It could fall under "administrative charges", or at least that'd be their way of defending it.

Diminished value does happen after some accidents and it's an expense that the rental company has to pay for. In British Columbia for example, and accident over $2,000 will put a declaration, or "dec" on the title. As soon as a buyer sees the dec, it will lower the asking price for sure, i.e. the price that the car could fetch from a dealer who's buying to re-sell.

So, the charge itself COULD be legit, but the amount not so much. I would join in saying to fight it. Ask them for an independent appraisal that supports the loss amount that they're claiming. For example, something that says an ordinary Ford Taurus would fetch $13,000 from a dealer but this one will only get $12,200. If they can't produce that or refuse to, don't pay it.