Generally, your insurance company has a duty to defend certain claims brought against you. This sounds like a situation that may fall into that category.
Diminished value means the difference in fair market value immediately before an accident and immediately after an accident. In other words, what would someone on the open market have agreed to pay for you car before it was damaged vs. what someone would pay for it after it was damaged. The difference in FMV is not always the same as the repair costs, but the amount of the repair costs can be used as one way to measure the difference in FMV. To give you an example - if your car is worth $10k before an accident and requires $2k to repair it, no buyer in his right mind would agree to pay you more than $8k to buy the car in its damaged state. In fact, the buyer might only agree to pay you $7k for the stigma of having a car that was in an accident. If your insurer has agreed to pay the other driver's repair costs, then it can argue that it has paid an appropriate amount to compensate for the loss in FMV. However, to avoid a lawsuit, your insurer may want to pay a little more than the repair costs to account for the stigma of a car that was involved in an accident.
This response is intended to be informational only, and not legal advice. This lawyer is licensed to practice law in the state of North Carolina, and is not licensed in any other state. If you are not from the state of North Carolina, you should consult an attorney in your state. Although a response is provided to the specific question, there may be other facts and law relevant to the issue. The questioner should not base any decision on the answer and specifically understands and agrees that no client-lawyer relationship has been established between the lawyer answering the question (or his law firm) and the inquirer.
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