Among the hot buzz words these days are these two: diminished value. What does it mean? Is it real? Is it perceived? What’s the story? Or … what’s the story from one collision repairer’s (my) perspective?
Are you interested?
You should be. It’s an issue that could dramatically affect our industry.
When I started in the collision repair industry in 1963, I’d never heard the words “diminished value.” It would be nearly another 35 years before the words came into common usage. At that time, attorneys were still somewhat rare, and most had enough work to do without creating work, just to have income. And, as a population or society, we still believed that we, as people, were responsible for our own actions and that much of what happened to us could be firmly placed on our own doorstep. When we spilled hot coffee on ourselves, we accepted the pain as the downside of being clumsy. We were still in the mode of believing that we were at least partially responsible for our own destiny and didn’t hold everybody else responsible for anything negative that happened to us. We accepted that some things that happened were actually the result of our own poor judgment.
I think you know what I’m talking about. You see it frequently with your customers. They’ll often buy the cheapest car they can find, earnestly trying to convince themselves that they got the “Mother Lode” deal of all time because they’re such sharp traders and skilled negotiators. It never occurs to them that their new gem was actually an escapee from the crusher that had been rebuilt from a conglomeration of marginally interchangeable recycled parts by people who never heard of I-CAR or ASE. By the time you get your hands on their bargain, after a minor collision, they look at you with a doubtful and distrusting eye when you explain reality to them. “What do you mean the clear peeled when you removed the door moldings and because of that, you had to paint the fender too?! This is crazy!”
They keep trying to squeeze that annoying little thought out of their brain that there was actually a reason they got that car for thousands under market value. And who cares if the airbag cover is all wrinkled looking?
These are the same people who question your integrity and expertise when you tell them you can’t guarantee what you did to their car because of previous substandard repairs.
“Why?” they ask.
“Because,” you tell them, “it would cost more than you paid for your car to fix it in a way we could guarantee. You see sir, there was a reason the car was so cheap. It would have cost more than it was worth to fix it properly prior to your purchase of it.”
Sound familiar?
But what about DV? Was there any DV associated with this automobile?
You bet there was.
But was the value diminished to the point of protecting the consumer? Was the price the bargain-hunting consumer paid for his “find” low enough to allow him to invest in the repairs necessary to return the vehicle without exceeding the market value for that car?
No. Ninety-five percent of the time, my experience has shown me that no way can it be done without somebody taking a loss.
And that’s what DV is all about – a loss in value.
According to Webster, DV means to make less or cause to appear less – dwindle. OK, but what about value? Webster says value is how much something is worth. So I guess it’s pretty safe to say that DV happens when you’ve made something worth less than it previously was. In the case of an automobile that’s been wrecked and improperly repaired, we’ve got a pure case of DV.
But depending upon whose attorney you talk to, it’s generally proposed that there are three types of DV. Two are fairly straight forward and relatively easy to understand. The third is more of a concept.
Now understand this before we go any further. I’m not an attorney – there were some things my mother and father just wouldn’t let us kids become. They had standards and if we didn’t want to be disowned (I didn’t), we adhered to those standards. I’m a collision repair shop owner who works on the line nearly every day. So the perspective I’ll give you on this issue is that of a shop owner and a technician who’s enjoyed laying hands on steel for 38 years. While I claim no legal expertise per se, I’ve been retained as an expert witness in a class action lawsuit involving DV. I can’t write about the specifics of that case, but I can tell you what I know about DV.
Let’s delve into this increasingly contentious issue.
Repair-Related and Insurance-Related DV
The two straightforward types of DV are repair-related DV and insurance-related DV. These are reasonably easy to understand.
Repair-related DV occurs when a collision-damaged vehicle is improperly repaired through ineptitude or fraud. The paint may be mismatched or improperly prepped and poorly applied. Body panels and parts may not align properly, and the repaired panels may appear wavy and have all the defects you can imagine, including scratches, pinholes, poorly defined lines, etc. You get the idea. The parts may be of poor quality also. The overall effect is one that’s less than it was before. In other words, it hasn’t been returned to preaccident condition in our commonly used parlance.
