Even if a motor land vehicle damaged in a traffic accident is repaired fully with original parts at authorized service centers, it cannot preserve its pre-accident market value when traded in the second-hand market due to past damage records (TRAMER) and replaced parts. Legitimate reservations arising on the part of buyers and free market dynamics directly reduce the vehicle’s marketability and exchange value.
In our legal system, this real diminution occurring in assets is referred to as “vehicle diminution in value” (vehicle depreciation); it is considered a direct item of damage under the tort liability provisions of the Turkish Code of Obligations and the Highway Traffic Act, and can be claimed and compensated from the at-fault party and the insurance company.
1. What is Vehicle Diminution in Value and Its Legal Nature?
Vehicle diminution in value is the negative monetary difference arising between the pre-accident undamaged second-hand free market fair value of a vehicle that has sustained physical damage in a traffic accident and has subsequently been repaired, and its free market fair value after being properly repaired.
In the established case law of the Court of Cassation (Yargıtay) and the Regional Courts of Appeal, diminution in value is recognized as an economic diminution left by the accident history on the vehicle, no matter how technically flawless the repair is carried out:
“The loss of value consists of the difference between the damaged value of the vehicle on the date of the incident and the value it would have after the damage is remedied (in its repaired state).” (17th Civil Chamber of the Court of Cassation, Decision No. 2016/5661)
2. Requirements for Claiming Vehicle Diminution in Value and Responsible Parties
To claim diminution in value compensation following a traffic accident with property damage, the claimant must not be one hundred percent (100%) fully at fault for the accident. A vehicle owner who is completely faultless in the accident can claim the entirety of the compensation, whereas a partially at-fault party can claim diminution in value in proportion to the counterparty’s fault rate. It is essential that the vehicle has not been subjected to “heavy damage” or “total loss (pert-total)” processing; in total loss vehicles, since the undamaged market value is paid directly after deducting the salvage value, a separate diminution in value calculation is not made.
Since the diminution in value loss constitutes direct damage pursuant to Highway Traffic Act (KTK) No. 2918, it is claimed jointly and severally from the following respondents:
- Compulsory Traffic Insurer (ZMSS): The company issuing the Compulsory Third-Party Liability Insurance policy of the at-fault vehicle is directly and monetarily responsible within the policy coverage limits and in proportion to its insured’s fault.
- At-Fault Vehicle Driver and Operator (Owner): The driver who caused the accident through actual fault is personally, jointly, and severally liable under the tort provisions of Article 49 of the Turkish Code of Obligations (TBK); the vehicle registration holder/operator is liable pursuant to Article 85 of the KTK for the resulting damage.
- Situation Regarding Comprehensive (Kasko) Insurance: As a rule, comprehensive motor insurance policies cover damage to the insured’s own vehicle, not damage caused to third parties. However, if a specific “Diminution in Value Coverage” clause is included in the comprehensive insurance policy, the at-fault driver may also receive payment from their own comprehensive insurer according to the policy terms.
3. Calculation Method in Light of Constitutional Court and Court of Cassation Decisions (Principle of Actual Damage)
Rigid mathematical formulas, mileage coefficients, and artificial limitations such as the 165,000 km threshold previously included in the annex to the General Conditions of Compulsory Motor Vehicle Third Party Liability Insurance have lost their validity through judicial rulings.
Pursuant to the Constitutional Court’s annulment decisions dated 17.07.2020 (E. 2019/40, K. 2020/40) and 29.12.2022 (E. 2021/82, K. 2022/167), it has been finalized that the compensation cannot be limited by administrative formulas and must be calculated within the framework of the “principle of actual damage” of the Turkish Code of Obligations.
Indeed, in the settled case law of the General Assembly of Civil Chambers of the Court of Cassation (Decision No. 2021/771), it has been explicitly ruled that the determination of diminution in value requires technical expert examination and that the difference between the undamaged market value of the vehicle on the accident date and its market value after repair must be taken as the basis.
In current judicial practice, diminution in value is determined through mechanical engineer and insurance expert witnesses based on the free market fair value difference method using the following concrete criteria:
- The make, model, equipment package, year of manufacture, and actual mileage of the vehicle on the accident date,
- The extent of the damage and whether internal structural components (chassis, fender support/apron, pillars, crossmember) were affected,
- Whether the parts used in the repair are original or aftermarket/equivalent components,
- Review of past damage history via Insurance Information and Monitoring Center (SBM) records; since it is essential that a part that was previously damaged and lost its originality is not subjected to repetitive diminution in value compensation (prohibition of unjust enrichment).
