What is the Before and After Method of Measuring Damages?

The rental contract holds you responsible for all loss or damage to the vehicle despite fault. This includes the cost of restoring the vehicle to the condition that it was in prior to the accident.

Sometimes repairs alone will not put the vehicle into the pre-accident condition. When a vehicle is heavily damaged but is not a total loss the most effective way to measure all of the damages is to take the value of the vehicle immediately prior to the accident less the value of the vehicle immediately after the accident. This is called the before and after method of measuring damages.

Large repairs take a very long time and often include large supplements. Therefore the original estimate does not indicate what it will really cost to fix the vehicle.

When a vehicle is severely damaged, it is often difficult or impossible to find all of the damage before any repairs are started. Once a vehicle is torn down, often hidden damage is found. This will generate supplements that will increase the costs of repair. Sometimes the rental agency has started to repair a vehicle and then finds extensive additional damages and realizes too late that they should have totaled the vehicle in the first place. Large repair jobs are not always done completely the first time around. The shop may have to make adjustments and the rental agency may find more damage or difficulties after the car is returned. Some large repairs will require two or three trips in to the shop. Likewise, big repairs take a very long time. If the rental agency has to put a car in the shop for four to six weeks, not only are they losing the opportunity to use the vehicle, but they are forced to make payments of the unusable vehicle while it is in the shop. Lengthy repairs are very costly and the rental agency wants to avoid these types of situations.

Additionally, if the vehicle requires frame repair, then it is no longer safe to operate. The frame is a structural part of the automobile. If it is cut or bent in any way the steel is no longer as strong as it was at the time of construction. The manufacturer indicates that a straightened frame is no longer in line with factory specifications and they can not guarantee its safety. When the frame is out of alignment, even by the smallest fraction, the rest of the car will also be out of alignment. This can cause extensive damage and injury if there is a subsequent accident. The rental agency can not take that risk.

Another reason not to repair rental vehicles is if they are a 'program vehicle'. Rental agencies can buy vehicles from manufactures on a special program. They purchase so many cars at a time and the manufacturer guarantees that they will buy back the vehicles from the rental agency. There are many rules to the program. For instance the vehicles can only have so many miles on them. The vehicles have to be kept for a certain period of time, and most critical to this discussion, the vehicles can not have sustained damages over a certain amount usually $2,500. If the vehicle you rented and damaged sustains $5,000 worth of damage not only can the rental agency not turn it back in on the program but they must pay off the car immediately.

The proper of measure of damages is the value of the vehicle immediately before the injury less the value of the vehicle immediately after the injury.

The before and after measure of damages is used to provide an equitable relief to injured parties. When a vehicle is a total loss, the injured party is given the fair market value of the vehicle. This puts him in the same position he was before the injury. When a vehicle is damaged less than its total destruction, the vehicle is repaired to make the owner whole again. But if repairs will not restore the vehicle it to its prior value, the owner is not made whole by the repair cost alone. The law will not treat these types of injuries differently in terms of recovery. In all instances the vehicle must be returned to its pre-accident value or an inequity would exist. One party would be made whole only because his injury was more severe than the other. It is an injustice to not completely restore the lesser-damaged individual.

The Restatement of Torts 2d § 928 sets forth the standard for measuring harm to chattels. "When one is entitled to a judgment for harm to chattels not amounting to a total destruction in value, the damages include compensation for (a) the difference between the value of the chattel before the harm and the value after the harm or, at his election in an appropriate case, the reasonable cost of repair or restoration, with due allowance for any difference between the original value and the value after repairs, and (b) the loss of use."

The general rule of before and after value was intended for heavy damage which is repairable but which significantly decreases the value of the vehicle. Clearly, when a new vehicle sustains damage which exceeds one-half of its value, it will never recapture its prior value. Repairs may outwardly give the vehicle its prior appearance, but close observation will always reveal its compromised character. Because we are required by law to disclose the existence and extent of prior damage, even the stigma of damage alone, especially damages over $7,000 for a vehicle valued at $14,755, will significantly reduce the value of this vehicle. Any denial is either profound display of ignorance of vehicle valuation or blind posturing for the sake of the bottom line. The application of the before and after rule was intended for just such a hit.

Below is a sampling of case law throughout the county which addresses the proper measure of damages for injury to property.

