Who Will Pay For My Damage ?
A simple question that can have a simple answer. If you have
Collision Coverage or Comprehensive Coverage on your own Auto Policy
(depending on the cause of damage), your insurance company will pay for
the damage to your vehicle regardless of who may have been at fault in
the accident or incident (assuming you have not intentionally caused the
damage yourself). Collision and Comprehensive Coverage covers damages
sustained by your vehicle. This is the coverage that would be required
by your lender if you have a lien on your vehicle. If you have a lien on
your vehicle but do not have Collision and Comprehensive Coverage on
your own policy, the lender will probably have purchased VSI (Vendor's
Single Interest) coverage. In effect, this is Collision and
Comprehensive Coverage that protects the interests of the lender only .
. . not the owner/borrower. The most that would be paid out on VSI
coverage is the lesser of either the cost of repair, the ACV (Actual
Cash Value) or the remaining balance owed on the loan. Any equity you
may have in you vehicle is not insured by VSI coverage. In order to
protect your equity interest in your vehicle, you should have Collision
and Comprehensive Coverage on your own auto insurance policy.
If you do not have Collision and/or Comprehensive Coverage on your
own policy and the damage is the result of negligence of another, your
only remaining option is to collect from the negligent party who caused
the damage. Hopefully, that party will have Liability Insurance that
will pay you on behalf of their insured. If another party is responsible
for your damage but does not have insurance, your only remaining option
is to pursue your claim against the negligent party personally.
If the responsible party does not voluntarily pay for your damages,
you may have to pursue legal action against them. If your total damage
is $5,000.00 or less (contact Justice Court or Small Claims Court in
your area to verify their authority limit), you can utilize the services
of Justice Court. A Justice Court action can be rather quick (less than
3 months), is relatively simple and can be pursued at a minimum of cost.
If your damage is over the limit of Justice Court, you will have to
bring your action in Superior Court which will be much slower and
probably much more expensive (legal representation is recommended). The
moral here is simple: if you can not afford to do without it . . .
insure it!
If you are fortunate enough to have the option of collecting for your
vehicle damage from either your own insurance company or the other
party's insurance company, we recommend you utilize your own coverage.
We make this recommendation for three reasons . . .
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In most states, your insurance
company can not increase your future auto insurance policy
premiums for claims submitted which did Not involve negligence
on your part.
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Your own auto insurance policy
affords you Rights that you do Not have in your dealings with
they other party's insurance company. Chief among those rights
is your access to a quick and cost effective process for
resolving disputes. This will be discussed in greater detail in
question #11.
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In the event your vehicle is a
legitimate candidate for a Post-Repair Diminished Resale Claim,
you do not want to exhaust the coverage limits of the other
party's insurance just for repairing your vehicle. Post-Repair
Diminished Resale Claims are discussed further in
question #9. If the repair of your vehicle even begins to
approach $10,000.00, use your own Collision Coverage.
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Using your own Collision Coverage may mean an investment on your part
in an amount equal to your policy deductible. However, the other party's
insurance company will probably be happy to pay you your deductible . .
. up front! That would minimize the need for capital commitment on your
part while still leaving your options open. Now that we have dealt with
the "who" . . . let us now address the question of "How much".
Go back to the top.
How Much Will Be Paid ?
Generally speaking, the maximum that will be paid for damage to your
vehicle will be the amount necessary to replace your vehicle with a
comparable used vehicle (plus sales tax, title and registration fees).
This is referred to as the vehicle's ACV (Actual Cash Value). An
exception to this rule would be if you had purchased an RCV (Replacement
Cost Value) endorsement as part of the Collision and Comprehensive
Coverage on your own insurance policy. That would raise the maximum
collectable to an amount necessary to replace your vehicle with a
comparable new vehicle. These amounts would be collectable if your
vehicle claim were to be resolved on a Total Loss basis.
If the damage is not severe enough to Total your vehicle, you
are owed whatever amount is necessary to return your vehicle to its
pre-loss condition (and in some cases, pre-loss value). To learn
more about being paid for Diminished Value of your damaged / repaired
vehicle, go to our Auto
Diminished Value FAQs section.
