By: Michael Alexander, JD

Let’s say you’ve been rear-ended. The accident isn’t your fault. And your insurance company has paid to have your car repaired, just like new. You think everything is fine until you go to trade your car in two years later and the dealer tells you he can’t pay market value. He says your car has “diminished value” based on the assumption that it will never be as sound as it was before the accident, in spite of the high quality repair.

You’re feeling ripped off. If your car was worth less after repair, why didn’t your insurance company compensate you for your full loss – the cost of the repair and the depreciated value of the car? That is a question that will have to be asked in Ontario, where the concept of diminished value has yet to be recognized by the courts. However, the British Columbia Supreme Court has applied the concept in two recent cases: Cummings v. 565204 B.C. Ltd. (2009) and Signorello v. Khan (2010).

As a result of these rulings, a BC plaintiff, seeking damages for diminished value or “accelerated depreciation,” can sue the driver who caused the damage, as well as his employer, if the driver was using a company vehicle in the course of his employment. The BC courts have used a basic common law tort principle, which holds that someone suffering property damage deserves to be compensated for the full value of his or her loss. To sue the party-at-fault, the plaintiff must tender solid evidence that dealers or appraisers would depreciate the car due to the accident.

Since these BC cases were decided based on Anglo-Canadian common law, which generally applies to all provinces, these cases are potentially applicable in Ontario. A diminished value case is waiting to happen in our courts.

Bottom line: You should consider suing the negligent party, and perhaps even your insurer, for diminished value, which could be a substantial sum if you own an antique or high-end luxury vehicle.

Michael Alexander, Lead Strategist and Innovation Counsel at BT10 Networks, defeated State Farm U.S. at the Supreme Court of Canada in 2005, saving Canadian consumers hundreds of millions of dollars in new insurance premiums. For further information, contact him directly at [email protected] or see the firm’s website at www.bt10networks.com