Case Law Update: “Stigma” damages for car involved in a serious accident
Posted Monday, December 2, 2013 by Christopher L. Thayer
In a recent Washington Court of Appeals decision, Ibrahim v. AIU Insurance Company (No. 69554-1-1, November 4, 2013), Division I held that “stigma” damages to a vehicle are distinct from “diminished value” damages. In 2007, Ibrahim was involved in an automobile collision while driving his 2007 Lexus. The party at fault was uninsured. Ibrahim’s vehicle suffered significant damage, requiring almost $19,000 in repairs.
Ibrahim then submitted a claim to his own insurance company for “diminished value” to his Lexus, arguing that his vehicle was worth less as a result of the accident damage. “Diminished value” claims in Washington are defined as where “a vehicle sustains physical damage in an accident, but due to the nature of the damages, it cannot be fully restored to its pre-loss condition.” Examples include damage to frame of a vehicle, where the frame is straightened, but due to the damage it is weakened. “Stigma” damages, on the other hand, occur “when the vehicle has been fully restored to its pre-loss condition, but it carries an intangible taint due to its having been involved in an accident.”
Ibrahim submitted an expert report that acknowledged that, “this vehicle was fully repaired back to its pre-loss condition and there is no remaining physical damage after these repairs.” Ibrahim was not arguing that the repairs were incomplete or deficient, but rather that the vehicle was worth less having been involved in a serious accident. His expert report stated that the vehicle had decreased in value by almost $17,000 as a result of the collision, arguing:
The stigma that it has been in a “severe wreck” with substantial structural damage would surely turn away a potential buyer when they could purchase a similarly priced Certified Clean History 2007 Lexus….
The Court of Appeals ruled that Ibrahim’s claim was more properly characterized as a “stigma damages” claim rather than a diminished value claim. It acknowledged that Ibrahim was entitled to recover on such a claim against the at fault party. However, it ruled that Ibrahim’s insurance policy with AIU contractually limited AIU’s liability to policy limits of $25,000 and, having paid out its full policy limits to Ibrahim, it was not contractually obligated to pay Ibrahim additional amounts under his “stigma” claim.
Setting aside the issues in this case relating to insurance coverage and interpretation of policy language, it does make clear that “diminished value” and “stigma damages” are distinct claims. If you are in an accident due to the fault of a third party and your vehicle suffers substantial damages, you may wish to have an expert review the repairs to confirm whether: (a) the vehicle was repaired back to its pre-collision condition; or (b) the vehicle has decreased in value due to the fact that it was involved in a serious collision and had significant repairs.
For questions about these types of claims, please call Chris Thayer at (206) 340-2008.