If your vehicle is reparable, you need to be aware of Two Factors
that Could prevent you from receiving the best in quality
repairs. 1 - DRP Contracts. DRP
is the generic term referencing a Direct Referral Program. This
is where insurance companies and repair facilities have entered into a
business relationship whereby the insurance company receives concessions
from the repair facility in exchange for an insurance company referring
work to that facility. In some cases, those concessions are merely
administrative in nature. The repairing facility is left to determine
how the vehicle will be repaired. However, in other more restrictive
relationships, the repairing shop will have forfeited full control of
the repair process to the insurance company. Insurance company Bean
Counters will determine whether a damaged component will be
repaired, replaced or even addressed at all. It is this 2nd scenario
that poses a great potential for post-repair defects. We have even seen
some DRP contracts that do not permit the repairing shop to tell
the vehicle owner about improperly repaired (or unrepaired)
damage. Note: To say that all DRP
Shops will turn out Poor Repairs makes no more sense than to say all
non-DRP Shops will turn out Quality Repairs. The quality of
repairs you receive has more to do with a shop's dedication to customer
service than whether or not they may have entered into any DRP
contracts. All of the pro-Consumer shops listed in our
Local Body
Shops section are totally dedicated to your best interests and
complete satisfaction. 2 - AfterMarket
Crash Parts are imitation sheet metal, plastic or lamp components
made as Knock-offs to original factory components. Such parts are
inferior at every level, are Cheap in every sense of the word
and, in some cases, present a severe safety hazard. I-Can Does Not
Endorse the use of AfterMarket Crash Parts. I-Can has a very low
opinion of Insurance Companies that mandate the use of these inferior
parts. Such insurance companies are those requiring the more
restrictive DRP relationships as referenced above.
Note: Any I-Can Local Body Shop
found to have installed an AfterMarket Crash Part, without prior
approval of the vehicle owner, would be subject to immediate suspension.
Go back to the top.
How Many Estimates Must I Get ?
The short answer is one (1). As you are the owner of the damaged
vehicle, you have the right to select what shop will be making the
repairs. In point of fact, you will probably not even have to get any
repair estimates as most insurance companies have their own appraisers
to evaluate the damage to your vehicle. What you need to do is make sure
you have chosen a quality repair facility to do the work on your vehicle
and then just let that shop deal with the insurance company.
Go back to the top.
Must I Accept Used Parts ?
In short . . . yes! However, do not stop here. Read on to understand
the "why", "when" and "what" that put limitations on used parts.
Virtually every auto insurance policy I've ever read had an "LKQ"
clause. L.K.Q. stands for Like Kind & Quality. While this means that
insurance companies can pay for used parts in repairing your vehicle ,
this does NOT mean JUNK parts. If your four year old vehicle needs to
have a door replaced that was in good condition prior to the accident,
it would only be reasonable to replace the damaged door with an
identical door in good condition. The operative word in the LKQ clause
(for this discussion) is "quality". If your damaged door had soft,
pliable and intact weather-strips, so should also the "used" door. If
your damaged door had never been repaired before, you should not have to
accept a used door that requires any repair to be usable. If an
insurance company makes an allowance to replace your front end sheet
metal with an "LKQ" assembly, an allowance should also be made for
servicing the radiator, a/c condenser and replace the dryer and/or
expansion valve so as to restore the functional reliability of these
components. Used parts have a legitimate place in the repair of your
damaged vehicle. JUNK parts have NO place in the repair of your damaged
vehicle.
Junk parts have always been plentiful. However, the availability of
good quality used parts has been unpredictable. This sporadic
availability of acceptable used parts gave birth to a whole new option
for insurance companies to save money versus having to pay for OEM
(Original Equipment Manufacturer) replacement body parts. Now comes the
"economy parts" industry. Economy parts are replacement body parts that
are manufactured by someone other than the manufacturer of your vehicle.
They are generally referred to as "imitation" body parts. They are of
inferior quality and pose a potential hazard for future occupants of
your repaired vehicle. These parts may be of like "kind" but are clearly
not of like "quality" and you are not obliged to accept these parts
(unless your policy gives decision making authority to the insurance
company).
WARNING: some insurance companies have now begun to rewrite their
policies so as to give the insurance company the right to select the
repair shop and dictate what parts will be used in the repair of their
insured's vehicles. This is not usually disclosed when you purchase or
renew your auto insurance. Be aware of this potential problem and review
it with your agent. Read your policy. Don't find out too late that you
have waived your rights and surrendered control to your insurance
company.
