Our law firm routinely receives calls from Oregonians who have had their vehicles declared a total loss and are wondering what to do. A “total loss” occurs when the cost of repairing a damaged vehicle plus the salvage value of the vehicle exceeds the market value of the vehicle. Essentially, insurance companies declare a vehicle a total loss when it is not economical to repair the vehicle. In our experience, a vehicle is generally declared a total loss when the repair costs equal or exceed 75% of the vehicle’s market value. If the vehicle is not declared as a total loss you could be looking at a diminished value claim.
It is also important to understand that in any car collision, two insurance companies can declare a vehicle a total loss. Your insurance company can declare your vehicle a total loss, provided you have collision coverage, or the at-fault driver’s insurance company can declare the vehicle a total loss.
Insurance companies will do everything they can to pay you as little as possible for your total loss. This is why it is imperative to understand your legal rights as they relate to a total loss.
When an insurance company declares your vehicle a total loss, they are obligated to pay you the actual cash value of your vehicle prior to it being damaged (also called pre-loss value). In return, you are obligated to transfer title of the vehicle to the insurance company. If you decide to keep your damaged vehicle, you are still entitled to a total loss payment, but it will be reduced by the salvage value of your vehicle.
Unfortunately, in our experience insurance companies rarely offer to pay the actual cash value of a vehicle declared a total loss. Instead, insurance companies attempt to pay as little as possible for your total loss claim. Insurance companies do this by using vehicle evaluation companies, or their own property damage appraisers, that invariably find absurdly undervalued “comparable” vehicles either listed for sale or just sold on the private market or through car dealers. The “comparable” vehicles then form the basis for the insurance company’s offer for your total loss.
It should come as no surprise that the “comparable vehicle” identified by the insurance companies is often very different from the vehicle declared a total loss. This is why it is crucial to demand an “evaluation report” from the insurance company. Insurance companies are legally obligated to provide an evaluation report and the report must tell you what factors were taken into consideration when appraising your vehicle’s pre-loss value.
You then need to compare the information listed in the evaluation report with what you know about your car. Make sure of the following:
1) the correct model is listed on the report;
2) the mileage is correctly noted;
3) all options are correctly identified;
4) recent upgrades or repairs are taken into account;
5) the condition of your vehicle's body is correctly noted; and
6) any prior damage is not over-exaggerated or emphasized in the report.
If you discover discrepancies in the evaluation report after reviewing it, bring it to the attention of the insurance adjuster handling your claim, preferably in writing. If you are dealing with your own insurance company, consider submitting a Proof of Loss if the adjuster refuses to increase the total loss payment.
A Proof of Loss is simply a letter sent to your insurance company that notifies it of the damages you are claiming. In your letter, cite ORS 742.061 and state that you will be proceeding accordingly if a fair settlement offer for the total loss of your car is not tendered in a reasonable period of time. This will allow you to potentially recover attorney fees if 6 months pass and your insurance company has still not adequately compensated you for your total loss. Include with the Proof of Loss any documentation that you believe justifies the higher valuation of your vehicle. Such documentation can be derived from:
1) quotes from car dealerships;
2) newspaper or Craigslist ads; and
3) guide books such as Kelly’s Blue Book or Edmunds.
It is important to remember that you do not simply have to take what is being offered by your insurance company. You have a legal right to bring a breach of contract action against your insurance company if you believe you are not being treated fairly.
Another option that is available if your insurance company is not offering fair compensation for the total loss of your vehicle is to invoke what is referred to as the “appraisal clause” in your insurance policy. Not all insurance policies have appraisal clauses, but most Oregon insurance policies do. Request a certified copy of your insurance policy. Review it to see if it includes an appraisal clause. If it does, consider invoking it and demanding that a third party appraiser evaluate the pre-loss value of your vehicle. If the 3rd party appraiser’s evaluation is for more than the insurance company is offering, the insurance company has to pay the appraiser’s bill and the amount he or she determines is the pre-loss value of your vehicle. All new insurance policies sold in Oregon after January 1, 2010 must contain an appraisal clause, and all Oregon insurance policies sold prior to January 1, 2010 must have the appraisal clause added when it is renewed.
Regrettably, many policyholders simply do not realize the protection afforded by the appraisal clause in their insurance policies. The appraisal clauses are often not invoked, even when the policyholder could materially benefit by doing so.
Both the Proof of Loss and Appraisal Clause can only be used if it is your insurance company that is being unreasonable. What then do you do if it is the other driver’s insurance company that is refusing to fairly compensate you for your total loss?
If the other driver’s insurance company is refusing to fairly compensate you for your total loss, there are fewer options because there is no contractual obligation imposed by Oregon Law. However, the other driver’s insurance company does have a duty to investigate the claim and make an undisputed total loss payment if liability is accepted and you agree to transfer title and possession of the vehicle.
If the other driver’s insurance company does make an undisputed payment for the total loss of your vehicle, but you believe your vehicle is worth more, you can still file suit to force the insurance company to be reasonable. If you intend to litigate the pre-loss value of your vehicle, ORS 20.080 may allow you to recover attorney fees if a proper demand is issued.
Total loss laws in Oregon are confusing and in many instances preferential towards insurance companies. However, by becoming an informed citizen you can shift the balance of power in your favor and obtain fair compensation for the total loss of your vehicle.