Reimbursement for Diminished Value

How is a Harley Davidson or a Ford GT similar to a violin?

If you have a Harley Davidson or other motorcycle which is desired by collectors and would be worth less after an accident even with proper repairs, you may now be entitled to reimbursement for the diminished value after an accident.

Reimbursement for the diminished value after an accident would be paid in addition to the cost of repairs even if the repair restored your motorcycle to look like its pre-accident condition.

In Franklin Corp. v Prahler (Dec. 10, 2011), the plaintiff, Franklin Corp. sought to recover $52,000 which included diminished value of a Ford GT which was struck by the defendant.  Although State Farm estimated that the cost of repairs to be $3,484.35, Franklin claimed that the Ford GT would be worth substantially less money after the repair.

The Appellate Division of the Fourth Department in New York concluded that the plaintiff is entitled to recover the amount of the diminished value in addition to the cost of repairs because the Ford GT is appreciating in value.

The Appellate Division compared the Ford GT to the plaintiff’s violin in Schalscha v Third Ave. R.R. Co., an 1897 case in the Appellate Division, First Department (19 Misc 141).  In Schalscha, the court held that the plaintiff could recover not only the cost to repair the damaged violin but also the amount of its depreciation in value after the repair.

With regard to the Ford GT, the Appellate Division stated:

“Where a vehicle, like any other piece of personal property, has increased in value and is subsequently damaged by the negligence of the defendant, the plaintiff should be entitled to recover the cost of that diminution in value. Otherwise, the plaintiff will not be made whole.”

The Appellate Division also stated:

“Here, plaintiff submitted evidence that, even if the GT was fully repaired, the mere fact that it had been in an accident had diminished its market value by $40,000 because it would no longer be in its “original factory condition.”

The ruling in this case allows for recovery of both repair costs and diminished value to a car or motorcycle which:

  1. Is damaged by someone else’s negligence;
  2. Appreciated in market value from the time it was obtained; and
  3. Has sustained proven diminished value.

If the motorcycle’s original pre-accident market value has depreciated, then reimbursement will be limited to either the reasonable cost of repairs or the motorcycle’s diminished value, whichever is less. However, my belief is that an argument could be made that this ruling should also apply to a motorcycle which has depreciated but has a market value after repairs that is less than the market value of the same vehicle without repairs.

Depending upon the demand for Harley Davidson’s, the ruling could even apply to a new Harley-Davidson but would certainly apply to any collectible motorcycle that has sustained diminished value because of an accident.