UPDATE: April, 2000 - Bob Crawford (Head of Florida's Dept of
Consumer Protection) issued a "Directive" to Collision Repair
Facilities that severely restricted the use of After-Market
("Competitive") Body Parts and Required Full Disclosure of their use to
vehicle owners. The Insurance Industry has Sued the State
of Florida (and Bob Crawford, individually) in an attempt to get that
Consumer Protection Directive nullified. Bob Crawford and the
State of Florida are meeting their obligation to their Consumers by
Defending against the Insurance Industry's Attack.
Go back to the top.
What if Additional Damage is
Found During Repairs ?
This is not an unusual situation and does not usually pose a problem.
Quite often additional damage is found when the vehicle opened up. In
this situation, the repairing shop will simply notify the insurance
company who will probably send their appraiser back out to the shop to
re-inspect the vehicle and reach an agreed price increase to repair this
now disclosed damage. As long as your vehicle is being repaired by a
shop whose ethics and reputation you can trust . . . you will not have a
problem!
Go back to the top.
Is Frame Damage Reparable ?
In a word . . . yes! Some frame damage is reparable. The operative
word here is "some"! However, with the advent of "unibody" proliferation
and HSLA (High Strength Low Alloy) steel, frame repair and frame
component replacement has become a field of specialization. We now have
very sophisticated diagnostic and repair equipment requiring specially
trained technicians.
WARNING: If the repair to your vehicle involves frame damage,
make sure the repairing shop has a dedicated bench , a MIG welder and a
technician who is certified by "ASE" or "I-CAR" in frame repair and
welding. The technicians certificate should be on file at the repair
shop and available for your inspection.
Go back to the top.
Which Body Shop Should I Choose
?
If you have been reading all the text that has appeared above, you
are just beginning to understand how critical shop selection can be. You
have the right to select the shop that will be repairing your vehicle.
With that right comes responsibility. Do some homework! Remember, you
are going to be driving your repaired vehicle . . . not the insurance
company. Here are some things to consider when choosing a repair shop .
. .
- Shop should provide written warranty
- Shop should not use "economy" parts
- Ask to see "I-CAR" training certificates of technicians
- Shop should have MIG welders
- Shop should use "Weld-Through" primer
- Shop should have a "dedicated bench"
- Verify shop status with your State Chapter of the Collision
Craftsman's Assoc.
- Verify shop status with the Better Business Bureau
- Tour the shop - check finished jobs and jobs in progress
- Use this
Local
Body Shops link to access a list of our I-Can member shops
Choosing the right repair facility will be critical to your safety,
satisfaction and peace of mind when you get your repaired vehicle back.
Take the time necessary to make the right decision.
Go back to the top.
Do I Get Substitute
Transportation ?
If you have Rental Reimbursement coverage on your own policy the
answer is yes, regardless of who may have been at fault in the accident.
If you do not have Rental Reimbursement coverage and the accident was
your fault, the answer is no. If you do not have Rental Reimbursement
coverage and the accident was the other party's fault and they have
liability insurance, the answer is probably! You may have to
front the rental expense on your credit card and then submit receipts
for reimbursement. For add'l information on this subject, go to
"Personal Injury Claims" and review
Resolving Your
Rental Car Claim. If the accident was the other party's fault and
they had liability insurance but you did not incur a rental vehicle
expense, this does not mean their insurance company just saved some
money. There is such a thing known as a "Loss-of-Use Allowance" whereby
the insurance will pay you (typically $15.00 per day) for each day you
had lost the use of your damaged vehicle.
Go back to the top.
Will My Repaired Vehicle Be
Worth What It Was Before The Accident ?
Probably not ! If your vehicle was substantially damaged in the
current accident and has no history of significant collision
involvement, you probably have sustained a post-repair reduction in the
resale value of your vehicle. In most states you are entitled to be
compensated, by the other party's insurance company (if the other party
were at fault), for any reduction in the resale value of your repaired
vehicle. In some states, you can even collect for this damage from your
own collision carrier.
Generally speaking, there are three categories of Diminished Value
that may affect the resale value of your collision repaired vehicle:
- Inherent Diminished Value
This is the minimum Diminished Value that would occur simply because
your vehicle now has a significant collision history. This would
apply even if optimum repair results had been achieved.
