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Car Insurance for Texas drivers

David Surles, Contributing Author

(Edited 9/19/2013)

The value of a physical damage loss on a personal auto policy is determined by the Limit of Insurance section in Part D (Coverage for Damage to Your Auto). That section says the company is liable for the smallest of the following amounts: (1) the actual cash value of the property; (2) the amount necessary to repair or replace the property with other of like kind and quality; or (3) the amount stated in the Declarations. These measures of loss don’t necessarily indemnify an insured for the full amount of financial loss, however, because sometimes a vehicle isn’t worth as much after a loss even if it has been repaired to its pre-loss condition. The issue of whether a policyholder can recover the “diminished value” of a vehicle under Part D was decided long ago. In 2003, the Texas Supreme Court decided in the case of American Manufacturers Mutual Ins. Co. vs. Schaefer that Part D does not obligate an insurer to pay for diminished value, because the coverage is clearly limited to the lesser of the three amounts shown in the policy. That ended the discussion.

But wait, there’s more! There is another way to get paid for damage to a covered auto on the PAP. The uninsured motorists property damage coverage can be used if the vehicle is hit by an uninsured motorist. Can a policyholder recover diminished value under this section of the policy? The Fort Worth Court of Appeals said “yes” last month in the case of Notebloom vs. Farmers Texas County Mutual Ins. Co. The court allowed recovery for the cost of repairs, loss of use and diminished value, as calculated on a comparison of the value of the vehicle before the accident and after the repairs.

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