OT: Insurance Law
I thought I'd throw this out on the board because we seem to have a lot of knowledgeable MGoAttorneys here.
Scenario:
~Person A and Person B live in an at fault state for auto insurance.
~Person A is rear-ended by Person B. Person B and their insurance company assume responsibility.
~Person B's insurance company deems the vehicle totaled due to the cost of repair exceeding 80% of their determination of the vehicle's fair market value.
~Person A doesn't have GAP insurance. The remaining loan amount is $13k, Persons B's insurance company says the car is worth $10k, leaving Person A owing $3k.
~In your opinion, does the 'Made Whole Doctrine' come into play here? As I understand it, the intent is to make the victim whole financially before the insurance company recoups any money. As I read this typically applies if you file a claim with your insurance company and applies before they get reimbursement from the offender's insurance company. But could that same concept apply to this scenario?
~If not, can Person A dig their heels in and fight the determination? Can they seek the $3k in small claims court from Person B directly?
To be clear, this isn't myself, just a friend at work. But this board has some bright legal minds and I though that I'd see what you thought.
August 18th, 2020 at 6:05 PM ^
It's all a scam to make insurance company executives a little bit more money. Just know that no matter what you'll get boned in the end.
August 18th, 2020 at 6:40 PM ^
What a refreshing take on insurance
Your input in greatly appreciated
August 18th, 2020 at 6:57 PM ^
He's right. Insurance is a essentially a ponzi scheme (much like our most of our banking and finance industry) - but avoids this dubious classification by by offering certain utility and some compensation in "disaster events" not just hope on financial returns.
That said, home and car insurance companies have long attempted to and will continue to argue out of paying as much of the claim as possible - it's a business after all. When they attempt to go too far, they can get sued, go bankrupt if it's systemic, and start over under a new name. Rinse, wash, repeat.
TLDR: Much better to own a car insurance company than expecting it to come through for you when shit hits the fan.
August 18th, 2020 at 7:40 PM ^
Insurance is a legal contract and the carrier will pay what they are legally required to. As a contract of adhesion counts tend to side with insured when it's a gray area. Carriers avoid paying out bogus claims and be glad they do. It helps keep your premium rates from rising even higher. The executive pay at some of the larger companies would be pennies or less when average across the millions of policies in force. But you know, the whole world is just conspiring against you. Sorry you got a bum agent
August 18th, 2020 at 10:04 PM ^
What are you wearing, "Jake" from State Farm??
August 18th, 2020 at 10:08 PM ^
I assume, then, that you don't buy anything but legally required insurance.
August 18th, 2020 at 10:19 PM ^
Your friend is responsible for his problem. He put himself in a situation where he owed more on his car than it is worth. It was entirely his decision.
August 18th, 2020 at 6:09 PM ^
I work for an insurance carrier, mostly handling Michigan claims (a no-fault state of course) but I do wade into 'tort' states once in a while too.
Without referencing a specific state law, I am of the opinion the 'Made Whole Doctrine' would not apply to your friend. In almost all instances (when it comes to tangible property) the insurance carrier owes for the Actual Cash Value (ACV) when it is beyond the point of repair - nothing more, nothing less. In the situation of your friend, they would most likely get roughly the same amount of money from either insurance company, assuming of course they don't have a fancy endorsement on their own policy, like new car replacement or a 'stated amount' for the car. You should probably have them check on that, but ultimately the fact your friend did not insure themselves as well as they could have and allowed themselves to be in a position where they were upside down on the loan is not the fault of the other party or their insurance carrier.
Of course, I will cede to an attorney, but I am pretty confident I am correct as a generality. I mean, I handled someone's claim where they owed over double the amount of money the car was worth (value $4,800, owed $9900) and I don't see how that's anyone else's fault. Sorry for the crap news.
August 18th, 2020 at 6:20 PM ^
Right, speaking in broad generalities, if I deprive you of the use of property worth $X, you can recover $X from me. It doesn't matter that the property secured a loan with a balance of more than $X.
This having been said, there may be some state-specific law or contractual term that I am not aware of, so this shouldn't be seen as legal advice for the OP or anyone else.
August 18th, 2020 at 11:04 PM ^
Makes sense. For example if someone rolled a bunch of negative equity into a new loan I couldn't see insurance covering that unless there was gap insurance.
August 18th, 2020 at 6:15 PM ^
I think your friend is out of luck. The most liability insurance will likely pay is the actual cash value of the damaged asset. The claimant being underwater on their loan won’t change that.
Edit- Griese beat me to it, and more eloquently. What he said.
