Vehicle Diminution

Vehicle Diminution has been accepted in law for a number of decades now. All the way back to 1974, the Court of Appeal deemed that if a potential buyer is considering two identical cars, one of which is unblemished and the other with a history of repair work, the buyer is likely to choose the unblemished car, or expect a discount on the purchase of the one that has a repair history.

The case of Payton –v- Brooks (1974), heard in the Court of Appeal, sets out that a claim can be brought for Diminution caused by a vehicle having been repaired.

The summary is that if the full cost of the repairs to the car is not enough to cover the financial loss to the owner, there is no reason the owner should be deprived of additional compensation under that head of damage also.

Another very important case was called Coles -v- Hetherton (2013). This case determined that the financial loss to a vehicle owner is realised as soon as the vehicle becomes damaged. The loss sustained is not simply the cost of the repairs, it is Diminution.

The cost of the repairs to put the vehicle into its pre-accident condition is simply a contribution towards the Diminution. The Courts can award a sum of compensation which is greater than the cost of the repairs if they feel that the case justifies it.

A recent survey conducted by Oakwood Solicitors Ltd showed that only 9% of car buyers would buy a vehicle that they knew had previously been involved in a car accident and had repair work carried out on it.

The survey of 2,087 people also showed that buyers between 18 and 34 years of age were most likely to buy the previously damaged vehicle, whilst older buyers would appear to be wary about such a proposition.

A more astonishing statistic is that when potential buyers gave a hypothetical purchase figure on a vehicle they had been advised had sustained some accident-related damage and been repaired, on average they would pay 24% less for the damaged car, meaning that the seller is out of pocket.

This diminution in value can be significant for some owners who believe that their beloved car is still worth the full book value, but as we have found out from our survey, this isn’t the case.

Many thousands of people in the UK have lost money as a result of unrecovered Diminution following a car accident.

Although Vehicle Diminution has been around for some time, it is not a very well known and understood area of law.

Insurers realise the impact that a number of claims would have on them financially if everyone who could seek compensation, did so. As such, they will try to avoid settling wherever they can and for the unrepresented diminution Claimant, this can prove to be extremely difficult and stressful to overcome.

• Members of our Road Traffic Accident (RTA) department have been very well trained to know what to look out for and how to respond to specific arguments from third-party insurers.
• We work with experienced engineering firms nationally and have access to Barristers who have appeared in Court to represent clients pursuing Diminution claims.
• We strive to ensure that our clients recover the highest level of compensation possible.
• Oakwood Solicitors Ltd has a highly successful track record of recovering compensation for many clients, and are happy to conduct an initial FREE assessment of your claim.
• We work on a no-win, no-fee basis and our fees are based on a deduction from our clients’ compensation. This means that we are incentivised to ensure that we obtain the maximum possible level of compensation for our Diminution clients.

A claim must be brought within six years of the accident which caused the damage.

It is often thought that only classic, rare or prestigious vehicles are likely to qualify for a diminution claim. Oakwood Solicitors Ltd has been able to settle a large number of matters for the owners of less valuable vehicles, and this has also been accepted by the Courts.

in order to qualify, we would expect the vehicle to be no more than five years of age (unless it falls into the classic or desirable/prestigious bracket) and have sustained damage costing over £3000 to repair.

The larger the market value and desirability of the car, the higher the compensation award is likely to be.

Although there are no known binding authorities on this point, our view is that all vehicles are likely to sustain some degree of Diminution if they have been involved in an accident of a reasonable magnitude.

There is a possibility that if a vehicle has a large number of keepers, some of them could have been a trader or dealer. The vehicle would therefore be less likely to have been involved in an accident.

It would be the responsibility of the motor engineer compiling the necessary evidence to support the claim for loss in value to take this into account and determine if there was any evidence of historical damage and repair work.

Diminution does not apply if the car has been deemed uneconomical to repair. The theory is that once a total loss payment has been received, the owner has been put back into the position they were in before the accident occurred.

