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  1. #1

    Default How is an Insurance Payout Calculated After a Total Loss

    My question involves insurance law for the state of: CA

    my friend was hit while parked in the emergency lane. the other driver's insurance accepted full liability and sent an inspector. afterwards, over the phone (nothing in writing), they estimated about $4.5k worth of repairs, and offered about $4.3k to total her car, or $3.5k if she wants to keep it. (they also pressured her to give an answer by the next morning)

    I looked at cars for sale with same year, model, and mileage in the area (they are all from car dealers), and they go for about $4-5.5k. I told her to ask for more.

    what I don't understand is, why is the 3rd party insurance allowed to deduct the salvage value from the value of her car? if repairs and total loss value are so close to each other, shouldn't she be given the full value of the car, as she can probably get it repaired for that amount?

    I understand that, if it's a 1st party claim, your insurance I imagine has it in your contract that they decide whether it's a total loss or not. I also understand that you can refuse a total loss determination by a 3rd party insurance, but are they still allowed to deduct the salvage value?

    Also, if you accept the lowered value, are you usually going to end up with a salvage title? I told her she should get something in writing to make an informed decision, since salvage titles are not as easy to insurance. I'm worried she thinks she keeps her car with a normal title but then finds out it's getting a salvage title. I am wondering if her accepting the lower offer means that she's giving consent to the 3rd party insurance to total the car. maybe I'm just uninformed and too distrustful but I'm paranoid when it comes to dealing with 3rd party insurances due to my personal experiences ^^

    Thanks!

  2. #2
    Join Date
    Mar 2013
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    Default Re: Third Party Claim Possible Total Loss

    The answer is simple. The other driver's insurance company is not her insurance company and owes her nothing until a court of law says so and says how much.

    Until then, the other insurance company can offer her a settlement based on whatever terms the other insurance company sees fit.

    There's no need to "understand" anything other than if she wants the money from that other insurance company she accepts the other insurance company terms.

    Now I'm going to give you what 35 years in the insurance business AND personal experience taught me. Take the total loss value and give up the car. It almost never pays to keep the car and get it repaired at the lower amount.

    She can, of course, ask for more than the $4.3k but she'll need to provide copies of those ads and show that those cars were comparable to her car, keeping in mind that advertised asking price is typically 10% to 15% higher than selling price.

    If the other insurance company's claim rep won't budge she can either accept the $4.3k, accept the reduced amount and keep the car, use her own collision coverage (if she has collision coverage) or file a lawsuit against the other driver and try to convince a judge that she should be paid more than the $4.3k. Trust me when I tell you that options 2 and 4 are not good ones.

  3. #3
    Join Date
    Jul 2018
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    1,061

    Default Re: Third Party Claim Possible Total Loss

    Quote Quoting RidinginCali
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    my friend was hit while parked in the emergency lane.
    I assume you mean your friends car was hit while it was parked in the emergency lane, not that he was hit. Was your friend in the car when this happened? Why was he parked in the emergency lane?

    Quote Quoting RidinginCali
    View Post
    what I don't understand is, why is the 3rd party insurance allowed to deduct the salvage value from the value of her car?
    The insurer is only deducting salvage value if she keeps the car (hence the offer of $4,300 or $3,500 if she wants to keep it). The reason for that is that even trashed car has value, and the insurer is "allowed to deduct" in this situation because no law prohibits it from doing so.

    Quote Quoting RidinginCali
    View Post
    if repairs and total loss value are so close to each other, shouldn't she be given the full value of the car, as she can probably get it repaired for that amount?
    She's entitled to the lesser of the car's fair market value as of the time of the accident or the cost to repair. Insurers will generally total the car if the cost to repair is above X% of the fair market value (with X being something in the neighborhood of 80-85). If your friend wants, she can elect to keep the car and try and negotiate for a higher number and see if she can repair it for that price.

    Quote Quoting RidinginCali
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    Also, if you accept the lowered value, are you usually going to end up with a salvage title?
    She should contact the DMV about this.

  4. #4
    Join Date
    Jan 2010
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    New Jersey
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    Default Re: Third Party Claim Possible Total Loss

    And to answer you question about: What will happen to the title if she wants to keep the vehicle? The title will be branded by a salvage tittle. Typically salvage vehicles are worth 40% less then a current vehicle with an unbranded title.

    If her vehicle is now worth $4,300 in good condition with an unbranded tittle, it would be worth $2580 after she fixes the vehicle and brings the condition to good with the branded title.

    So technically if she chooses to keep the vehicle and spends $3,000 to fix the vehicle, she's underwater $440. The more she spends fixing the vehicle, the more she will lose.
    I'm not a lawyer, but I did stay at a Holiday Inn Express last night.......

  5. #5

    Default Re: Third Party Claim Possible Total Loss

    Thanks for your replies. I got the insurance report and they used 3 comparables but 2 of them have 60k more miles than the car in question. So I found 2 more accurate comparables, much closer in mileage and with a rather higher valuation, and we're going to send them to the adjuster for consideration.