August 18th, 2020 at 6:35 PM ^
I think there's some confusion here regarding the vehicles. There's two vehicle at play here. Depending on how the the policy is written, the only the physical damage portion of the vehicle cover the car on an acv basis. It really depends on the liability limits in this situation. Since it's no fault, persons A carrier would be paying the claim, and then subrogation against B. If carrier A determined the car is worth 13k, they can pay the full amount and surrogate against b. Chances are, and the reason this likely came up, is because A and B have already agreed up the value of the totalled vehicle. Now, even if it's a no fault state, I believe you can still bring a lawsuit direct lawsuit against person B if you feel there are additional damages they were not covered by the insurace. However its doesnt seem very practical given the $3k price difference. But I'm not a lawyer. I am in risk management though
August 18th, 2020 at 6:43 PM ^
I think you have a couple things confused: First, with respect to the liability limits, that would only come into play if the amount of damage caused was close to (or over) the limits. For example, if the person that struck their car was a tight ass and only carried $20,000 in property damage liability limits, the insurance company could only pay $20,000, even if the person rear-ended a new Ferrari and totaled it out. At that point, the Ferrari owner's insurance would have to pay for the car and seek reimbursement back directly from the person driving the car for any amount owed in excess of $20,000. Simply put, the insurance company of the at-fault driver owes either the ACV of the damaged property or their policy limits, whichever is less. You cannot sue for more than the car is worth. I mean, what would stop me or anyone for suing another party for $90,000 for my 2013 Chrysler 300 when it's probably worth around $8,000?
Secondly, I can almost guarantee the two insurances have not gotten together to put a value on the car and come to some agreement. Speaking from experience, if we have an accident that can be covered by either insurance carrier but they present it to us, we never seek out guidance from the other carrier for how much they would pay ahead of time; that all takes place when we are seeking reimbursement.
August 18th, 2020 at 7:11 PM ^
Fascinating, I've never worked in claims. I would think in a no fault state the first thing I'd do is contact the other insurance carrier and try and determine the value of the vehicle to avoid potential legal disputes. Wouldn't A pay the value to the client before subrogating against B ? Wouldn't they want to get the most for their customer? What if B doesnt agree to the value? They just eat the difference at that point? Arbitration?
August 18th, 2020 at 7:29 PM ^
Few things: In Michigan (no fault), the other carrier is never paying for the value of the other person's car - either up front or after the fact so there's no reason to get together with the other insurance company. In an at-fault state, trying to agree to terms with the other insurance company before any checks were issued sounds great but is almost impossible in practically, mostly from a customer service perspective as the amount of time to actually get checks issued would be greatly increased and no one, including the insurance carriers, wants that.
Second thing, most people assume we're going to 'fight' for them and they're right, but they're wrong about what we're going to fight for - let me explain. Insurance serves to fight for you if someone is coming after you (lawsuits) and to pay you for covered claims; we are not there to seek money for you from another entity or insurance carrier. Lots of people are deeply troubled when I explain that to them, but ultimately we do not have the resources to handle claims against our company and to handle claims for our insureds against another carrier.
With that being said, when the claim is over and we can seek reimbursement (depends on state law) from another carrier, we turn that over to a different department to handle. But you do raise a good point about what happens if another carrier pays out $10,000 for a car and we only value it at $9,000 - really our only options are negotiate, eat the difference or go to Arb. With regards to the latter, I have had zero luck in trying Arbitrate reimbursement requests from other insurance carriers. The arbitrators for whatever reason don't usually go for it, so our best realistic option is just to negotiate.
Side note, I really have enjoyed this thread and the fact there is something other than Covid to talk about.
August 18th, 2020 at 7:48 PM ^
Agreed, I dont handle personal lines. And I write in all states so ironically, I know very little about Michigan rules. But I do appreciate the info. Its great for people who are into this sort of thing
August 18th, 2020 at 7:58 PM ^
Thanks! It is kind of fun in my personal life (even though I don't sell insurance) to help out someone when I inevitably get a text that says, "can I call you with an insurance question?" although that usually means something bad has happened to them. Also, I have some good earning friends that have made poor insurance choices so it's been fun to educate them as well. Keep fighting the good fight on the writing end!
August 18th, 2020 at 9:05 PM ^
Risk management. . . Did I find another actuary on here?!
August 18th, 2020 at 6:44 PM ^
All that being said about no requirement to make them whole the amount they offered is negotiable. I would not just accept the first offer. Depending on how far they want to push it they could also start mentioning things like their neck still hurts, they had to take off work to deal with it, they are having trouble sleeping due to the trauma – their friends are telling them to talk to a lawyer. They can probably get some more money out of the insurance even if they don’t get made whole.
