Texas diminished value claims and first party liability

Diminished value claims are claims for the loss of market value in a vehicle after it experiences a car wreck. Diminished value is a subset of personal injury law that deals with car accidents. Insurance companies avoid paying on diminished value claims because they can add thousands to a claim. Sometimes insurance companies will tell you lies. Like they do not pay diminished value claims, or use artificially low calculations for your diminished value claim.

Third party liability in Texas

A key issue in diminished value claims in Texas is that a third party must cause the damage. That means some other person or entity must be negligently or intentionally responsible for the damage to your vehicle. Texas generally prohibits first party diminished value claims, meaning claims where you file a claim against your own insurance policy for damage you caused. Normally you will file a first party claim when you caused damage to your own vehicle. Regardless of whether you hit a stationary object or caused an accident with another vehicle. The Supreme Court of Texas ruled that insurance companies do not have to pay diminished value on first party claims. (Unless they contracted otherwise.)


On one hand it doesn’t make a lot of sense because your car will be worth less on the market if it has been in an accident regardless of whether you are the cause of the damage to your car or somebody else. The insurance policy covers property damage and diminished value is a financial loss based on the property damage.

First party liability issues

On the other hand, it makes a lot of sense not to allow people to file diminished value claims on their own insurance policy. There are two important policy considerations why the Supreme Court of Texas ruled this way. First, by reducing the ability for individuals to recover against their own policy for diminished value it encourages drivers to drive more carefully to avoid being the cause of an accident and losing value on their vehicle. Second, it takes away the ability for individuals to treat their vehicles like a savings account where an accident is the deposit slip.

If you could drive into a tree, have your insurance policy pay for the damage and then also pay the diminished value then you would see people in need of money (and there are a lot of us in this economy) purposefully getting into accidents to get the diminished value out of their car when they need money. Increasing the amount of accidents is something we all probably agree is a bad idea. We definitely don’t want people driving into other people to get some diminished value money to pay their mortgage for the next few months.

Hire a Texas personal injury lawyer

If you have had an accident and believe you are at fault you should not immediately call your insurance company. The other driver may be partially or fully liable for the accident. By filing against the other driver’s insurance policy you may be able to preserve your diminished value claim.

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