The Worth Of 'Diminished Value' Claims In Ontario – Update

In past blogs,1 my colleague, Patricia Forte, has tracked the case law on the state of "diminished value" claims in Ontario. A recent Superior Court case, Zheng v. Certas Home and Auto Insurance Co.,2 provides further insight as to the limited "value" of advancing a diminished value claim against the vehicle owner's own insurer.

By way of background, the concept of "diminished value" under review is the perceived loss of value of a vehicle following an accident-related repair. The substance of the claim is that an informed purchaser will pay less for a vehicle that has been in an accident than the same buyer would pay had the same vehicle not been involved in an accident.

In certain Canadian provinces, like British Columbia and Alberta, individuals can sue tortfeasors at fault for an auto accident for the diminished value of the vehicle. Diminished value claims in tort are permitted in some U.S. states, and some states permit individuals to claim diminished value loss under their own automobile policies.

Volkswagen recognized a (non-insurance related) subset of diminished value claims in its agreement to settle the lawsuit brought by the U.S. Department of Justice and the Environmental Protection Agency arising out of TDI (diesel) vehicles. Volkswagen agreed to buy back or, if approved, repair vehicles affected by the recall. In either case, Volkswagen agreed to provide owners with an additional "restitution payment" to compensate owners for the diminished value of their vehicles. As of October 26, 2015, the resale value of affected model cars in the U.S. was down by between 5% and nearly 16%, depending on models, as compiled from used auction prices by Black Book and Kelley Blue Book.3

Diminished value is a legitimate consumer concern. Some automobiles, such as pristine collector automobiles, may suffer significant diminished value in the resale market if they are damaged and then repaired.

Since Ontario introduced its "no fault" auto insurance regime in 1990, s. 263 of the Insurance Act4 has barred claims for recovery of damages to an insured's automobile, to its contents and for loss of use against anyone other than the insured's insurer. In order for s. 263 to apply, the following criteria must be met:

An automobile or its contents, or both, suffers damage arising directly or indirectly from the use or operation in Ontario of one or more other automobiles; The automobile that suffers damage, or in respect of which the contents suffer damage, is insured under a motor vehicle liability policy issued by an insurer licenced to undertake automobile insurance in Ontario; and At least one other...