Invoking the appraisal clause for your diminished value claim
If you have been involved in an accident, you may have a diminished value claim for your vehicle, so long as you were not the at-fault driver. Diminished value claims are often neglected, as most individuals are not aware of their right to make a diminished value claim.
Essentially, diminished value claims provide you with an avenue to seek reimbursement for the lost fair market value of your vehicle after it has been involved in an accident. Simply put, diminished value is the difference between the fair market value just before the accident and the fair market value after repairs.
There are two key ways to try to resolve your diminished value claim with an at-fault driver’s insurance company before you would file your claim in court: 1) negotiating with the adjuster or 2) invoking the North Carolina appraisal clause. This article will focus on the latter action, invoking the appraisal clause.
What is the North Carolina Appraisal Clause?
In North Carolina, whenever the damages to your vehicle are greater than 25 percent of the fair market value, then the notation must be made on your title or in writing when that vehicle is sold. With this being said, the North Carolina legislature established a statute that provides an individual with an avenue to seek compensation for their diminished value claim. See NC. Gen. Stat. § 20-279.21 (d1). Essentially, NC. Gen. Stat. § 20-279.21 (d1), known as the appraisal clause, provides you with a means to have your diminished value claim resolved with very little involvement on your part.
By invoking the clause, you place the diminished value claim in the hands of third-party appraisers. This can be beneficial because neither you nor the insurance company is involved in the negotiating process.
The certified appraisers do all the legwork. Once you invoke the clause, two appraisers, one of your choosing and one of the insurance company’s choosing, will attempt to come to an agreement as to the value of the diminished value claim. Therefore, you will have very little involvement in the process other than hiring an appraiser of your choosing.
When can I invoke the clause?
Pursuant to NC, Gen. Stat. § 20-279.21 (d1), you can invoke the clause under two different circumstances:
If the disputed amount of diminished value between you and the at-fault party’s insurance is greater than $2,000.
If the disputed amount of the diminished value is greater than twenty-five percent (25%) of the fair market retail value of the vehicle prior to the accident (based off of NADA – National Automobile Dealers Association pricing guidebook).
How do I invoke the clause?
Once you have determined that your diminished value claim relates to one of the two circumstances above, you may invoke the appraisal clause. The clause must be invoked in writing. This can be done by mailing a letter to the adjuster assigned to your claim, stating that you wish to invoke the appraisal clause in accordance with NC. Gen. Stat. § 20-279.21 (d1). Also, be sure to include your claim number and list which circumstance your situation falls under regarding the disputed amount of diminished value.
Important Note: Pursuant to the statute, you must provide the insurance company with the contact information of the appraiser you choose within 20 days of the clause being invoked. With this being said, it is a good idea to include this information within the letter used to invoke the appraisal clause.
How does the appraisal clause work?
Once you have invoked the appraisal clause in writing, both parties must select a competent and disinterested appraiser. Once you have selected an appraiser, you must provide the other party (the insurance company) with the appraiser selected within 20 days after making the written demand. As previously mentioned, it may be a good idea to include this information in the written demand invoking the clause.
As soon as the appraisers are chosen and both parties receive the appraisers’ information, the process falls into the appraisers’ hands. Typically, both appraisers will need to inspect the vehicle. Once they do so, each will create their own diminished value reports and then will try to come up with an agreement as to the diminished value amount.
If the two appraisers cannot come to an agreement, they will hire another third-party disinterested appraiser to act as an umpire. If the appraisers cannot agree upon an umpire within 15 days, either you or the insurance adjuster may request that a magistrate, who is a resident in the county where your vehicle is registered or the county where the accident occurred, select the umpire. Once the umpire is selected, the appraisers will then submit their differences to the umpire. The umpire will prepare his or her own report determining a reasonable diminished value amount; however, the diminished value amount cannot be higher or lower than the determinations of the appraisers.
For example, if your appraiser values the diminished value claim at $4,000 and the appraiser for the insurance company values the claim at $3,000, then the umpire cannot value the claim lower than $3,000 or higher than $4,000. In other words, his value must fall with the $3,000-$4,000 range. With this being said, the umpire is able to accept a valuation of one appraiser over another. Thus, the umpire may decide to accept one appraiser’s valuation in full.
Once either an agreement is reached between the two appraisers or the umpire creates his report, the determination must be presented to both you and the insurance company. Once you have received the diminished value amount, you have 15 days to either accept or reject the determination.
Failure to reject the determination within the 15 days will be considered an acceptance and will become binding. A rejection must be sent to the adverse party (the insurance company) formally stating that you reject the appraisal clause diminished value amount.
IMPORTANT NOTE: Again, if the report or amount is not rejected within 15 days of the receipt of the diminished value determination, the report or amount will be binding for both you and the insurance company.
What is an appraiser?
Essentially, an appraiser is someone who is certified by the state to give a proper valuation of your vehicle. Typically, most appraisers are able to provide you with the fair market value of your vehicle. In a diminished value claim, an appraiser will determine the fair market value of your vehicle both before and after the accident, and the difference will result in the diminished value amount that you may be entitled to claim.
Who pays for the appraiser?
Each individual party is responsible for covering the cost of their appraiser. In other words, once you invoke the clause, you will be responsible for paying the appraiser you choose to handle the process. If an umpire is needed, then both you and the insurance provider share the cost of the umpire equally.