Many of you are familiar with third-party automobile inherent diminished value claims against the at-fault party in a collision. The advent of Carfax and other reporting agencies brought about a change in buying and selling cars both by dealers and via arms-length private transactions. Trade-ins make up a majority of transactions. Now that prospective buyers can view a car's accident history, they have a bargaining chip by which to request a discount. If a car had structural damage or air bag deployment, a dealer can't certify or even sell it so it goes right to auction. That car will bring about 50% of it's pre-accident trade-in value as a result.
When auto diminished value claims started trickling in, an insurance company created a formula based on numerical "modifiers" to assess diminished value of cars. The formula, known as Rule 17C, was soon adopted by insurance appraisers and independent appraisers alike. By manipulating the numbers, any result was possible. A landmark case was brought before The Georgia Supreme Court (against State Farm Insurance) who ruled that 17C was inequitable and should only be used when no other methodology was available. Appraisers still use these formulas and algorithms today, mostly because they make it simple to calculate diminished value - however accurately or inaccurately.
In 2008 I began preparing auto diminished value reports. To determine how much a vehicle has lost in value after accident repairs I query the sales managers at recognized new car dealerships. If my client lives in Orlando and owns a Lexus, we query Lexus dealers in North Florida. We describe the vehicle, the repairs it underwent and ask them typically how much less the car would bring in trade. These dealers provide answers out of courtesy as they are also informed that the subject vehicle is not available for purchase or trade. We obtain six dealer quotes and the average reduction in price determines the diminished value amount.
Judge Hardesty in Mobile, AL asked why we go to the trouble of securing six opinions instead of on or two. I answered "with six, I know that I'm in the ballpark." That case, along with many others, was a judgement for our client.
The problem is that there are no other independent appraisers who go to the trouble of securing professional opinions. The truth is that I created this methodology because it represents what a car owner will encounter in the real world. There isn't a more valid method that I'm aware of. Despite this, under Daubert, the chances of my testimony being excluded seems likely.
I have written articles that are part scholarly and part trade publishing. I'm also looking into how peer reviews work.
Thank you for taking the time to read my posts and answer my questions.