The dramatic effect of the diminution claim is illustrated in Farmers v. R.B.L. Investment Company, 675 P.2d 1381 (Ariz. 1983). In that case, the court stated that in "major accidents", the proper measure of damages is the difference between the value of the vehicle before and after the accident. Where the injured party has elected to repair the vehicle, it may then recover the diminished value. In Farmers a dealership's automobile was damaged. The vehicle was worth $16,415. The repairs cost $3,122.63. The dealership then sold the vehicle for $13,500. The court awarded the difference in value which amounted to $2,915.

Farmers further supports the before and after measure citing Mesa City v. Lesueur 21 Ariz. 532, 190 P. 573, 576. "The measure of damages for injuries to personal property less its destruction is the difference in the value of the property immediately before and immediately after the injuries." The argument that the court supports is clearly outlined by the appellant;

"It is very clear that an automobile loses value when it is damaged. The appellant in Farmers points out the common sense realities of diminution of value. "an automobile that has been in a major accident is worth less than an identical automobile that has not been in an accident, suggesting that one need only examine their own biases as a consumer to acknowledge a disparity in the price they would be willing to pay for either vehicle. They further argue that where the choice is between an automobile that is "new" versus one that was new but was in an accident and is now repaired, the disparity is magnified."

The law in Arkansas provides that when personal property is damaged, the measure of those damages is the difference in the value of the property immediately before the injury and immediately after the injury. See Ark. St. 27-53-401. The reasoning behind this rule is that sometimes a vehicle can be repaired, yet still lose some of its value due to the damages.

Colorado case law supports both the concept of diminution of value and before and after as a measure of damages. Airbore, Inc v. Denver Air Center, 832 P.2d 1086 (Colo. Ct. App. 1992) sets forth the basis for diminution of value in Colorado. An injured party is entitled to be made whole by the tort-feasor. If a vehicle sustains damages, which after repairs can not be put back to its prior condition, then the owner has not been made whole. The court unequivocally states, "In addition to the reasonable costs of repairing the property, the plaintiff is entitled to the decrease in market value to the property as repaired."

Duggan v. Board of County Commissioners of the County of Weld, 747 P.2d 6 (Colo. Ct. App. 1987) explains that the proper measure of damages for an automobile damaged in a collision is the difference between the value of the vehicle immediately prior to the accident and the value of the vehicle immediately following the accident.

The general rule for the measurement of damages in the state of Ohio is the difference between the before and after accident values. See, Allstate Insurance Company v. Reep, 454 N.E.2d 580 (Ohio Appraisal Fee. 1982); Robbins Motor Transportation, Inc. v. Key GMC Truck Sales, Inc., 381 N.E.2d 1329 (Ohio 1978); Pettijohn v. Clark, 277 N.E.2d 455 (Ohio App. 1971); Falter v. City of Toledo, 158 N.E.2d 893 (Ohio 1959), and Hayes Freight Lines, Inc. v. Traver, 73 N.E. 2d 192 (Ohio 1947). Nothing in any Ohio case law makes repair the exclusive remedy or mandates the cost of repair measure. Cost of repair is a fine alternative when it makes the claimant whole. When it contravenes that most basic of all principles of tort, which is to indemnify the injured party, it is an improper measure.

"The damage sustained by an automobile in a collision may be established by showing the reasonable cost of repairs necessary to restore it to its former condition although the general rule is that the measure of damages to personal property is the difference between its market value immediately before and immediately after the injury. This rule is subject to the limitation that the cost of repairs must be less than the diminution in market value due to the injury. The plaintiff should not benefit by the loss. Where the automobile is totally destroyed, the measure of damages is its reasonable market value immediately before destruction. There can be no recovery beyond such value for mere repairs. Falter v. City of Toledo, 158 N.E.2d 893 (Ohio 1958) citing to Gass v. Agate Ice Cream, Inc., 190 N.E. 323, 324."

It is well-established Oregon law that the proper measure of damage to a vehicle is the difference between the vehicle value before and after the accident. See, Costley v. Holman, 68 P.2d 614 (Or. App. 1980), Powell v. Hartman, 587 P.2d 506 (1978); State v. Crace, 554 P.2d 628 (Or. App. 1976). That effectively resolves the issue, for that is the measure of damage by which the responsible party is required to adjust this claim under Oregon law. The rationale behind the before-and-after measure of damage is that mere repairs will not make the injured party whole because its property is no longer worth what it was. The rental agency has the right to be put back into the same situation that it was in prior to the accident.

