The 17c diminished value formula, explained

How the formula works

1. Start with the vehicle’s value. The insurer takes a pre-accident value, usually from a price guide.
2. Apply a 10% cap. Ten percent of that value becomes the most the formula will ever allow.
3. Apply a damage multiplier. A figure from 0.00 to 1.00 chosen by the adjuster, in steps of 0.25. Severe structural damage is 1.00; no structural damage or only replaced panels is 0.00.
4. Apply a mileage multiplier. A figure from 1.00 down to 0.00 that falls as mileage rises.

The mileage multipliers commonly used with the formula:

An illustration of the arithmetic

Take a vehicle valued at $30,000 with 45,000 miles and damage the adjuster rates as moderate (0.50). The cap is $3,000. Multiply by 0.50 for damage and 0.60 for mileage, and the formula gives $900. Change nothing but the odometer to 100,000 miles and the formula gives $0, whatever the damage was.

These are illustrations of how the formula behaves. They are not estimates of any vehicle’s loss.

Where it came from

The formula grew out of Georgia class-action litigation in the early 2000s, after the Georgia Supreme Court held in State Farm v. Mabry (2001) that the insurer in that case had to assess diminished value on its policyholders’ physical-damage claims. Insurers needed a way to assess large numbers of claims, and the formula spread from there. Insurers in other states sometimes use it too. See Georgia diminished value claims for the cases.

Why it tends to produce low figures

• The 10% cap is not drawn from the market. Nothing in used-vehicle pricing limits the effect of an accident history to a tenth of the vehicle’s value.
• It ignores the vehicle. A luxury sedan, a work truck and an economy car of the same value and mileage get the same answer, although buyers treat their accident histories very differently.
• The mileage multiplier goes to zero. At 100,000 miles the formula says an accident history costs nothing.
• The damage multiplier is a judgment call. The adjuster picks it, and a small change moves the result by a quarter of the cap.

Is an insurer allowed to use it?

The formula is not required by any statute, and Georgia has not endorsed any formula as the measure of diminished value. A Georgia appellate court has held that an insurer’s reasonable reliance on the formula can protect it from a bad-faith penalty, which is a different question from whether the number is right. Outside Georgia the formula has no special standing.

How to answer a 17c offer

Ask the adjuster to send the calculation in writing, including the starting value and each multiplier. Then answer with market evidence: comparable vehicles with and without accident history, and an explanation of how your vehicle’s loss was measured. That is what a diminished value appraisal provides. Our methodology does not use the formula.