Iowa Draft Bulletin Would Reportedly Expand Diminished Value Coverage

The Iowa Division of Insurance could reportedly force insurers to
consider diminished value as an additional measure of damages in all
third-party automobile claims, if it issues a draft bulletin currently under consideration.

Iowa is one of only eight states that allow diminished value coverage. However, Iowa courts have ruled that diminished value is recoverable only if the claimant can prove that there is a difference between the reasonable market value of an automobile before and after the accident.

The National Association of Independent Insurers (NAII) is urging the division to not issue the draft. “The obligations insurers have regarding diminished value have already been clearly outlined by the Iowa judiciary,” Ann Weber, counsel for NAII, said. “We have grave concerns regarding the mandates contained in the draft bulletin. It does not accurately reflect an insurer’s responsibilities according to the law. The court has clearly placed the responsibility of claiming and proving diminished value on the claimant. If insurers were required to address diminished value in every third-party claim,
the length of time to resolve a claim would increase and undoubtedly, the cost of insurance would increase.”

In addition to the draft bulletin on diminished value, the division is circulating the third draft of changes to its Unfair Trade Practices regulation. NAII is urging the division to remove a section that directs insurers to pay diminished value to third party claimants.

“The subject of the draft bulletin and rule changes are of critical importance to the members of NAII. We appreciate the opportunity to comment and the division’s willingness to consider our suggestions. The division has demonstrated a desire to craft rules and regulations that will best serve the public by allowing us to respond to these documents while they are in the draft stage,” Weber added.