This loss is based on remaining flaws and defects caused by improper repairs for which the shop had been asked, and paid, to complete. Poor repairs would cause the vehicle to be valued less than a properly repaired vehicle.
A few examples of repair related flaws and defects are as follows:
Poor structural, and cosmetic welds
Frame repair listed on the insurance estimate, but not completed properly
Inferior repairs on straightened panels
Miss-matched color paint after “blending” had been paid
Sanding scratches on moldings, glass, and trim
Keep in mind that even if there is “Repair Related Diminished value”, the insurer is still the only one contractually obligated to restore the vehicle to its pre-loss condition relevant to function, appearance, safety, and value, thus any “Repair Related” diminished value would still be the insurer’s responsibility. This area of coverage may fall under the “comprehensive”, or “Under Insured” sections of the insurance policy. If the insurer feels that they have sustained losses due to poor repairs, they have the duty to pay the remaining damages (perhaps under the comprehensive section of the policy), and the right to subrogate those losses directly against the at fault shop.
By following these correct and legal steps, the insurance industry would be sending a clear message to repairers that poor quality repairs and fraud are unacceptable.