Important Distinction Regarding Plastic and Electronic Equipped Parts: While simple replacements of classic bolt-on plastic parts generally have a limited impact on diminution in value, in modern vehicles, the replacement of radar sensors, cameras, driving assistance equipment, and LED/laser lighting units located on front/rear bumpers, along with the resulting high TRAMER records, can directly lower the vehicle’s market appeal and value. Expert examinations concretely assess the impact of these technological components on the free market price.
4. Difference in Liability Between Loss of Use (Replacement Vehicle) Fee and Diminution in Value
Rental or transportation expenses arising from the inability to utilize the vehicle during the reasonable repair period in which the vehicle remains at the authorized service center or repair shop following a traffic accident are termed “loss of use / replacement vehicle fee.”
The most frequently confused aspect in practice is the liable party for this damage:
- Traffic Insurance Does Not Cover: The Compulsory Traffic Insurance (ZMSS) policy only covers direct physical losses (vehicle damage and diminution in value) arising from the accident. The loss of use fee, being an indirect loss, falls outside compulsory traffic insurance coverage.
- Liable Parties Are Solely the Driver and Vehicle Owner: The reasonable replacement vehicle fee to be claimed for the number of days the vehicle spent at the repair shop must be demanded directly from the at-fault vehicle driver and registration holder (operator), not from the insurance company. It is calculated and collected through car rental invoices or market equivalent rental rates via expert examination.
5. Compensation Recovery Process: Insurance Application, Arbitration, and Litigation Stages
The recovery of the diminution in value claim is subject to sequential procedural steps prescribed by law:
Stage 1: Gathering Documents and Mandatory Application to the Insurer (KTK Art. 97) Prior to filing a lawsuit or applying to the Insurance Arbitration Commission, submitting a written application to the traffic insurance company of the at-fault party is a curable special cause-of-action condition (procedural prerequisite) under KTK Art. 97. The application petition must include the Traffic Accident Report, accident photographs, repair invoice, vehicle registration copies, and the expert appraisal report, if available.
Stage 2: Default Period and Conclusion of the Application (KTK Art. 99/1)
- Regarding the Insurance Company: Pursuant to KTK Art. 99/1, compensation must be paid within 8 business days from the date the required documents reach the insurance company; upon the expiration of this period, the insurer enters into default. If no payment or an underpayment is made within the 15-day general response period granted pursuant to KTK Art. 97, legal proceedings are initiated.
- Regarding the At-Fault Driver and Owner: For tortfeasors, default occurs automatically as of the accident date when the tortious act was committed.
6. Insurance Arbitration Commission (IAC) Proceedings, Dynamic Monetary Limits, and Attorney’s Fees
If the insurance company fails to make a payment or makes a partial/insufficient payment, the most practical venue yielding significantly faster results compared to judicial courts (averaging within 4 months) is the Insurance Arbitration Commission:
- Independent Arbitrator Examination: Following an online or physical application made to the Commission, the appointed dispute arbitrator obtains an independent expert report over the case file and renders a decision with the effect of a court judgment within 4 months at the latest.
- Dynamic Appeal and Legal Remedy Limits: The monetary thresholds for appealing arbitrator decisions before the Appellate Arbitrator Panel and filing an appeal before the Regional Courts of Appeal / Court of Cassation are not fixed (statutory fixed amounts). Pursuant to Article 30 of the Insurance Law No. 5684, these monetary thresholds are updated at the revaluation rate at the beginning of each calendar year. Arbitrator decisions below the current thresholds of the relevant year are final.
- Attorney’s Fee Exception in Arbitration (1/5th Rule): Pursuant to Article 30/17 of Law No. 5684 and the Regulation on Arbitration in Insurance, the attorney’s fee to be awarded in favor of parties represented by counsel in arbitration proceedings is determined at 1/5th (one-fifth) of the fee prescribed for civil courts of first instance in the Minimum Attorneyship Fee Tariff (AAÜT), provided that it is not less than the fixed fee (Court of Cassation 4th Civil Chamber, Decision dated 21.03.2024, Docket No. 2022/7181, Decision No. 2024/2967).
