First-party vs. third-party — why this distinction decides everything
A first-party diminished-value claim is one you file against your own insurer, usually under your collision or uninsured/underinsured-motorist coverage. It's governed by the wording of your own policy contract. A third-party claim is one you file against an at-fault driver's liability insurer — that's governed by general tort law, not your policy's wording, which is why it's recognized far more consistently across states. See First-Party vs. Third-Party Claims for the full general explanation. This guide focuses specifically on where each type stands on diminished value.
The one state with a clear first-party rule: Georgia
Georgia is the state most often cited as having settled this question for first-party claims. In State Farm Mut. Auto. Ins. Co. v. Mabry (2001), the Georgia Supreme Court held that an insurer's first-party payment obligation includes the vehicle's diminished value, not just the cost of repairs — building on a line of Georgia case law going back to 1926. That ruling is also the origin of the "17c" calculation approach discussed in a separate guide. According to the peer-reviewed 2023 NAIC journal survey cited below, Georgia remains "the only state with a clear legal direction that first-party auto claimants are entitled to recover the diminished value losses from their automobile insurers."
States where courts have ruled against a first-party obligation
In several other states, courts examining the same standard policy language reached the opposite conclusion — that the contract's "repair, replace, or pay actual cash value" wording does not obligate an insurer to also pay diminished value on a first-party claim:
| State | Case / source | Outcome |
|---|---|---|
| Florida | Siegle v. Progressive Consumers Ins. Co. (Fla. 2002) | No first-party DV obligation once repairs are complete. |
| Texas | Am. Mfrs. Mut. Ins. Co. v. Schaefer (Tex. 2003); TDI Bulletin B-0027-00 | Insurer obligation limited to ACV or repair/replace; no DV requirement. |
| California | Ray v. Farmers Ins. Exchange (Cal. Ct. App. 1988) | Court declined to read a DV obligation into standard collision wording. |
| Delaware | Delledonne (1992) → O'Brien v. Progressive Northern (Del. 2001) | Position shifted from ambiguous to no first-party obligation. |
| Maine | Maine Supreme Judicial Court, reported 2002 | Held "repair" is unambiguous and does not include diminished value. |
Third-party claims are recognized far more widely
Because a third-party claim arises from general tort principles (the idea that a wrongdoer owes compensation for the full value lost, codified in the Restatement of Torts § 928) rather than your own policy's wording, it doesn't depend on Georgia-style first-party litigation. The 2022 Matthiesen, Wickert & Lehrer 50-state survey — cited in the NAIC journal article — lists Arizona, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Maryland, New Mexico, New York, Oregon, South Carolina, and Virginia among states with documented third-party diminished-value recovery. That list reflects documented case law as of that 2022 survey, not a guarantee for every claim in every one of those states today — but it illustrates the same pattern seen throughout this research: third-party recovery is the norm insurers plan around, first-party recovery is the exception.
A different approach: North Carolina's statutory appraisal process
Rather than leaving diminished-value disputes to case law, North Carolina built a resolution process directly into its motor vehicle statutes. Under N.C. Gen. Stat. § 20-279.21(d)(1), if the insured and insurer disagree on diminished value by more than $2,000 or 25% of the vehicle's fair market value, each side selects and pays for an independent appraiser; if those two still disagree, a third appraiser renders a final, binding decision. It's a useful example of how a state can address the same underlying disagreement — how much is diminished value actually worth — through a defined process rather than court precedent.
What this guide cannot tell you
It cannot tell you your specific state's current legal position if it isn't listed above — most states fall into that gap, having neither a Georgia-style ruling for claimants nor a Florida/Texas-style ruling against them, simply because the exact question hasn't reached their courts in a reported decision. It also cannot tell you how a specific insurer will actually handle your specific claim, which can differ from the strict legal minimum. For anything case-specific, confirm with your state insurance department or a licensed attorney in your state.