In the case, Meridian Security is asking the Indiana High Court to reverse a state Court of Appeals ruling that would allow a lawsuit based on the theory of diminished value in automobile crash cases to proceed to trial.

The Court of Appeals held that Meridian's auto insurance policy requires Meridian to pay not only the cost of repairs, but also an additional amount for the "diminished value" that damaged vehicles allegedly may suffer even after
being completely and properly repaired.

The lower court issued the ruling despite the fact that Meridian's policy language explicitly limits its liability to either the vehicle's actual cash value or the amount necessary to repair or replace the vehicle's damaged parts with repair parts of "like kind and quality, whichever is less."

In their brief, the trade groups contend that the Court of Appeals' decision not only creates "unnecessary, cumbersome new law in Indiana, but also contradicts the strong national trend rejecting
'diminished value' claims."

Diminished value is the
difference between the market value of a car before it has been in a collision and its value after it has been repaired.

"Only 10 states recognize the concept of diminished value, and Indiana shouldn't take that route," said Robert Hurns, PCI counsel and legislative database manager.

"There is an overwhelming trend reflected in recent court decisions around the nation that diminished value is not recoverable under policies limiting insurer liability to the cost of repairs.

In the past three years, Hurns said, six state supreme courts have rejected coverage for 'diminished value,' and the "Indiana Supreme Court should do the same."