Vehicle Diminished Value Compensation: Insurance and Legal Procedure 

Traffic accidents often result not only in physical damage but also in a decrease in the vehicle’s market value. Even if a damaged vehicle is fully repaired, its marketability is negatively affected due to its accident history. This difference in value—referred to as diminished value—is legally compensable. In this article, we examine the legal basis, eligibility conditions, application procedures, and judicial remedies regarding diminished value claims under Turkish law, particularly within the scope of the Turkish Code of Obligations and the Highway Traffic Law.

What Is Vehicle Diminished Value?

Vehicle diminished value refers to the depreciation in the resale value of a car after an accident, even after proper repairs. Despite the restoration, the vehicle is now classified as “accident-involved,” which reduces its market appeal. This form of damage is compensable under the at-fault driver’s compulsory motor third-party liability insurance (MTPL).

Legal Grounds

Claims for diminished value are primarily based on the following statutory provisions:

• Article 49 of the Turkish Code of Obligations (TCO): The liable party is responsible for compensating the full extent of damages arising from a tortious act.
• Article 122 TCO: Damages that exceed direct material loss—such as diminished value—also fall under the scope of compensable loss (excess damage).
• Article 97 of the Highway Traffic Law: Prior written application to the insurer is a mandatory procedural prerequisite before initiating litigation.

Conditions for Diminished Value Claims

To be eligible to claim vehicle diminished value compensation from an insurance company, the following conditions must be met:

1. The claimant must not be entirely at fault in the accident.
2. The damage in question must be new, i.e., the relevant parts should not have been previously repaired.
3. The vehicle must be repairable, not declared a total loss.
4. The application must be made within two years from the date of the accident.
5. Mileage restrictions have been lifted—vehicles with over 165,000 km may also qualify for compensation.

Application Procedure Against the Insurer

The claim process involves the following steps:

1. Written application must be submitted to the liable party’s insurance company.
2. The insurer is legally obligated to respond within 15 business days.
3. If the response is negative or no response is provided, the claimant may:
   • File an application before the Insurance Arbitration Commission, or
   • Initiate litigation before the Commercial Court of First Instance.

The Insurance Arbitration Process

The Insurance Arbitration Commission offers a faster and cost-effective alternative to litigation. Claims are typically resolved within four months. If the disputed amount is less than TRY 15,000, the arbitral award is final and binding. For higher amounts, an appeal may be lodged.

The claimant must attach an expert report showing the loss in value and all supporting documentation.

How Is Diminished Value Calculated?

Diminished value is calculated based on the difference between the pre-accident and post-repair market value of the vehicle. The following criteria are taken into account:

• Age and mileage of the vehicle
• The nature and location of the damaged parts
• General depreciation coefficients (amortization rates)
• Technical findings in the expert assessment

Recent regulations stipulate that if the repair cost is less than 2% of the vehicle’s market value, the amount of compensation is limited accordingly. Therefore, obtaining a professional expert report is critical for success.

Litigation and Competent Jurisdiction

If the insurer rejects the claim or provides an insufficient payment, the claimant may file a lawsuit:

• Jurisdiction: The competent court is the Commercial Court of First Instance at the defendant insurer’s registered seat or the claimant’s place of residence.
• Statute of Limitations: Two years from the date of the accident.

A prior written application to the insurer is mandatory before filing a lawsuit.

FAQs

Who pays for the diminished value compensation?
The insurer of the at-fault party, under the compulsory traffic insurance policy, is responsible for payment.

Can rental or leased vehicles claim diminished value?
Yes. The owner (typically a leasing company) can claim compensation by proving the loss.

Who prepares the expert report?
Either an independent insurance expert or a court-appointed technical expert.

Diminished value is one of the most common and often overlooked types of damage resulting from traffic accidents. Drivers who are not at fault have the legal right to claim compensation through the at-fault party’s insurer. Since the process is both technical and time-sensitive, legal support is essential.

At Türeli&Ceylan Law Firm, we provide end-to-end legal services for your diminished value claims, including insurer correspondence, arbitration filings, and litigation. Contact us today to protect your rights.