In the case of Standard Accident Insurance Co. v. Richmond 297 S.W. 879, the court looked at the standard for repairs. "Appellant contends that it was only required to pay the cost of restoring the car to substantially the same condition it was in before the injury. That is true, if the words 'substantially the same' mean a condition which made the car equal in value to what it is was before the injury." The theory of indemnification requires that Avis be made whole by giving the value of what was lost. The measure of before and after accomplishes this task by looking at the value of what the injured party had immediately prior to the harm and then evaluating the value of what they had immediately following the harm inflicted upon them.

The court in Northwestern National Insurance Company v. Cope, 448 S.W. 2d 717, similarly stated that "It would not be restored to the same condition if the repairs left the market value of the automobile substantially less than the value immediately before the collision."

Pasadena State Bank v. Isaac, is the defining case on the issue of diminution of value in the state of Texas. The Supreme Court outlined the rule for measuring damages to personal property as the difference in the market value immediately before and immediately after the injury. The court further stated, "this principle of law is of such universal application that it would be trite to cite authorities from the many jurisdictions that follow the rule.

Recognizing that different fact patterns may require a variation on the general rule, the court relied on the Restatement of the Law of Torts Vol. 4 §928 which states:

Where a person is entitled to a judgment for harm to chattels not amounting to a total destruction in value, the damages include compensation for

(a) the difference between the value of the chattel before the harm and the value after the harm or, at the plaintiff's election, the reasonable cost of repair or restoration where feasible, with due allowance for any difference between the original value and the value after repairs...

Therefore, if the property is repairable, the injured party may elect to repair the property and recover the difference in value rather than collecting the measure of damages from the before and after method. see also Jones v. Wallingsford, 921 S.W. 2d 463 (Tex.App. Eastland 1996) and Carson v. Bryan, 523 S.W. 2d 711 (Tex.App. Amarillo 1976).

In the state of Utah the courts have adopted the before and after rule to measure damages to damaged property. The case of Hill v. Varner, 290 P.2d 448 the court restated the principle of indemnity citing to Park v. Moorman Mfg. Co., 241 P.2d 914, "The fundamental principle of damages is to restore the injured party to the position he would have been in had it not been for the wrong of the other party."

The case of Hill v. Varner goes on to explain the formula for measuring damages by citing to, Angerman Co., Inc. v. Edgemon, 209 P. 169, "The proper measure of damages for injury to personality not entirely destroyed is the difference between its value immediately before and immediately after injury."

The reasoning behind this rule is that sometimes a vehicle can be repaired, yet still lose some of its value due to the damages. The court looked to the case of Metcalf v. Mellen, 192 P. 676, to expound on this concept. "In some instances, proper repair will restore the market value of the property, but the plaintiff can recover not only the reasonable cost of repairs, but also depreciation in market value, if any, after repair."

The Supreme Court of Virginia in Averett v. Shircliff, 237 S.E. 2d 92 adopts the rule determining the proper measure of damages to motor vehicles. It is outlined in the jury instructions below. The law clearly provides for diminution of value.

"The court instructs the jury that in the valuation of personal property, which has been damaged but not destroyed, the measure of damages is the difference between the market value of the property immediately before and immediately after the property was damaged. The Court further instructs the jury that an exception to this rule is that where personal property can be restored by repairs and the repairs would be less than the diminution in value because of the injury, the amount recoverable is the reasonable cost of restoring the property to its former condition. Thus, if you believe from the preponderance of the evidence that the car involved could not be restored to its former condition by repairs, the measure of damages is the difference between the market value of the car immediately before and immediately after the accident. And if you believe from a preponderance of the evidence that the car involved could be restored to its former condition by repairs, the measure of damage is the reasonable cost of repairs, with reasonable allowance for depreciation."

Under what circumstances will mere repair make the claimant whole? Common reason suggests that the cost of repair method of valuation is to be used in two situations: 1) minor damage wherein the vehicle can be restored to its prior condition and value, and 2) low value vehicles with high cost repairs where it makes no sense to repair. Under what circumstances will mere repair cost fail to make the claimant whole? The answer: 1) when a vehicle is a total loss, and 2) when a vehicle can not be restored to its prior condition and prior value. Judge Whiteside, in this concurring opinion in Allstate Insurance Company v. Reep, 454 N.E.2d 580 (Ohio Appraisal Fee. 1982);, commented: "Costs of repair of the damaged property is a substitute measure of damages if: (1) it mitigates rather than enhances damages computed by the difference-in-market-value test; and (2) it restores the damaged property to the same condition and same value it had before the injury." Allstate, 454 N.E.2d at 582. This sensible requirement harmonizes with the principle of making the claimant whole. Certainly there is no mystery behind the rationale.