The result is that the repaired automobile can be worth less than it was in its preaccident condition. This can be as great or small as the severity of the repair, or it can be exaggerated or minimized as the case may be, by a seller or a buyer. It’s negotiable.
Insurance-related DV is a whole different beast, though it has some similarities to repair-related DV. Insurance-related DV can happen when the repairer forgets who owns the car and listens adoringly to the adjuster (you’ve got shoes older than some of them), an adjuster who’s scrambling to the top of the heap in his company, making a real name for himself. He’s the one who’ll tell you, “Our company doesn’t pay to blend the fenders when you put a front bumper cover on.”
Hey, gee, guess what you just allowed to happen?! Mismatched silver on those people’s nice car. Sticks out like a sore thumb too, doesn’t it? Aren’t you proud that you let that expert talk you into that? To top it off, they live next door to your shop, so you get to see it drive by every day. You know what? Turning down that job completely would have been better than this ugly picture.
And there’s lots more insurance-related DV that occurs. You know most of them: repairing parts that should be replaced, using parts or glass of less quality than was previously on the automobile before the accident. All the things that overzealous insurance industry people do to save money. Every adjuster is admonished that their company is obligated to return the customer’s vehicle back to pre-loss condition. They’re also admonished to reduce claims costs. If a repairer isn’t diligent or an adjuster prudent, insurance-related DV can happen.
Inherent DV: A Lawyer’s Dream Come True?
The third type, in the attorney’s briefcase, is called inherent DV and is a mystical, vapor-like concept, according to me and probably the insurance industry, although I can’t speak for them. (They don’t even speak for themselves on this issue, unless it’s through their corporate attorneys.)
The concept is that no matter how well the collision-damaged car is repaired, it suffers inherent DV because it can’t be repaired back to pre-accident condition. This really raises my dander because I don’t believe it. I truly don’t believe the contention that a properly repaired automobile is worth less by virtue of the fact that it’s been repaired.
Is the car exactly the same as it was prior to the accident? No … but it might be better. How many times have you repaired a vehicle and then said to yourself, “That wreck was the best thing that ever happened to that car,” and it literally was? Often, customers don’t even recognize their car sitting in the parking lot when they walk by it. Most shop owners who are honest and concerned for their welfare and that of their customers subscribe to philosophy of “exceed the customer’s perceived expectations.” We do this by honestly improving the vehicle beyond its pre-accident condition.
Still, the perception exists that no matter how well we repair a vehicle, it’s not as good as it was before. Why? Because if you have a choice in purchasing two identical used cars (except for the fact that one had been repaired), you’d probably choose the one that you knew hadn’t been repaired out of fear of the unknown – you don’t know who repaired it, how well they repaired it, how severe the accident was, etc. While in reality the finish on the repaired car may be more durable and of better quality than the OE, along with rustproofing procedures, not to mention better alignment gaps on the body and an accurately aligned suspension. While I admit that this may not always be the case, on the other hand, it may.
A customer of mine recently took his new Ford that had been rear ended and needed a tailgate and bumper to his friendly drive-in claims insurance office. The adjuster told him there was really no need to blend the bed panels. “Besides,” she said, “the OEs have the best paint in the world.” My customer went ballistic! He told her that he had just traded in his seven-year-old truck and the only paint that was still on it was the part that we painted right after he bought the truck new and was in an accident. He told her we warranted our work for the life the vehicle, as long as he owned it. She shut up and coughed up, after we took photos of the job in process.
When you warranty your work beyond the existing warranty on the car, if it even has one, are you diminishing the value? When you rustproof your repair areas where they had no rust proofing, are you diminishing the value? When you provide a repair that’s undetectable under close scrutiny, have you diminished the value?
We’ve spent years honing our skills and training continuously, to provide an excellent product for customers. Granted, I don’t inspect the work that’s being done by other shops, but I can say, for the most part, that the majority of the repair work I see that comes into my shop as part of another accident is of a higher quality than in the previous two decades. Part of this is due to superior quality paint, training availability and better automobiles. (Lousy work is more noticeable on a BMW than a Geo for some reason.) There’s no doubt in my mind that pay methods, greed and fraud are serious contributors to repair-related DV, just as the never-ending drive to reduce costs at the expense of quality contribute to insurance-related DV. These are real. There is no doubt. But if it hadn’t been for attorneys switching from tobacco to insurance, would inherent DV be an issue?
