Insurer recovering reduction in vehicle value

aroominyork

A few months ago I was in a small accident - the other party's fault but not provable. My insurer, LV, decided to split costs with the other insurer (only my car was damaged). The other insurer is now not responding so LV has passed it to their lawyers who have issued legal proceedings against the other driver. The repair cost about £1000 and I paid £300 excess. The lawyers say they are seeking £2196.14 for reduction in vehicle value and £300 for my excess. I asked who would keep this 'reduction in vehicle value' and they replied "we are recovering the reduction for LV".

This seems strange. Why would the insurer receive anything for the car being worth less (which it probably isn't) or is this just the way insurers and courts handle these issues to justify a worthwhile sized claim?

Grey_Critic

You need to ask LV. YOU own the vehicle the only time the value comes into it is if they were writing it off

Aretnap

I'm guessing that the repairs cost £2196.14, and that's what they're claiming for. (Or possibly 2 X £2196.14 plus your excess).

Technically a claim for property damage is a claim for the reduction in value that your property suffered as a result of the accident. In other words the difference between what your car would have sold for five minutes before the accident, and what it would have sold for five minutes after the accident. The repair cost is generally accepted as a proxy for that number because a £10000 car that needs £1000 of repairs is probably worth... about £9000.

That's what they mean by reduction in value - they don't mean any residual reduction after the repairs have been completed (which should be zero if they have been done to a good standard).

Added: Silly me, I missed that you said the repairs cost about £1000. However an interesting proviso of the fact that the claim is technically for loss in value is that the insurer can claim more than the actual repair cost. A court case a few years ago ruled that the loss in value should be measured as the reasonable market cost of the repairs - not necessarily the amount that was paid. Insurers put a lot of business the way of garages so are in a position to negotiate better prices than you or I. But if the bodyshop would have charged you as a walk up customer £2196.14 then that's what the insurer can claim - even if they actually paid closer to £1000. 

https://www.clydeco.com/en/insights/2013/12/coles-v-hetherton-ors

DullGreyGuy

aroominyork said:
The repair cost about £1000 and I paid £300 excess. The lawyers say they are seeking £2196.14 for reduction in vehicle value and £300 for my excess. I asked who would keep this 'reduction in vehicle value' and they replied "we are recovering the reduction for LV".

This seems strange. Why would the insurer receive anything for the car being worth less (which it probably isn't) or is this just the way insurers and courts handle these issues to justify a worthwhile sized claim?

Did you see the final invoice? Many people see the quote which is often £1,000 plus parts at List Price and only see the labour charge. Its very possible the full invoice paid was £2,196

When an accident happens, what you are technically entitled to claim for is the diminuation in value. The courts have previously decided that rather than debating what your car was worth pre-accident and then what its worth with a dented wing (or whatever the damage was) that the cost of repair is an appropriate proxy for the reduction in value. 

Insurance claims are a matter of evolution... insurers and counterparties adjust their wordings and processes to maximise the recovery prospects as cases happen each year

rigolith

This is a very interesting area of law, because it means that if you deal with the third party insurer and manage to get a good deal on the repair, you can pocket the difference between that and the "reasonable market rate".

This also gives you a good counter argument if the TP insurer tries to force you to use their cheaper garage. You are under no obligation to minimize their repair costs, and can claim the market rate that you would pay, not their favourable rate.

A related argument is for diminution of value of the car even after it had been repaired, because many people will not be willing to pay as much for a car that has been in a major accident. There the loss of value may be considerably more than the cost to repair.