When a Canadian driver gets into a car accident, they’re entitled to an insurance claim for “direct losses” — e.g., enough funds to restore the car back to its pre-accident condition.
But, few insurers will compensate drivers for long-term financial damages. For many drivers, a prominent concern is how much money they’ll lose once an accident has diminished the value of their car, and they eventually decide to sell.
Diminished value payouts rarely get approved in Canada, and when they do, they’re typically for newer and luxury vehicles in cases where the vehicle owner is “100% blameless for the accidents,” Gary Cogbill, who specializes in appraising vehicles, told the CBC on Sunday.
But in several states in the U.S., diminished value payouts are a standard part of auto insurance policies. In Georgia, insurers are required to hand over a payout even if a driver hasn’t claimed it. Meanwhile, Mississippi, North Carolina, and New York count diminished value as a “direct loss”.
This is not the case in any province or territory in Canada.
“Auto Insurance policies are designed to cover what are known as direct losses,” said Steve Kee, from the Insurance Bureau of Canada. “The responsibility of the insurance company is to put the damaged vehicle in the same condition that it was in prior to the accident causing the damage.
“Any reduction in the value of that vehicle is regarded as an indirect loss and as such is not contemplated to be covered under the policy.”
When a vehicle incurs more than $2,000 in damages from a single accident, sellers have to disclose that information to buyers. Companies like Carproof and Carfax also provide vehicle history reports describe repairs, which buyers can access. This information will almost definitely affect how much a buyer is willing to pay for the vehicle.
That means whenever you get into an auto accident that has to be disclosed to buyers, you’ve lost a chunk of that car’s value — forever. Not only do you have to live with that punishment, but your insurance rates will also go up as a result.
Some Canadians are deciding to take matters into their own hands. When Ray Signorello, a driver from West Vancouver, saw $26,000 in damages after an airport valet parking employee damaged his $200,000 Mercedes-Benz convertible, he took ICBC to court and asked for $16,000 to make up for the diminished value.
“If a car gets into an accident, that's part of the history of the car. So it only makes sense,” he said.
“If I ask you, which car would you rather pay more for? A car that had no accident, or a car that had, in this case, a severe accident? I think most people's answer would be, 'I'd take the car that didn't have an accident.”