First-Party vs. Third-Party Diminished Value Claims: What's the Difference?
Understanding who you are claiming against is crucial. Learn the difference between first-party and third-party claims and how it affects your payout.
The Basics
In the world of auto insurance, knowing the difference between a first-party and a third-party claim is essential, especially when pursuing diminished value.
First-Party Claim
- Who: You vs. Your Own Insurance Company.
- Basis: Your insurance policy contract.
- Scenario: You were at fault, it was a hit-and-run, the other driver was uninsured, or you are invoking your collision/comprehensive coverage.
Third-Party Claim
- Who: You vs. The At-Fault Driver's Insurance Company.
- Basis: Tort law (negligence).
- Scenario: Another driver hit you, and their insurance is accepting liability.
Diminished Value Differences
This is where the distinction becomes critical.
Third-Party Diminished Value
In all 50 states, you have the legal right to claim diminished value against an at-fault driver. Under tort law, the at-fault party is responsible for making you "whole," which includes compensating you for the loss of your vehicle's market value.
First-Party Diminished Value
Claiming diminished value against your own insurance is much harder. Most standard auto policies explicitly exclude coverage for diminished value.
The Exception: Georgia Georgia is currently the only state where first-party diminished value is mandatory under the famous Mabry v. State Farm ruling. In Georgia, your own insurer must pay you for diminished value even if the accident was your fault.
Other States: In states other than Georgia, you can typically only pursue a first-party diminished value claim if:
- You have a specialized policy that specifically adds this coverage.
- You are claiming under Uninsured Motorist Property Damage (UMPD) coverage (rules vary by state).
Which Path Should You Take?
If the other driver is at fault and has insurance:
- ALWAYS file a Third-Party claim for diminished value. It is your strongest legal avenue.
If the other driver is uninsured or you were at fault:
- Check your policy language carefully. Unless you live in Georgia, a first-party DV claim is likely excluded, but it is worth a professional review.
Summary Table
| Feature | First-Party Claim | Third-Party Claim |
|---|---|---|
| Opponent | Your Insurer | At-Fault Driver's Insurer |
| Legal Basis | Contract | Tort Law |
| Appraisal Clause | Available | Not Available (usually) |
| Diminished Value | Excluded (except GA) | Allowed in all 50 states |