Note – obviously not a lawyer.
August 18th, 2020 at 9:47 PM ^
Low rent hustles aren't going to impress an insurance company. But it is worth checking the Blue Book on the car and thinking about whether you can prove their valuation is too low.
August 18th, 2020 at 11:35 PM ^
I don’t know about that. I have seen many examples of insurance paying out low rent hustles because it’s cheaper than fighting it. As an example my company was sued by a lady last year that merged into the lane of one of my colleagues was in. The incident resulted in a slight paint scuff on each car (Hertz did not even do anything about it)
The lady claimed damage from a previous accident (the adjuster said this was clearly BS) as well as pain/suffering and a bunch of other shit. The lady wanted 100k. It was all BS. Despite this the Hartford gave her 3k to go away.
In my experience insurance will usually come up a little in their first offer. If you give the impression you are likely to be a pain in the ass and delay getting the claim closed they may move a little more. You don’t actually have to go full hustle on it. They are not going to come up 3k in this case but you could get another grand out of them.
August 18th, 2020 at 7:02 PM ^
Did you ask person A if refinancing his car for a weekend in Cabo with a hooker was worth it?
August 18th, 2020 at 8:10 PM ^
Assuming the car is in fact worth 10k...B causes 10k worth of damage, why should they be on the hook for 13k? A suffered a 10k loss, why should they come out ahead and get 13k? A receiving a 10k settlement would make them whole financially... again assuming the car is in fact worth 10k.
Now if A thinks the car is worth more than 10k they could disputed it with proof (comparable vehicles sold in the area recently, not including dealer mark ups) The other option is for A to go through their own carrier and see what they determine the value to be, but it would probably be comparable to B. Most carriers use 3rd party vendors to determine value based on condition, mileage, location...etc.
August 18th, 2020 at 8:44 PM ^
Exactly. The fact that his friend is underwater on his loan is his friend's fault and has zero relevance in this matter. To the insurance company, the accident caused $10k in damages and that is what they'll cover. They will never give him an extra kicker because he had negative equity. Any incremental recovery will be if he is able to argue that the $10k replacement value was too low
August 18th, 2020 at 11:35 PM ^
I'll take that advise under cooperation, alright? Now, let's say you and I go toe-to-toe on bird law and see who comes out the victor.
August 18th, 2020 at 8:53 PM ^
+1 Informative
The old-timers here will get it...
August 19th, 2020 at 2:59 AM ^
Good one.
August 18th, 2020 at 8:54 PM ^
Your friend is most likely out of luck unless he tries to file for non-economic losses (pain and suffering) to cover the difference. Everyone would just leverage as much as they can over the value of their car and and make it gets hit if this was possible. If you somehow owe $30,000 on a car and it's only worth $10,000 you need gap or you are SOL.
August 18th, 2020 at 9:12 PM ^
Look, I’m no attorney, but even I know you’re Person A.
August 18th, 2020 at 10:23 PM ^
I’m far from an expert, but my understanding is that if the repair cost is greater than x% of total value, they’ll just total the car and get to the situation you’re discussing. Any chance your friend can get the $10k check, buy the damaged car from the ins co and get it repaired with the remaining proceeds? You don’t want to do that with structural damage, but if it’s just a lot of body work??
August 18th, 2020 at 11:39 PM ^
I’m not an insurance claims guy, but my late father was for decades.
If I asked him this question my guess is that his advice for me would be to go after the adjuster’s estimate of my vehicle’s worth (after lecturing me on why my debt is higher than the value of the vehicle):
1: Is the valuation of the vehicle correct? If you think not, then you’ll need documentation of meticulous maintenance records, low mileage, or anything else that would improve the value of your car.
2: Get a written appraisal of a similar vehicle from a dealer of the make of your damaged vehicle. For example, if your damaged car is an Audi, go to an Audi dealer and speak with the Pre Owned manager. Get this from 3-5 different dealers if you can and then negotiate with the adjuster starting with your highest estimate.
3: Invoke the Appraisal Clause in your policy, which is basically arbitration.
4: Did you lose any personal high value items in the accident, like IPad, IPhone, laptop? You may be able to get some additional money out of your homeowner/renter policy.
Then he would lecture me again on owing more on a vehicle than it is worth, life lessons, etc.
August 19th, 2020 at 3:00 AM ^
And what if you're using USAA which both holds your title and insures your car? Does that change anything? Asking for a work friend and I definitely don't share a login with Blizzardo.
August 19th, 2020 at 3:41 AM ^
Just pay the $3000.00. Don't get any court costs involved, which you or your friend will lose.