Before you go pointing the fraud finger at me hear me out… my questions are why isn’t #1 an option and where is #2 forbidden.
Background (Michigan law if it matters)… somebody bumped me in a parking lot. Got an estimate for $750. Got a check made payable to me and the body shop.
#1… I can live with the dent and would have been happy to “settle” the claim for a few hundred dollars without getting it fixed. Everybody wins. I was told that would never fly by others (not insurance people). Why not?
#2 … I don’t see anything on the check making it clear that the work needs to be done. Why couldn’t the body shop and I cash it without doing the work? Is it an agreement that he has made with every major insurance company or one that’s in my policy somewhere?
I’m in PA. I used to have an old Ford Escort that was hit multiple times; never my fault. I would pocket the money and patch things up only as far as needed to pass inspection. Totally legal, at least here.
The caveat with the state law might be important. Michigan has some unique auto insurance laws, although I’m not sure if any of them apply here.
In most states I’m familiar with, just taking the money and not getting the car fixed is no problem. If you’ve still got a loan on the car though, the terms of the loan will require you actually have the repairs done and so the insurance company will usually (but not always) only issue a two-party check to make sure you don’t just pocket the money.
If the car is paid off (and assuming there isn’t some sort of Michigan regulatory weirdness) you should be able to contact your insurance company and get them to cut you a check in your name only.
AFAIK, #2 is perfectly acceptable everywhere in the U.S. as far as the insurance company goes. If the car is leased or if you have a loan outstanding on it, the terms of that contract might specify that the work has to be done to restore the full collateral value.
Who made out that check? Why should the body shop get any of it? If the check was written by the owner of the other vehicle, I’d tell him to tear it up, and write one payable to you alone, if for no other reason than that you should have the option of using a different body shop. If the check was written by the insurance company, then ask them why the body shop’s name is on it, because maybe there are important laws that I am not aware of.
Like I mentioned above, the insurance companies issue a two party check if there’s a lien on the vehicle to make sure you actually get the repairs done. I don’t know if they’re legally required to do it, but it’s common practice. If you want to use a different body shop, you contact your insurance company and they issue another check with the different shop’s name on it.
Even if there were some situation where the insurance company issued a two party check when they didn’t need to, I’m not so sure a body shop is going to want to help you cash it.
In my experience there is no problem with pocketing the money. You car was damaged and you were recompensed for the damage. Getting it repaired is your option (this might be different under state law, but I can’t see the state requiring you to fix a car). However, if you don’t get it repaired and you have a subsequent accident, you will not receive compensation for the initial damage. Its like have an additional $750 deductible.
I’ve done this twice. Once I was in California, but shortly moving back to Michigan, and I got the payoff based on the (higher) California repair rates.
The other time I actually was in Michigan, although it was for paint overspray, not a dent.
Both checks were payable to me, though, not two-party checks.
If you own the car, you don’t have to get it repaired and can keep the money. However, if you are ever in another accident that causes damage to that part of the car, they will deduct whatever money they gave you from the new claim. (And probably more, they will say that because the part that wasn’t fixed weakened the other parts of the car.)
If you don’t own the car yet, your lender will require you to get it fixed. However, you get to choose the body shop.
I don’t know about your neck of the woods, but how it works out here is that the check will be issued to the body shop of your choice after the work is completed to your satisfaction. You won’t need to sign the check at all, you will just need to sign your name one the body shop’s form that says the work was completed.
The only time you will see a check, is if you own the car and tell the adjusters to issue it to you.
This is completely correct. In California, at least, we can also issue the check directly to you and your lien holder.
To be honest, we really don’t care if you get your vehicle repaired. We just need to pay you. Now, if you don’t repair your vehicle then get hit in the same spot and not tell, that’d be fraud. But not repairing for original damage isn’t an issue.
I’m so proud I got it right, and an expert in the field agreed!
I know this stuff because I used to drive a big old RED lifted Jeep that got hit all the time. I was driving an armor plated tank and people would run into me on a daily basis. (OK that was a lie…during the 3 years I owned it, I was only in NINE fender benders and they always happened when someone hit me while I stopped.)
I think that thing was cursed. It was a really fun ride, and cars bounced off it…but still.
Unless there is a loan on the vehicle, then the check would be made out to the leinholder or you and the leinholder. The loan issuer would then take the balance of the loan out of the insurance check and cut their own check to you for whatever amount was in excess of the payoff.
Presuming you didn’r owe more than the car was worth.
Thanks for all of the info everyone…I contacted my agent to see what my options are now. I’ll report back.
I’m interested in what would happen if the car was damaged later in the same area. If I got the car fixed, they’d pay the claim. Why would it be dif if I didn’t?
I can understand if the damage was less extensive the second time though. Seems like it would be difficult to tell…in fact, I think that this exact scenario was an example of why I was originally told that I had to get it fixed.
No answer yet, but on a semi-related matter as long as there is an expert or two in attendance…
On a recent People’s Court, the concept of loss of value came up. Basically, even after your damages have been repaired and covered by insurance, you could face add’l damages down the road when you try to sell the car and it is discovered that there was an accident. Potential buyers are likely to pay less than the car would otherwise be worth when they see that it was involved in a major accident.
The Court said that insurance companies will cover that loss of value and called it the best kept secret in the insurance industry. The TMZ guy on the street said that you need to check your policy cuz his doesn’t cover that kind of claim.
…or, you don’t fix the damage, and when you sell the car down the road, you’ll have to discount the selling price because of it.
Twice in the 1990s I was cut checks for minor damage to two different vehicles. One an older Subaru that was clipped in a parking lot by a delivery truck - that one didn’t even go through insurance; the company cut me a check directly. The other was a minor ding on the rear bumper of a work truck when someone rear-ended me. Both older vehicles and fully paid for.
In both cases I was assured that I was under no obligation to get the vehicles repaired because I was being compensated for loss of value - what I did with the money (minor amounts) was up to me. Made sense, and I kept the money both times without a qualm.
I had State Farm at the time, and this was in Colorado.
Diminished value is the phrase used to describe this. It is definitely becoming more of an issue as used car buyers are starting to treat CarFax as gospel, so even relatively minor accidents are affecting resale. There’s law firms out there that have made a niche of suing the insurance companies for DV when the other party is at fault, but most collision policies doesn’t cover it, or only offer it as an add-on. Some of them may, if you ask them, consider DV when deciding whether to total your car or not after a serious accident, but they won’t just give you extra money if they decide not to.
Who wrote you the check? Your insurance company, the other driver’s insurance company, or the other guy directly?
Michigan has unique auto insurance laws (it’s one of the only no-fault property damage states left) and I wouldn’t be so quick to assume that it’s OK to take the money without repairing your vehicle. If the check was cut by an insurance company, call them and talk to the claim handler in charge of your case. They’ll explain it all to you.
I got it right, and an expert in the field agreed!