Canadian Underwriter

Diminished Value

November 30, 2014   by John Gilbert, Associate; and Scott Matheson, Associate, Field Law

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Approximately 11 months after Provincial Court Judge Skitsko provided his decision in the diminished value test case King et al v. Satchwell et al (2013 ABPC 358), the first appeal of a diminished value trial was heard in Alberta. On November 13, 2014, Justice Crighton of the Alberta Court of Queen’s Bench, sitting in an appeal and cross-appeal from the Brown v. Hermann et al (2014 ABPC 122) case rendered a decision. That decision, as explained below, must be viewed as a significant success for the defendant and for insurers defending other diminished value claims.

The History

Diminished value claims are based on the notion that a vehicle that has been in an accident is not worth as much as a similar vehicle that has not been involved in an accident. This article focuses on the recent wave of diminished value trials in Alberta, particularly on the evidentiary burden plaintiffs face in proving a claim for diminished value and the evidence that has recently been proffered at trial in support of diminished value claims.

In these recent decisions, the plaintiffs have provided reports by Mr. Ed Grieve in an effort to prove their claims. The first diminished value decision featuring Mr. Grieve that these authors are aware of was an unreported decision, Taylor v. Hrytsak (Action No. 1103600100). In Taylor, the Court accepted the evidence of Mr. Grieve and awarded diminished value.

Following Taylor, the next trial of the issues of diminished value came of the Satchwell test case. In Satchwell, Mr. Grieve’s qualifications and the standard for proving diminished value were put through the rigors of the common law. In his decision, Judge Skitsko found that Mr. Grieve was not an appropriate expert on diminished value, noting arbitrariness in his methodologies.

The court did apply Mr. Grieve’s methodologies in categorizing three types of diminished value: insurance, repair, and inherent. Judge Skitsko’s definition of each type was:

1) Inherent: the value lost due to the “stigma” of having a vehicle involved in an accident;

2) Repair: the value lost due to the repairs not fully returning the vehicle to its pre-accident level; and

3) Insurance: the value lost due to the use of lesser parts during a repair.

After splitting (or “trifurcating”) diminished value into three heads, Judge Skitsko refused to award any amounts for insurance or inherent diminished value, but did award $3,500 for repair related diminished value on the stated bases of several factors, including the vehicle’s age, prestige, repaired damage (structural/cosmetic), reporting requirements and the quality of the repairs. This method of quantifying repair-related diminished value did not appear to be tied to Mr. Grieve’s report.

Following Satchwell, the Alberta Provincial Court saw at least five civil claims proceed to trial, with numerous others filed and presently awaiting trial. Three of the five post-Satchwell trials were presided over by Judge Skitsko, and in each of those three decisions, Judge Skitsko awarded repair-related diminished value. Two of those decisions were subsequently appealed, with the Hermann decision being the only appeal heard to date. It was heard on November 13, 2014 and is discussed below.

In the two decisions not authored by Judge Skitsko the respective judges rejected each plaintiff’s claims. In Purschke (Purschke v. Bell and Wawanesa, Action No. 1301500025), Judge Deck granted a non-suit application at the close of the Plaintiff’s evidence, In Gordon v. Elves (2014 ABPC 147), Judge Hess dismissed the plaintiff’s claim in its entirety at the close of all evidence. Further, Judge Hess rejected the plaintiff’s proposition that the court quantify his damages by looking to other jurisprudence where diminished value was awarded. Essentially, the plaintiff asked for the court to quantify damages like it would for a claim for pain and suffering, but the court refused.

This left four decisions awarding repair related diminished value, two completely dismissing the plaintiffs’ claims, and none since Taylor awarding what Judge Skitsko would consider inherent diminished value. The overarching theme developing between the cases was that “each claim for diminished value is unique and depends on its facts.” With this uncertainty as the backdrop, the Hermann appeal was heard.

The Appeal

In Hermann, both the defendant and plaintiff appealed the trial decision of Judge Skitsko. Judge Skitsko found that Mr. Grieve was not an expert in diminished value, but that as the defendant’s expert could “not rule out structural damage to the C-pillar” of the vehicle that an award for repair-related diminished value was appropriate.

The defendant appealed, among other things, on the grounds that Judge Skitsko erred in his application of the facts and burden of proof regarding the damage to the vehicle, and in assessing and quantifying damages to the plaintiff’s vehicle for repair-related diminished value. The plaintiff appealed on the grounds that Judge Skitsko erred by, among other things, failing to qualify Mr. Grieve as an expert, assessing evidence in a biased manner, failing to accept common sense and in failing to apply jurisprudence from other jurisdictions.

The defendant was largely successful with regards to arguments on diminished value. To start, Justice Crighton found that it was inappropriate to split (or trifurcate) diminished value into three heads of damage, and that it should be treated as one head, with the categories referred to being potentially useful in the quantification of that head of damage. Further, and of particular note, the court found that, as diminished value is a special damage, any damages claimed under that head must be “specifically claimed and strictly proven.”

As there was nothing inherently reliable in Mr. Grieve’s methodologies, Justice Crighton rejected the claim for repair-related diminished value (although she did award a small amount for repair fixes). In discussing the quantification of damages, the Justice noted that an analysis akin to general damages (where there is no clear pathway) should not be performed on special damages claims and should consider evidence with regards to the future use of the vehicle.

Moving Forward

Hermann must be viewed as particularly valuable to defendants as it is a Superior Court decision and is binding on the Provincial Court – where the vast majority of these claims are being prosecuted. The decision leaves plaintiffs with the burden to prove their claim and rejects the argument that the Provincial Court can aid them in assessing a special damage, such as diminished value on the basis of common sense or gut instinct. The role of the court remains that of a gatekeeper of evidence and a trier of fact and law. The burden of proving a special damage claim and of quantifying that special damage claim remains with the plaintiff.

Besides the numerous Provincial Court matters currently pending, diminished value is slated to be heard by the Court of Queen’s Bench again in 2015 on the Tardif case (Tardif v. Bustos PC 1390303122). Until more Provincial Court judges hear this matter, or until the Tardif appeal is heard, what will remain unclear is what evidence will be sufficient to properly prove a claim for diminished value in Alberta.

Moving forward, plaintiffs in Provincial Court must treat their claims as: (1) special damage claims subject to the burden to prove damages and quantify those damages, and (2) requiring appropriate expert evidence. Whether plaintiffs are able to lead this evidence to the sufficiency required of the courts is a significant question that could have costs consequences. Based on the decisions of Judges Skitsko, Deck, and Hess, as well as Justice Crighton, it appears unlikely that Mr. Grie
ve’s methodologies to date will be sufficient. 

John Gilbert and Scott Matheson are associates with Field Law in Calgary and Edmonton, respectively. Both specialize in insurance litigation, with areas of focus including motor vehicle, property loss, personal injury, professional liability, fraud and bad faith claims.