Cash for Clunkers: The Labyrinthine Method for Claiming Diminished Value in North Carolina

Paying for your car repairs is often only the first battle in the Property Damage war.  You may not know it, but you're also entitled to the diminished value of your car, and North Carolina law provides an alternative method for handling your diminished value claim with the insurance company.

Paying for your car repairs is often only the first battle in the Property Damage war.  You may not know it, but you're also entitled to the diminished value of your car, and North Carolina law provides an alternative method for handling your diminished value claim with the insurance company.

What do you mean when you say "diminished value?"

Imagine with me that two years ago, you bought a brand-new (at the time) 2015 Chevy Corvette Z06 convertible.  Cherry red, 6.2 liter V8, 650 horsepower, zero to sixty in three seconds flat.  It was the car you had always dreamed of, and you were happy to pony up the $85,000 that it cost.  Diminished value claims were the furthest thing from your mind.

But six months later, you got sideswiped on 540 by some dude in a Jeep Cherokee.  You were fine and the car was repaired, so you took the money that his insurance company gave you and went on your way.  But now, two years after buying the car, your life has changed.  You're married with a baby on the way, and Corvettes don't make for great family transportation.  So you decide to sell the 'Vette and get a nice Tahoe.

Now imagine that you're at the dealership.  You've done your homework, and you know that the Kelley Blue Book value on your Corvette is $65,000.  But when you go to trade it in, the dealership only offers you $50,000 on account of the Carfax showing a past accident.  You're ticked.  You didn't realize that the accident would have such far-reaching implications, and you're wondering if you can go back and claim that diminished value from the at-fault driver's liability insurance provider.

The short answer is that as long as you didn't sign a full and final settlement and release of all your claims, yes, you can claim diminished value.  Folks like you, who've been harmed by the negligence of another, are entitled to compensation of all of the damages you've suffered due to said negligence; including any diminished value of your vehicle.  However, the process for claiming diminished value in North Carolina can get a little tricky.  Let's go over it step by step.

Option One:  Try the old-fashioned approach.

This is fairly straightforward.  Get the car repaired, get an appraisal of what the diminished value is, open a diminished value claim with the liability carrier, and hope that they give you a fair shake.  Oftentimes this approach works, but if it doesn't, you'll either need to (i) file your lawsuit or (ii) implement the alternative method prescribed by North Carolina law.  It's a bit of a rabbit hole, but it can and does work.

Option Two:  The "Appraisal Clause."

As of January 2010, personal injury claimants have access to the "Appraisal Clause" found in North Carolina General Statutes § 20-279.21(d1).  To use this option, you need to have an appraisal done on the vehicle, and demand that the insurance company get one of their own.  If they've already had one performed and you're just at odds with them over what the diminished value is, then it might be wise for you to just go ahead and file your lawsuit.  The Appraisal Clause has several requirements, as follows:

Requirement One:  You are unable to come to an agreement with the insurance company as to what the diminished value of your vehicle is.  "Diminished value," for these purposes, means the difference between the "fair market value" of your car (i) in the moment immediately before the accident took place, and (ii) in the moment immediately after the accident took place.  

Requirement Two:  Your opinion of diminished value and that of the insurance company must be more than $2,000 or 25% of the fair market value.  So let's say the fair market value of the car is $6,000.  Your diminished value opinion is $2,500, and the insurance company's opinion is $900.  The difference here is less than $2,000, but more than 25%, so this requirement would be satisfied.  On the other hand, if your opinion is $2,000 and the insurance company's is $1,000, then the difference is less than $2000 and less than 25% of the fair market value.  That means you wouldn't be able to use the Appraisal Clause.  Fun tip:  Use NADA.com to find your car's fair market value.

Requirement Three:  You must demand, in writing, that the insurance company select a "competent and disinterested" appraiser.  The insurance company then has to notify you of their selection within 20 days after you make your written demand.

Requirement Four:  You have to select an appraiser of your own and notify the insurance company of your selection within 20 days.  You and the insurance company will each pay for your own appraiser.

Requirement Five:  Both of the appraisers will do what they do.  If they disagree on the diminished value (remember that this is the fair market value immediately before and immediately after the accident), then they have to select a third "competent and disinterested" appraiser to serve as an umpire.  You and the insurance company will share the cost of this umpire.

Requirement Six:  If the appraisers can't agree on an umpire, then you can request that a magistrate make the selection (the insurance company can also make this request).  Keep in mind that you can't go out and get a magistrate from the next town over; it has to be in the county where the accident occurred or where the policyholder's vehicle is registered.  This means the at-fault driver, not you.  So if you live in Orange County, the accident happened in Durham County, and the at-fault driver's car is registered in Wake County, you can get a magistrate in either Durham or Wake.  Orange County is off the table in this example.

Requirement Seven:  The chosen umpire looks at both appraisals and makes a report showing the final amount of your loss, but not showing any liability.  The final determination has to be somewhere in between the amounts asserted by each appraiser.  The umpire then provides the report to you and to the insurance company.  If you and the insurance company are both cool with the report, then that's the end of the analysis.  If not...

Requirement Eight:  Either party has 15 days within which to notify the other of its rejection.  If you don't do so, then the report becomes binding on both parties.

Holy cow, that's a lot!

Yeah, I know.  It's a pain.  But it beats paying someone like me to prosecute a lawsuit for you, right?  This stuff is complicated, and if you have questions or concerns, please get on the phone with an experienced personal injury attorney.  Happy hunting!