working with an experienced attorney can help you calculate the costs and understand the full extent of your damages.
Contact us today so we can ensure you receive the compensation you deserve.