So our van got hit the other day. It was clearly and entirely the fault of the other driver, who has insurance.
If we had had an expensive car, they would have paid for the entire cost of the repair. Our van is… well, not worth a whole lot of cash. They say that the cost of the repairs exceeds the price of the van, so it’s totalled. They will buy the damaged van off me for its’ worth plus a couple of minor fees.
Thing is, the damage in pretty much entirely cosmetic, so we can keep driving it. This is where it gets weird. Because we are keeping the van, they will pay us the price of the van MINUS the salvage value they would have gotten if they sold it. I don’t understand at what point they own the rights to any of the worth of my van. Why are they less liable for my damage because my van is old?
Their liability is to restore you to your position from before the accident. They are entitled to minimize the cost to themselves of doing this. The cheapest result for them that leaves you in the same position you were prior to the wreck is for them to buy you a used van of comparable quality, and sell what’s left of yours for whatever they can get from the scrap metal place. At the end of that transaction, you would have an undamaged vehicle of similar age and value, and their net cost would be the price they paid to buy that vehicle, minus the money they got back from the salvage yard. Thus, that dollar figure is their legal liability.
Were they to pay you the total value of a replacement vehicle, and also let you keep the remains of the old vehicle, then at the end of the transaction, you’d be in a better position than you were before the accident–you could buy a replacement vehicle, and then sell the old van for scrap yourself. or make a lawn ornament, or whatever. They have no responsibility to bring you to a better situation, just to restore you to the original situation.
Because your monthly premium rates are determined, at least in part (and a big part) on the age and make/model of your vehicle. You haven’t been sending them as much money each month as a person who drives a 2011 Prius, so you won’t get as much when they total it.
In other words, they’re “less liable”, because they’ve taken in less money due to the age of your vehicle.
Welcome to the world of the “rolling total” as we say in the biz. The insurance co is only liable for the actual cash value of the damages. Since the cost to repair is greater than the van’s ACV, they now own your van. When the co takes it, they then salvage it to get something back. In essence you are now the buyer at the salvage auction, except there are no bids and they “sell” it back to you at what would essentially be the minimum generic bid (lots of guesstimations to get to this bid figure) at the salvage yard.
Enjoy the world of the salvage title.
SCSimmons, thank you. This makes much more sense to me now.
My liability rates are not set based on the condition or value of other people’s cars I plan to damage by my negligence.
I think you are mixing up comprehensive and liability insurance.
No, wait a second. They don’t own my van by dint of denting it. I never agreed to sell it. Why am I buying it from them? $2000 damage to a $20,000 van would be paid straight up, while $2000 damage to a $1300 van is paid $900. Their legal liability is to return it to pre-accident condition, right?
They are obligated to make you whole, which does not mean they have to do it the way you want them to. They can just pay you an amount that would enable you to buy a similar car to the one they took.
If you don’t think the amount they are offering is not the true value of the car, then you can refuse the settlement and take them to court.
The fundamental principle is that you cannot reduce the value of something below zero. So there is no such thing as a $2000 dent on a $1300 car.
If someone damages my $200 painting, I don’t think the insurance company should pay an art restorer $2,000 to fix it. They just give me $200 and tell me to go get another painting I like. If it is a $200,000 painting, they give met $2,000 to go hire a restorer, or hire a restorer themselves.
I think the problem people have with cars is that they know the condition of their particular car, and believe it to be better than any random car offerred for sale of the same make/model/age/mileage. That knowledge has some private value that cannot be monetized. When you sell a used car the market price represents the buyers suspicion that they might be getting a lemon. At the very low end, the transaction costs are likely to be significant relative to the cost of the car. But then so are the costs of litigating a claim, unless you can proceed pro se. Of course the insurance company will have lawyers who litigate for a living, so good luck with that.
Sometimes there just isn’t a fair solution.
I get that, but why would they then own the van? And I would not expect them to pay more than the van is worth to fix it, but I don’t see why my keeping the vehicle lessens their obligation to pay for the damage up to that point.