The before and after measure states that we begin with the fair market value of the vehicle immediately prior to the accident.

Both the rental contract and negligence law requires that the rental agency be put back into the position that they would have been if the damage had not occurred. The question is what value will appropriately put them back in to this position.

Fair market value is defined as "The amount at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts." Black's Law Dictionary

The purpose of determining fair market value is to ensure that the injured party is made whole or put in the position that they would have been in if the damage had not occurred. The inured party can not receive a windfall due to their damages. The goal is to determine what the property is worth in the open market.

PurCo will evaluate the Manufacturer's Suggested Retail Price (M.S.R.P. ), the Kelly Blue Book Value, the National Automobile Dealers Association (N.A.D.A.), or the M.S.R.P. less a mileage depreciation. There are various ways to determine the Fair Market Value of the vehicle. Used car guides can be implemented to determine a value. However if the vehicle is too new to be in the guide this will not be applicable. The M.S.R.P. can also be implemented if the vehicle is brand new. C.C.C. are also available but are traditionally low as the data is recovered by inquiring the lowest amount that the dealership would sell the car for. This does not fill the definition of Fair Market Value.

This value is not connected to the amount originally paid for the vehicle. That figure can only demonstrate what the value was to the parties involved at the time of purchase. The fair market value is also not connected to the amount that the injured party owes on the vehicle. Clearly, any amount owed on the vehicle only demonstrate what someone was willing to loan with the vehicle as collateral.

Both the rental contract and negligence law requires that the rental agency be put back into the position that they would have been if the damage had not occurred. The question is what value will appropriately put them back in to this position. "Whether the retail or wholesale price will govern when calculating damages depends on the replacement market available to the injured party." 4 J. Nates et al., Damages in Tort Actions §37.01 [1][b], at 18 (1994).In the case of United Truck Rental v. Kleenco Corp., 929 P.2d 99 (Hawaii App. 1996) the court looked at replacing a rental truck and determined that the retail value was the appropriate value."Because United was a rental company it is not strictly a consumer or a trailer….There was no evidence that a single vehicle replacement could be purchased by United at the wholesale price. Hence the evidence supports the conclusion that unless United was buying in 'bulk' the wholesale market was not available to it. As a result the market price which would accurately or as precisely as possible compensate United for its stolen truck, under these circumstances, was the retail market price. See Richards, 10 Haw.App at 623, 880 P.2d at 1238-39 ("All of the difference measures for damages to personal property are merely guides to common sense, and the question in each case is ultimately a question of fully compensating the injured party. Thus, the various measures should be adjusted as required to meet the goal of compensation. It follows then that no mechanical rule can be applied with exactitude in the assessment of property damage and each case must rest on its own facts and circumstances as supported by the proof in the record.)The rental agency is limited to the wholesale price only if they can replace the vehicle at the time of injury with a wholesale price. Since your clients can not regularly replace their vehicles at a wholesale price, then in order to put them in the position that they would have been in if the accident had not occurred, they will have to be compensated with a retail value of the property lost.

When a vehicle is damaged and repaired, it may not retain its pre-accident condition. When there is a loss in value due to an accident it is called diminution of value.

Section 928 of the Restatement (Second) of Torts provides that compensation for damage to personal property can include "the reasonable cost of repair or restoration, with due allowance for any difference between the original value and the value after repairs". Comment (a) indicates that the risk of repairs not restoring the item to its original value is placed on the one who caused the damage. Under such circumstances, the owner may recover not only repair costs, but the difference in the value of the property before the damage and the value after repairs.

The before and after measure of damages is intended to compensate the injured party for all of the damages sustained. When you use the before and after method, the injured party will be fully compensated for all damages including the diminution of value. Diminution is a separate damage, but can be compensated by using the before and after method of damages.

In Littlejohn v. Elionsky, 130 Conn. 541, 36 A.2d 52 (Connecticut. 1944) the court stated, “The correct rule is well stated in Hawkins v. Garford Trucking Co., Inc., 96 Conn. 337, 341, 114 A. 94, 96: 'Our rule is that, when the injury is less than a complete loss * * * the measure of damages is the difference in value between the property before and after the loss, with interest from date of loss. And when the property injured may be repaired, if the repairs will substantially restore the property to its former condition, the cost of such repairs will ordinarily furnish proper proof of the loss.' In the instant case there was no claim of proof that the automobile was restored to substantially its former condition, except as it may be indicated by the claim that the car was repaired. The ordinary meaning of repair is to restore to a sound or good state after injury. Webster's New International Dictionary, 2d Ed. The finding is, therefore, to be construed as equivalent to one that the defendant offered evidence that the car could be and was restored to a sound or good state. This falls short of a claim that the repairs had put the car in substantially the same condition as before the collision. For example, a new car may be badly damaged and be repaired so as to put it in a sound or good state, and yet be worth much less than before the collision. The clause quoted from the Hawkins case, supra, 'if the repairs will substantially restore the property to its former condition,' is an integral part of the rule, and not mere tautology. The court was justified in ignoring the defendant's claim as to repairs, for if it had mentioned the matter it would have had to say something like this: 'There is evidence that the car was repaired at an expense of $400, but you cannot take that as the measure of damages, because there is no evidence that these repairs restored the car substantially to its former condition.'“