- Insurance Related Diminished Value
This form of Diminished Value would be in addition to Inherent
Diminished Value. This would apply if and when an insurance company
has mandated the use of inferior replacement parts and/or
inappropriate procedural techniques in the repair of your vehicle.
In most cases, the savings realized by short-cutting the repairs to
your vehicle are more than lost by having to pay for Insurance
Related Diminished Value claims.
- Repair Related Diminished Value
This happens when the repairing facility fails to meet even the
minimum standards of repair quality for which they have been paid.
Repair Related Diminished Value is owed to you by the repairing
shop.
To collect for this damage will require a detailed report addressing
each of the Diminished Value categories outlined above. Said report
should be from a recognized authority who understands appropriate
collision repair techniques and is familiar with vehicle values in your
local market area. Letters from Used Car Dealers are not usually
sufficient.
Go back to the top.
How Are Total Loss Settlements
Figured ?
In insurance terms, the expression "Total Loss" simply means the cost
of repair + projected supplements + projected diminished resale value +
projected Rental Reimbursement expense exceeds the cost of buying the
damaged vehicle at its pre-accident value minus the projected proceeds
of selling the damaged vehicle for salvage. This is the definition of an
"Economic Total Loss". There is also what is known as a "Constructive
Total Loss". No mathematics required here. If a car drives off a bridge,
gets hit by a speeding train and then catches fire, that is a
"Constructive Total Loss".
Whether the Total Loss was "Economic" or "Constructive", most all
Total Loss Settlements are based upon the pre-loss ACV or depreciated
value of the vehicle as explained in question #2 of
this text. In order to define a realistic ACV it is necessary to find
vehicles comparable to the Total Loss vehicle and see how much those
"Comps" are being sold for. To that amount the insurance company should
add sales tax, title and registration fees. Here is where there seems to
be a wide disparage of opinions. The ACV of your Total Loss vehicle
could vary dramatically based upon the motivation of the appraiser
locating the "Comp" vehicles. As a matter of practical application, most
insurance companies use an independent automated market survey service
to locate "Comps" and make a value recommendation for the Total Loss
vehicle. As there are more than one such automated services competing
for work from various insurance companies, there is an implied incentive
to have a service provide lower priced Comps which will save insurance
companies money and theoretically encourage an insurance company to use
that service again in the future. All too often it seems that the true
market value of a given vehicle becomes a secondary consideration in
these relationships. It is for this reason that more and more consumers
are exercising their right to appraisal as outlined in their own
insurance policy. Explanation of the appraisal process is discussed
next.
Go back to the top.
What if I Do Not Agree With The
Settlement Being Offered ?
What you are about to read here is yet another reason why we
recommend you include Collision, Comprehensive and Rental Reimbursement
Coverage on your own auto insurance policy. Incorporated into your own
auto insurance policy is what is generally referred to as an Appraisal
Clause. Loosely translated, that means arbitration. If you and your
insurance company do not agree as to the settlement value of your auto
damage claim, either you or the company may invoke the Appraisal Clause.
That means you would hire an appraiser to represent your interests, the
insurance company would hire an appraiser to represent their interests
and those two [2] would hire a third appraiser to act as "umpire" or
"Referee". In the event the first two appraisers fail to reach an
agreement as to a reasonable settlement value, they would each submit
their respective work product to the third appraiser for determination.
If either of the first two appraisers agrees with the determination of
the third appraiser, the settlement amount has been resolved and is
binding on the insurance company. In this process, the insured pays the
fee of their appraiser. The insurance company pays the fee of their
appraiser. The insured and insurance company split the fee of the third
appraiser.
The appraisal process typically takes 2-6 weeks. However, most
insured need not forego receiving any settlement during this process. In
most cases, you are entitled to receive the last existing offer (the
"undisputed" amount) promptly. Failure of the insurance company to pay
you amounts to bad faith. For more information on bad faith go to
our HomeOwner Insurance
Claims page and read the
Bad Faith
Conduct text.
Submitting your claim settlement value dispute to appraisal can be
quick, cost effective and (more often than not) will result in a
settlement increase. Unfortunately, your right to appraisal exists only
in matters of dispute between you and your own insurance company. You
have no right to appraisal in matters of dispute between you and the
other party's insurance company. If the other party's insurance company
does not agree to submit your dispute to appraisal, your only remaining
option would then be litigation. That option is discussed further in
question #1 of this text.
Go back to the top.
