Oregon Supreme Court Upholds Right to Collect Diminished Value

The Oregon Supreme Court on Oct. 23 upheld an Appeals Court decision and ruled in favor of an auto policyholder who argued that his insurance company should pay not only for repairs, but also for the loss in value his vehicle suffered as a result of an accident.

The decision cited an earlier case finding that if repairs to a vehicle fail to restore the vehicle to its condition before the accident, then the correct measure of damages is "the difference between the fair cash value of the automobile before and after the collision."

The lead plaintiff, Jose Gonzales, was involved in an accident in 1998 that damaged his 1993 Ford pickup truck, which was insured by Farmers Insurance. Farmers paid the $6,993.40 repair costs, minus the deductible. Gonzales demanded that Farmers compensate him for the diminished value of the vehicle. However, the insurance company refused, arguing that it was responsible only for the cost of repairs.

Gonzales and another individual brought a class-action suit against Farmers in 1999, alleging that the auto insurance policy required Farmers to restore the vehicle to its pre-loss condition and to pay for diminished value. Farmers moved for summary judgment, arguing that the policy didn’t cover diminished value. The trial court agreed with Farmers and granted its motion.

Gonzales appealed the trial court decision, arguing that Oregon precedent required an auto insurer to fully repair a damaged vehicle and pay for any remaining diminished value, unless the insurance policy expressly excluded such coverage. This appeal cited two cases decided by the Oregon Supreme Court more than 60 years ago. The Court of Appeals ruled in favor of Gonzales -- a decision that the Supreme Court affirmed.

Much of the case focused on the true meaning of the word "repair," as it appeared in the policy.

The Supreme Court decision applies to insurance policies that do not explicitly exclude payment of diminished value.

Gonzales' attorney, Dan Gatti, told the Oregonian newspaper that his law firm also has class-action cases pending against three other major insurance companies -– Allstate, State Farm and Progressive – seeking payment for diminished value.

To access the court decision document, click here.