    By the way, it's true that the 3rd party insurance has no legal obligations to you (only to their client), but today I was reading Section 2695.1 of the CA code and I learnt something I didn't know which may be of interest to readers of this thread: the 3rd party insurance still has the obligations listed in that section. For example the obligation to use the correct comparables. So if they do not, you can actually file a claim with the Dept. of Insurance and ask them to review your claim. Of course, that's only going to help if the insurance did something wrong, and not if you're simply not happy with their offer when it's a fair offer.

    http://www.insurance.ca.gov/01-consu...laims-regs.cfm

  6. #6
    Join Date
    Dec 2018
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    168

    Default Re: Third Party Claim Possible Total Loss

    Quote Quoting RidinginCali
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    Thanks for your replies. I got the insurance report and they used 3 comparables but 2 of them have 60k more miles than the car in question. So I found 2 more accurate comparables, much closer in mileage and with a rather higher valuation, and we're going to send them to the adjuster for consideration.

    By the way, it's true that the 3rd party insurance has no legal obligations to you (only to their client), but today I was reading Section 2695.1 of the CA code and I learnt something I didn't know which may be of interest to readers of this thread: the 3rd party insurance still has the obligations listed in that section. For example the obligation to use the correct comparables. So if they do not, you can actually file a claim with the Dept. of Insurance and ask them to review your claim. Of course, that's only going to help if the insurance did something wrong, and not if you're simply not happy with their offer when it's a fair offer.

    http://www.insurance.ca.gov/01-consu...laims-regs.cfm
    Funny, the guy with 35 years experience neglected to mention that they are obligated. Maybe it was an oversight on his part, huh?

    BTW- My brother's son just totaled a one week old car that was not his fault. The other insurance company wanted a copy of the invoice. My brother who handled the case said "no", that "it was personal financial information," and for them to make him an offer. The insurance company ended up paying $1,000 more to replace his son's car.

    Lesson: Don't be too eager to settle with them and don't be intimidated or dissuaded by an insurance company mouthpiece. They want to settle the case too.

  7. #7
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    Default Re: Third Party Claim Possible Total Loss

    Quote Quoting Chuck77
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    Funny, the guy with 35 years experience neglected to mention that they are obligated. Maybe it was an oversight on his part, huh?
    Did you miss the part where I wrote:

    She can, of course, ask for more than the $4.3k but she'll need to provide copies of those ads and show that those cars were comparable to her car, keeping in mind that advertised asking price is typically 10% to 15% higher than selling price.
    Or did you just want to grab the opportunity to bash insurance people.

    Quote Quoting Chuck77
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    BTW- My brother's son just totaled a one week old car that was not his fault. The other insurance company wanted a copy of the invoice. My brother who handled the case
    Your brother is a lawyer? Or he was engaging in the unauthorized practice of law.

    Quote Quoting Chuck77
    View Post

    Lesson: Don't be too eager to settle with them and don't be intimidated or dissuaded by an insurance company mouthpiece. They want to settle the case too.
    Well, you finally got something right. There's an old saying among claim reps. The longer the file stays open the more it costs to settle.

  8. #8
    Join Date
    Dec 2018
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    168

    Default Re: Third Party Claim Possible Total Loss

    I am not bashing insurance reps. I am pointing out falsehoods in your post.

    Quote Quoting adjusterjack
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    The answer is simple. The other driver's insurance company is not her insurance company and owes her nothing until a court of law says so and says how much.
    False. They are obligated to pay a fair market value as described in the above thread.

    Until then, the other insurance company can offer her a settlement based on whatever terms the other insurance company sees fit.
    False.

    There's no need to "understand" anything other than if she wants the money from that other insurance company she accepts the other insurance company terms.
    False.

    She can, of course, ask for more than the $4.3k but she'll need to provide copies of those ads and show that those cars were comparable to her car, keeping in mind that advertised asking price is typically 10% to 15% higher than selling price.
    My brother's experience proved that to be false.

    If the other insurance company's claim rep won't budge she can either accept the $4.3k, accept the reduced amount and keep the car, use her own collision coverage (if she has collision coverage) or file a lawsuit against the other driver and try to convince a judge that she should be paid more than the $4.3k. Trust me when I tell you that options 2 and 4 are not good ones.
    You forgot to mention that she can accept nothing and wait for them to meet her demands.

  9. #9
    Join Date
    Oct 2016
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    Default Re: Third Party Claim Possible Total Loss

    Chuck, they aren't obligated to pay anything until either a judge orders it or she and the insurance company come to an agreement on the amount that will be paid.

    If the insurance company isn't buying into the higher value she is going to either have to prove the value to the insurance carrier or a court to get a higher amount.

    Your brother's experience means nothing assuming it even really happened.

    The insurance company doesn't have to pay a dime until a court orders them to.

  10. #10
    Join Date
    Dec 2018
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    168

    Default Re: Third Party Claim Possible Total Loss

    Quote Quoting PayrolGuy
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    Chuck, they aren't obligated to pay anything until either a judge orders it or she and the insurance company come to an agreement on the amount that will be paid.

    If the insurance company isn't buying into the higher value she is going to either have to prove the value to the insurance carrier or a court to get a higher amount.

    Your brother's experience means nothing assuming it even really happened.

    The insurance company doesn't have to pay a dime until a court orders them to.
    Just as your opinion means nothing as well.

    It boils down to negotiating skills and how a 'suzy homemaker' can deal with a skilled claims adjuster. Not how a court is required to force an insurance co to pay fair market for a bumper...or a car.

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