You either get
the van and an amount equal to the reduction in value due to the dents
or
the value of the van before the accident.
Why would you get the value of the van AND the van. That would make you better off than you were before. Not the job of the insurance company.
Forget **drewc’s **post about them now owning your van. It’s nonsense in any jurisdiction I’ve ever known. It may be a shorthand way to think about it, but it doesn’t reflect legal reality. The insurer of a car that hits you can’t magically gain title to your car as a consequence of the smash.
In this sort of case, the insurer offers to pay the owner of the car the value of the car, as long as the owner agrees to give the insurer what remains of the car. And commonly the owner would take that offer, and hence the insurer would end up owning the car. However, **drewc **is missing out the vital point that the insurer’s ownership of the car derives from the post-accident deal done between the owner and the insurer, not from the accident itself.
You can’t do $2000 worth of damage to a $1300 van.
You had an asset worth $1300. They are required to fix or replace that asset. At the end of the day, you need to own stuff worth $1300, because that’s what you started with.
Since it’s not possible to fix the van for $1300, they don’t have a choice. They have to replace it. They could hunt high and low and find you another van worth exactly $1300 and you’d be square. You would give them the broken van and they would give you the replacement. Note here that they give you a $1300 asset to replace the one that was destroyed, and you give them the destroyed asset. That makes you square with them. You need to give them the van for this to be fair.
The insurance company won’t hunt down a $1300 van and give it to you. They instead just hand you the cash, and let you replace the van yourself. This works out better for you, since it gives you much more flexibility. If you so choose, you can find a van exactly like the one you have and buy it, and be right back where you started. Or you can use that $1300 as a down payment on something better. Or you can just pocket the $1300 and spend it on something else if you so choose (maybe you already have another car and don’t care about replacing the van). The important thing is, to make you square with them, they take your van and give you $1300.
But you want to keep your van. It’s not fair to them to make them pay you $1300 and let you keep the van, since the van has some scrap value ($400 in this case). You would end up with $400 extra worth of stuff than you had when you started. They are only required to restore the value of what was lost, not give you any extra. But if they give you your van back (now a $400 asset), plus $900, that totals $1300 which is the financial worth that you started with. You started out with $1300 worth of stuff (one van worth $1300), you ended up with $1300 worth of stuff (one van now worth $400 plus $900 cash). Financially. you are right back where you started. It’s fair.
They’re not paying for the damage, they’re paying for a new van. So you get two choices.
Take $1,300, they keep the old van (which you don’t need anymore since you’re getting a new one for $1,300) or
Take $900 and keep the old van, which you can sell for $400 to get a new van.
Again, their responsibility is to get you to where you were before. Using Cheesesteak’s example numbers: If you owned a $20,000 van, which is now worth effectively $18,000 because it has $2000 in repair costs needed, they pay you $2000 to return you to the $20,000 total asset value. (You don’t need to spend the $2000 on repairs if you don’t want to–although if you have a lien, the lienholder might insist that you do.) If you owned a $1300 van, which is now worth $400 as scrap metal after the damage, they owe you $900 to get you back to your same total effective asset value.
From most people’s point of view, the insurance company is doing them a favor in taking the totaled vehicle off their hands. To get your actual $1300 in cash for a replacement vehicle of comparable value, you’d normally have to take their $900 check and then find yourself a scrapyard, negotiate the $400 purchase, get the remains towed there, etc. Since the insurance companies do this sort of thing all the time, it’s cheaper and easier for them to handle the scrap sale, so they’re willing to pay you your damages and buy the remains in one transaction, making it more hassle-free for the injured party. The only situation where it’s irritating to the car owner is if they, for some reason, want to keep their ‘totaled’ vehicle; eg. if it has sentimental value and they want to repair it anyway, or it’s such a heap that it’s still driveable after damage exceeding its value. (I used to have an old '72 Plymouth Satellite that was effectively totaled every time it ran out of gas–been there!)
That was it. I was thinking of the amount of the damage, not the amount needed to bring me back to where I was. Still feels unfair, but on paper it is logical. Thank you all.