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What the heck is “Diminished Value?” & What is the “17c Formula”?

Diminished Value (commonly referred to as “DV”) is the economic loss in a property’s value as a result of having been damaged.

Most insurance companies use a diminished value calculation known as “17c”. This diminished value calculation was developed by Infinity Insurance and first implemented in a court by State Farm in a Georgia class action lawsuit in which State Farm submitted this calculation method as a way to calculate diminished value for a large number of claims at once for ease. The court in that case (Mabry v. State Farm) approved its use–in that case–and as a result of the low value produced by the formula, most insurance companies have adopted it or a similar one.

Since then, this formula has been rejected by the Georgia Insurance Commissioner over any other case than the one in which it was approved. However, it is extremely favorable to insurance companies so they all quickly adopted it. They may not tell you they are using it, but it’s out there.

The 17c and most of the related formulas calculate diminished value by immediately placing a 10% cap on your claim.  So if your car is worth $30,000.00 this formula dictates that the maximum possible payout is $3,000.00, even if you sustained $20,000.00 in damages.  From there this formula places both a “damage modifier” and a “mileage modifier.”  The word “modifier,” is industry speak for reduction.  These modifiers chip away at your diminished value often leaving you with a a very low offer.

Consumers are often falsely led to believe that the 17c formula is the only applicable method for determining diminished value, when this is simply not the case. For those who contest the 17c-determined amount, insurers also place the responsibility on their insureds to “disprove” the 17c amount, which leaves claimants uncertain of their rights. Under the Mabry decision, however, the burden is on the insurer to establish that its valuation method is an “appropriate methodology and procedure”. It is important for consumers to know that they have the right to a second opinion and do not simply have to accept the dollar value resulting from the 17c formula. Nor should they, because it is almost never correct.

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