They will have received the market value of the car prior to the accident which means they can go out and purchase a like for like replacement vehicle.

A standard, fully comprehensive insurance policy will not cover the loss in value. Diminution is classed as an ‘uninsured loss.’

Action will be made against the insurers of the driver who was to blame for the collision. Any payment of compensation will be sought from them, so a Diminution claim should have no bearing on your own insurance.

Whatever the claim involves, there are always going to be some cases that insurance companies are not prepared to settle. This may be for several reasons.

From our experience, most cases are settled through proactive negotiations. On rare occasions, Court proceedings may be necessary so that a Court Order can be obtained which confirms that the insurer must pay damages to the Claimant.

This argument was rejected by the Inner House of the Court of Session in Hunter v Thomson and another. The Sheriff Principal in that case refused to accept the argument that the Court could not be satisfied on the balance of probabilities that there was any Diminution until the car had been sold on at a financial loss.

The case of Coles v Hetherton (2013) is also a good authority to rely on when arguing that the loss is realised when the damage to the vehicle has occurred.

Unfortunately, if you were at fault for the accident, you will not be able to make a successful claim for Diminution.

• You should take the full details of the driver at fault for the accident. This should consist where possible of full name, address, phone number and vehicle registration.
• You should try to take some photographs of your own vehicle in its damaged condition.
• Try to ensure that your car repairs are carried out at a reputable, approved repairer.
• Ensure that your vehicle is returned to you from the repairer in a good condition and that you are satisfied with the quality of the repair work. If the car has been repaired to a poor standard, it makes it very difficult to assess the loss in vehicle value.
• If possible, you should request a copy of the repair documentation from the body shop or garage. This should include any repair estimate and reports. Invoices should include a list of all parts and labour work carried out.

When submitting a claim for Diminution to the third-party insurers, it is likely that they will want to see evidence of the loss in the form of engineering evidence, provided by a qualified motor engineer.

This will involve a review of the repair documentation and an inspection of the fully repaired vehicle.

Although it is not impossible to obtain a ‘desktop’ engineer’s report and submit a claim for Diminution, it can create difficulties because without a physical inspection of the vehicle, the engineer’s report will be based on second-hand information (the repair documents) and it would also bring in to question how the engineer has determined a true and accurate market valuation of the car.

A desktop report without a physical inspection is likely to result in a report being open to criticism and the Courts may even not accept it as a loss that can be substantiated.

We would therefore always recommend that a physical inspection is carried out if you wish to pursue your matter.

A Diminution value can only be determined once the owner knows that the vehicle repairs have been carried out to a commercially satisfactory standard.

If there has been additional undiagnosed damage requiring further repair work, then the value of the eventual outcome could be affected.

You may also find that the insurers of the third-party insurers try to argue that the repairing garage was to blame for the loss in value due to incomplete or unsatisfactory repair work.

It is therefore important that you are satisfied that the repairs have been completed to a reasonable standard before an engineer is instructed to inspect the vehicle.

Oakwood Solicitors Ltd was asked to represent by Mr. M of Bolton, Lancashire in order to pursue his Diminution matter.

Mr. M’s 2018 plated Audi S5 motor vehicle which was stationary at a set of traffic lights when a third party vehicle collided with the rear of his vehicle which subsequently pushed his vehicle into the rear of the car in front. Mr. M’s vehicle sustained moderate damage totalling £9412 including VAT.

The vehicle had been repaired to a good standard by an approved Audi repairer and Mr. M. had reported no ongoing issues or concerns with the car. The vehicle had been purchased from new, had not previously been involved in any other accidents, was well maintained with fairly low mileage for its age.

Liability for the accident had been admitted by the third-party insurers.

At our instruction, specialist engineering evidence was obtained following a physical inspection, and the claim for Diminution was assessed at £3340.00.

The claim was submitted to the insurers of the fault driver who proceeded to negotiate a settlement and an agreement was reached to pay Mr. M the sum of £3,150.

This particular case was resolved within four months of instruction.

Additional case study