GO PUBLIC

Drivers take on car insurance companies for coverage you can't get in Canada

It's the insurance claim you can't make — for the diminished value of a vehicle after being damaged in a crash.

Diminished value payouts are the law in some states, but Canadians must fight for compensation

After his SUV was damaged in a collision, Bill Brown tried to recover the diminished value of the vehicle in Alberta small claims court. (Pat Ebert)

It's the insurance claim you can't make — to be compensated for the value a vehicle loses after being damaged in a crash.

Even when repairs are done properly, the diminished value means drivers lose money when they go to sell the vehicle.

Bill Brown knew his almost-new SUV was worth thousands less as soon another driver plowed into it causing a lot of damage but not enough to write it off.

The Kamloops, B.C., man took the at-fault driver and her insurance company to small claims court in Edmonton, where the collision happened, to try and recoup the diminished value.

Brown's Nissan Juke was badly damaged when it was struck by another vehicle while parked. (Bill Brown)

"I took the stand because I had a lot of damage to a vehicle that was five months old," Brown says about his Nissan Juke SL.

"There was $15,000 damage done and I knew I'd have to disclose that when I sold it, and it would be worth less than if it had not been in an accident," Brown told Go Public.

Owners are required to disclose damage to vehicles over $2,000 to potential buyers. Plus, vehicle history reports from companies like Carproof describe repairs, so any prospective buyer of a used vehicle can check for themselves if it has sustained major damage.

Go Public found while a few insurance companies are quietly paying out on diminished value claims, others are choosing to fight the claims in court.

Many argue Canada should look to the U.S., where insurance companies in some states are required to pay depreciation costs after a crash.

'It's not an even battle'

Brown, who represented himself against two lawyers hired by the at-fault driver's insurance company, initially won his case.

Brown initially won his claim in small claims court, but lost after his insurer appealed the amount he was awarded for damages. (Bill Brown)

The judge awarded him $6,000 in damages but when the insurance company appealed, his award was cut to $1,500 and he was ordered to pay legal costs for the other side. In the end, he was $1,000 in the hole.

"These battles are fought at the small claims level, they are not for large amounts. Most amounts are not large enough to warrant paying a lawyer, so most Canadians will end up representing themselves and I can tell you it's not an even battle," Brown says.

In his 2014 ruling, the judge said either the province should enact legislation to deal with the issue or the insurance industry should offer coverage for diminished value — neither has happened.

B.C. man gets $16,000

Some lawsuits have been more successful. West Vancouver's Ray Signorello had a lot more to lose when his $200,000 Mercedes-Benz convertible was damaged by an airport valet parking employee, resulting in $26,000 in repairs being required.

Raymond Signorello's legal team won him $16,000 in B.C. Supreme Court for his diminished value claim against provincial insurer ICBC. (Mike Zimmer/CBC)

Signorello hired a lawyer and took his case to B.C.'s Supreme Court, which ordered the Insurance Corporation of British Columbia (ICBC), a provincial Crown corporation, to pay $16,000 for the diminished value claim: the amount Signorello asked for.

He says he went to court to make a point. "If a car gets into an accident, that's part of the history of the car. So it only makes sense," Signorello told Go Public.

"If I ask you, which car would you rather pay more for? A car that had no accident, or a car that had, in this case, a severe accident? I think most people's answer would be, 'I'd take the car that didn't have an accident.'"

Diminished value payouts are law in Georgia

Both drivers point to various places in the U.S. where diminished value payouts have been part of auto insurance coverage for years.

The Georgia Supreme Court determined insurers have to to pay the diminished value even if the insured doesn't claim it.

Other courts, including in Mississippi, North Carolina and New York have decided diminished value should be covered in insurance policies under direct losses.

Yet no province or territory in Canada offers that kind of coverage, according to the Insurance Bureau of Canada.

"Auto Insurance policies are designed to cover what are known as direct losses. The responsibility of the insurance company is to put the damaged vehicle in the same condition that it was in prior to the accident causing the damage.

"Any reduction in the value of that vehicle is regarded as an indirect loss and as such is not contemplated to be covered under the policy," Steve Kee, from the Insurance Bureau of Canada, wrote in an email.

'Nobody wants a car that's been hit'

Gary Cogbill, who is in the vehicle appraisal business, says he's been called on to testify in diminished value claims and believes diminished value is a direct loss for drivers involved in a crash.

"Nobody wants a car that's been hit for $10,000 in repair versus one that hasn't when you're faced with paying the same price for either one," Cogbill says.

Appraiser Gary Cogbill suggests auto insurance holders negotiate for diminished value compensation with their insurers. (Richard Grundy/CBC)

"So one of them is going to have to suffer in value."

The problem, Cogbill says, is proving a dollar amount in court since the vehicle hasn't been sold yet.

Cogbill says successful cases typically involve newer or higher end vehicles, where the vehicle owner is "100 per cent blameless" for the accident.

CBC's Marketplace looked at this issue seven years ago. Since then, there has been only one small change, according to Cogbill, who says some insurance companies might negotiate settlements to avoid court action if drivers ask. The problem, he says, is proving exactly how much a driver will lose when they go to sell their vehicle, so he says an independent appraisal report with a dollar amount could help convince the insurer to pay.

With files from Jenn Blair

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About the Author

Rosa Marchitelli

@cbcRosa

Rosa Marchitelli is a national award winner for her investigative work. As co-host of the CBC News segment Go Public, she has a reputation for asking tough questions and holding companies and individuals to account. Rosa's work is seen across CBC News platforms.