Below is a sampling of case law which explains the diminution of value issue

Farmers Ins. Co. of AZ v. R.B.L. Investment Co., 138 Ariz. 562, 675 P.2d 1381 (Ariz. Ct. App. 1983). The owner of a negligently damaged motor vehicle would be compensated for damages for the loss in fair market value above and beyond the cout of repair.

Airborne, Inc. v. Denver Air Center, Inc., 832 P.2d 1086 (Colo. Ct. App. 1992). The plaintiff is entitled to damages for the decrease in market value to property as repaired, in addition to the reasonable costs of repairing the property.

Bayboro Marine, Inc. v. MacFarlane, 484 So.2d 1380 (Fla. Dist. Ct. App. 1986). The owner of a chattel partially destroyed by the negligence of another may recover the reasonable cost of repair or restoration with due allowance for any irreparable and permanent loss in value.

Alonso v. Fernandez, 379 So.2d 685 (Fla. Ct. App. 1980). Where personal property is harmed, the owner is entitled to damages including the reasonable cost of repair or restoration where feasible, with due allowance for any difference between the original value and the value after repairs.

Giles Lafayette, Inc. v. State Farm Mut. Auto. Ins. Co., 467 So.2d 1309 (La. Ct. App. 1985), writ not considered 472 So.2d 911. Generally, recovery in cases of damage to automobiles is limited to the cost of repair, but additional damages may be recovered on proof of diminution of value by virtue of the vehicle having been involved in an accident.

Volkswagen of America, Inc. v. Robertson, 713 F.2d 1151 (5th Cir. 1983). Under Louisiana law the cost of repair plus the "as-repaired" depreciation in market value is the correct measure of damages.

Thomas v. Global Boat Builders & Repairmen, Inc., 482 So.2d 1112 (Miss. 1986). Fair compensation to recover the loss on personal property which has been damaged encompasses the cost of repairs plus the depreciation, if any, following the repairs.

Wright v. Edison, 619 S.W.2d 797 (Mo. Ct. App. 1981). If repairs are made to personal property such as an automobile, and after the repairs are made the item is still not as valuable as it was before the injury, the owner may recover in addition to the cost of repairs such amount as will equal the difference between the value of the item before the injury and after the repairs were made upon it.

Rook v. John F. Oliver Trucking Co., 556 S.W.2d 200 (Mo. Ct. App. 1977). A person whose car was damaged in a collision may recover both for the cost of repairing the car and for the difference between the market values of the car before the collision and after the repairs.

Fanfarillo v. East End Motor Co., 172 N.J. Super. 309, 411 A.2d 1167 (N.J. Super. Ct. App. Div. 1980). An appropriate measure of damages for a damaged automobile was the cost of repair and the depreciated value of the vehicle.

Hale v. Basin Motor Co., 110 N.M. 314, 795 P.2d 1006 (1990). If repairs fail to restore personal property to its original fair market value, the owner may recover the difference.

Hill v. Varner, 4 Utah 2d 166, 290 P.2d 448 (1955). In some instances, proper repair will restore the market value of an automobile, but the plaintiff can recover not only the reasonable cost of the repairs, but also depreciation in market value, if any, after repairs.

Ellis v. King, 184 W.Va. 227, 400 S.E.2d 235 (1990). If the owner of a vehicle which is damaged and subsequently repaired can show diminution in value, then recovery is permitted for that diminution in addition to the cost of the repair.

Hawes v. Germantown Mut. Ins. Co., 103 Wis. 2d 524, 309 N.W.2d 356 (Wis. Ct. App. 1981). The trial court properly found that even after repairs had been made the market value would be impaired, and compensation for that diminution of value was proper in addition to the cost of repairs where the repairs, when made, would not restore the property to its pre-damaged value.