Despite what insurance companies will tell you, diminished value does exist. For example, you may be offered up to 50% less by a prospective buyer (private or commercial) for a vehicle that has been damaged and repaired even if the repair was completed to a factory standard. In addition, if the same damaged vehicle were to be written off by an insurance company, they may deduct up to 40% from the final pay-out based on the prior damage. Diminished Value of Canada uses the same formula to calculate your lost value that insurance companies typically use in this scenario.

There are two types of diminished value to discuss, "Inherent" diminished value and "Repair-Related" diminished value. Inherent diminished value is described as the loss of value caused by the stigma of a history of damage and repair. Inherent diminished value is typically present even if the repairs of the damage were done to factory standard. If the repairs were not done to this standard however, repair-related diminished value results. This diminished value is caused by sub-par repair work and will result in an additional loss of value to your vehicle.

As described in the Alberta Standard Automobile Policy (SPF No. 1) (pg. 10, Section C), the insurer must agree to "...indemnify the insured against direct and accidental loss of or damage to the automobile...". Whether or not diminished value is a 'direct' loss has and will continue to be debated in and out of the courts, but history has shown insurance companies have a tendency to settle out of court rather than have the cases seen.

At the last Alberta Insurance Rate Board meeting in 2013, diminished value was a hot topic and was listed (pg.2, "Changes in Property Damage Claims Patterns") as one of the contributing factors to the proposed increase in insurance rates. After the meeting, insurance rates for all Albertans were increased by 5% (average $30 annually per insured). If an estimated calculation is performed applying this price increase to every insured in Alberta, estimated at 3,529,125 (based on Alberta vehicle registration statistics), this would result in an additional revenue of over $105,000,000.00 annually across the Alberta insurance industry. After this letter was released and was used to justify diminished value claims, diminished value's status as a contributing factor was contested by a follow up notice. Despite this follow-up notice, claims have continued to be settled out of court rather than having the cases heard in court.