7. Competent and Authorized Court, Statute of Limitations, and Current Litigation Procedure (HMK Art. 109 Partial Lawsuit)
If the dispute is to be resolved through litigation in judicial courts, procedural rules operate as follows based on the parties involved:
- Competent Court (Subject-Matter Jurisdiction): If the lawsuit is to be filed solely against the insurance company or jointly against the insurance company together with the driver/owner, the Commercial Court of First Instance has jurisdiction as the matter is of an absolute commercial nature. If the action is brought solely against the natural person vehicle driver and vehicle owner, the Civil Court of First Instance has general jurisdiction.
- Mandatory Pre-Litigation Mediation: In commercial disputes falling within the jurisdiction of the Commercial Court of First Instance and involving the insurance company, pre-litigation mediation is a mandatory condition precedent; however, lawsuits filed solely against the tortfeasor driver/owner are not included in this scope.
- Authorized Court (Territorial Jurisdiction): The lawsuit can be filed at the domicile of one of the defendants, the place where the accident occurred, the residence of the damaged plaintiff, or the court of the location where the insurance company’s headquarters or branch is situated.
- Current Lawsuit Type (HMK Art. 109 Partial Lawsuit): In new compensation lawsuits to be filed, it is essential to file a partial lawsuit (HMK Art. 109) while reserving the rights regarding surplus claims. Pursuant to HMK Art. 109/4, the diminution in value amount claimed in a partial lawsuit can be increased once until the end of the trial investigation after the expert report is submitted, without being subject to the prohibition against expanding the claim; the statute of limitations is deemed interrupted from the date of the lawsuit regarding the increased amount as well.
- Statutes of Limitations (KTK Art. 109): Claims for diminution in value are barred by the statute of limitations after 2 years from the date the injured party learns of the damage and the person liable for compensation, and in any event after 10 years from the date the accident occurred. If death or personal injury occurred as a result of the accident, the extended criminal statutes of limitations under the Turkish Penal Code also apply to claims for material compensation and diminution in value.
- Type of Interest: Statutory interest is applied to compensation awarded in tort lawsuits concerning private passenger vehicles; for commercial vehicles or commercial operators, commercial default (advance) interest may be claimed.
8. Frequently Asked Questions (FAQ)
Does selling my vehicle after the accident prevent me from receiving diminution in value compensation? No. Selling the vehicle after the accident does not extinguish the right to claim. As long as the traffic accident report, service records, and photographs are available, diminution in value compensation can be claimed retroactively within the 2-year statute of limitations.
If I accept the partial payment made by the insurance company to my account, do my rights terminate? No. If the insurance company makes an incomplete payment, this transaction is considered a “partial payment.” An objection can be submitted to the insurer for the remaining actual diminution in value balance, and the differential compensation can be recovered with statutory interest through the Insurance Arbitration Commission or before the court.
If the parties are equally at fault in the accident (50% – 50%), how is diminution in value collected? In cases where the parties bear equal fault, vehicle owners are entitled to claim 50% of the actual diminution in value incurred on their vehicles from the compulsory traffic insurance of the opposing party or from the at-fault vehicle owner.
Do past damage records on the vehicle completely eliminate diminution in value? Past damage does not automatically zero out diminution in value. What matters is whether the parts damaged in the latest accident had sustained damage in previous accidents. The fact that the vehicle previously sustained damage on its left side does not preclude claiming diminution in value resulting from new damage to the right bodywork components in the latest accident.
You may seek professional legal counseling to avoid any forfeiture of rights in all your processes regarding the recovery of vehicle diminution in value compensation, Insurance Arbitration Commission applications, expert inspection, and compensation lawsuits.
Importance of an Expert Attorney in Vehicle Diminution in Value Processes Vehicle diminution in value compensation claims require technical expertise due to low partial settlement offers by insurance companies, free market fair value calculation methods that changed following Constitutional Court annulments, and the current procedural rules of the Insurance Arbitration Commission. From the outset of the process, complete procurement of damage files, timely submission of technical objections against fault rates and expert reports, and proper construction of the partial lawsuit strategy in accordance with procedural rules directly prevent the loss of rights.
Conducting all stages—from the mandatory initial application to the insurance company to the litigation processes before the Insurance Arbitration Commission or the Commercial Court of First Instance—under the representation of an attorney specialized in insurance and compensation law ensures that vehicle owners are not bound by inadequate offers and recover their actual damages in line with market realities, in full alongside statutory interest and loss of use fees.