So now a few opportunists come along and malign our capabilities and truly try to make something out of nothing. They’ve portrayed this as unclaimed money. But is it due to them for any real reason other than their claim?
What DV Means to Repairers
DV has changed our industry. Most insurance companies don’t like to talk about it, but I have noticed less argument to pay for proper repairs. I also think there are more reinspections being done these days to assure quality. In the past, our customers were the sole judge of quality and, frankly, in talking to several reinspectors in the State Farm vs. Mabry Georgia class action case, customers aren’t necessarily good judges of quality. A lot of repairers had the attitude that the job was good as long as the customer didn’t complain. Well, they didn’t complain but a lot of that reinspected work was shoddy. Not good. Not good for anybody at all.
I don’t believe that the effect of DV has fully hit our industry yet. The insurance industry seems to be busy defending itself and strategizing a competent response to the issue rather than raising rates. When they do, we’ll be among the first to know.
My prediction? DV could have a major effect on our industry by lowering the threshold at which a vehicle would total out. Adding DV to the cost of repairs and rental car expenses would lower the amount of repairs that a vehicle could have performed on it before it’d be totaled out by the insurance industry. Thus, less cars to fix.
What should shop owners do? Strive for an undetectable repair. This should be the goal when you start the job. If you can’t see it, you’ve achieved the goal.
If you do the best job you can (match the underbody textures and sealers, ensure adhesion of non-exterior finishes, match the gloss level of underhood and deck lid areas, match the colors on non-exterior finishes), your intentions regarding quality work probably won’t be questioned. Do the best you can. It’s good for you, and it’s good for your industry.
How does a repairer with a direct-repair relationship maintain quality in the face of rising costs and increased pressure for concessions?
Remember who the customer is and represent the customer’s best interests. When you do this, you protect:
- Your customer’s best interest.
- Your own welfare.
- Inadvertently, the insurer.
The customer should always come first. When you do this, the system works the way it should. But when the repairer puts the insurer or himself in front of the customer, DV can – and probably will – occur. We can blame it on anybody we want, but the customer entrusted his vehicle to us so it’s up to us to repair it properly. If we followed the simple axiom, “The customer comes first,” DV wouldn’t be the issue it is today.
Writer Mike West, a contributing editor to BodyShop Business, has been a shop owner for almost 30 years and a technician for almost 40 years. His shop in Seattle, Wash., has attained the I-CAR Gold Class distinction and the ASE Blue Seal of Excellence.
|
My Role as an Expert Witness As with many issues, litigants are often several layers removed from the actual nuts and bolts issue in dispute. This is why experts who – supposedly – are involved in the day-to-day issue at hand are retained. The attorneys, of course, rarely have the knowledge necessary to actively pursue or defend a DV case. Therefore, it’s necessary for them to retain experts who can persuasively move their particular cause forward. This is important because it’s often this expert testimony that convinces a judge or jury one way or another. I can’t speak specifically in regard to any case I’ve been involved with for legal reasons, but I can comment in a general way. In preparation, I reviewed other DV cases to determine the plaintiffs’ point of view. In the cases I reviewed, the plaintiffs’ experts weren’t collision repairers. So it wasn’t like watching TV where you have one psychiatrist testifying against another. This wasn’t the way it happened. The plaintiffs often used an automotive engineer, an automobile appraiser (ACV) and a statistician to move their point of view forward, and the defense (namely the insurers) used someone to counter the oppositions point of view. In my case, it was me, a collision repairer with day-to-day actual repair experience and knowledge. The plaintiff’s claim was that no matter how well a damaged vehicle is repaired, it’s not humanly impossible to return it to as good a condition as it was prior to the accident. I don’t believe that at all. I’m proud of what I, as a technician, can do, as well as what other highly skilled and qualified collision repairers do every day. Therefore, I was perceived as a good expert witness for the defense. I know I’m over simplifying it, but that’s the crux of the issue. While our industry may not be legally involved in the majority of these DV class action cases, our reputations as experts at what we do and as legitimate collision repair people is on the line. Anyone who believes otherwise is sadly mistaken. |
