A Texas public adjuster earlier this year used GEICO’s own policy language to prevent the insurer from totaling a vandalized Cadillac with an actual cash value over the price of repairs.
The incident helps guide you a carrier’s contractually established liability limits and joint right to appraisal can be leveraged by a car repair shop or customer who’d prefer not to total an automobile. Specifically in Texas, which doesn’t consider a vehicle a total loss before the repair bill reaches 100 percent from the car’s cash value.
Auto Claim Specialists recently provided us with data from more than 700 total loss appraisal clause actions found vehicles were actually worth around $3,500 a lot more than the insurance company had initially estimated. That discrepancy is large enough to point out that invoking the appraisal clause can flip some ostensibly totaled vehicles to being repairable.
For example, let’s say an appearance shop writes a car for $10,000 and also the insurer values the car at $9,000. It looks a total loss. But the customer invokes the appraisal clause, and the insurer and consumer representatives conclude the car’s actually worth another $3,500. It’s now cheaper for that insurer to repair the automobile for $10,000 rather than total and purchase it for $12,500.
If the insurer’s policy liability limit says the carrier owes the lower of the two prices — the cost to repair an automobile in comparison to the car’s actual cash value — then the shop and consumer can demand this type of vehicle be fixed.
Cash value and repair cost
Auto Claims Specialists recently handled an overall total loss decision and valuation dispute which illustrates these concepts. In this instance, GEICO had actually estimated a greater vehicle cash value than a Texas shop’s repair bill immediately. The consumer’s invocation of the appraisal clause produced a level wider disparity — yet GEICO at first still insisted on totaling the vehicle.
GEICO had estimated it might cost $6,649.21 to repair the vandalized 2021 Cadillac CTS. Paris, Texas-based Scott’s Collision calculated the repair cost at $13,600.79 .
Scott’s Collision owner David Norris described the harm to the CTS as “solely vandalism.” No doubt of vehicle safety existed, he said.
According to Auto Claims Specialists managing director Robert McDorman, GEICO totaled the automobile anyway — simply to have CCC in January calculate its cash value to become $15,041.
“A quick look at the math clearly shows $13,600.79 is less … still, GEICO resisted and told the insured they had no options, and also the vehicle was being deemed an overall total Loss,” McDorman wrote in an email May 22. “Scott’s Collision was at the center of the repair coupled with already ordered every part. Scott’s Collision referred the customer to us, we invoked the right of appraisal in the contest from the repair or replace.”
Norris said the client viewed the CTS as his final vehicle and last hurrah. The customer felt, “‘I wish to drive that car before I die,'” Norris said.
Under the typical “right to appraisal” process, either the client or insurer can use an “appraisal clause” within a policy to resolve a dispute over the balance due in a claim. Both parties hire separate appraisers, such as Auto Claim Specialists, to evaluate the totaled vehicle or repairable vehicle damage. If the two sides' appraisers agree on $ 1 value, that quantity is binding on the customer and insurer. When the appraisers can't arrived at a resolution, they agree to hire an “umpire,” who also conducts their very own assessment. If the two appraisers agree or one appraiser and the umpire agree with an amount, that value is binding.
In this case, McDorman and GEICO’s designated appraiser SCA Appraisal in March agreed the CTS was worth $19,500 — beating CCC and GEICO’s estimate by a lot more than $4,000 and also the repair bill by nearly $6,000.
“CCC's valuation solution delivers fair, market-driven valuations for purchasers,” CCC said inside a statement. “CCC uses extensive data from local markets across the U.S. to derive values which are individual to the loss vehicle.”
Limit of liability
Yet GEICO refused to allow the automobile be repaired, according to McDorman. “GEICO still argued the Cadillac would remain an overall total Loss,” he wrote in an email.
Auto Claims Services sent an ultimatum to GEICO to pay for the rest of the repair bill or it might recommend the customer take legal action. McDoramn quoted the insurer’s own limits of liability as compelling vehicle repair:
“GEICO is contractually necessary to comply with the appraisal process and to pay the sum going to be the lesser of the actual cash value of the damaged property or the amount essential to repair the home,” McDorman wrote in the letter.
The insurer ultimately agreed to the repair. “That’s what we should all want,” Norris said.
Norris said GEICO paid the vehicle owner the whole total loss value anyway.
“They overpaid the repair claim,” he explained. The shop issued a refund return towards the customer.
“He’s driving his car,” Norris said.
Norris noted the “beautiful part” concerning the outcome involved GEICO covering all the operations and rates the insurer says they “never pay for.”
“They paid everything,” he said. They paid it all and then some.”
GEICO did not react to a request comment.
“I’m not here to fix a total loss,” Norris said. Instead, he expressed objection to situations in which a vehicle is “portrayed and forced into total loss” but “they’re not really.”
Scott’s Collision doesn’t often encounter situations in which a total loss is flipped back to a repairable one following a utilization of an appraisal clause. He said the shop fixes about 35 cars per month, and also the “great majority seem to be very repairable vehicles.”
However, “it does happen,” Norris said, estimating perhaps a dozen incidents over the past 1.Five years. He explained he refers customers to McDorman, and “it’s been a success.”
Norris said he wanted shops to know there’s a “much more vehicles to repair out there” It’s about discovering exactly what a customer “really truly wants,” Norris said. When they want their vehicle fixed, this can be achieved, and shops will have more work. “It’s that easy,” Norris said.
Learn more about appraisal clauses at Repairer Driven Education
Incentives
Norris said he’s currently battling an insurer over a truck vulnerable to being declared an overall total, though he was “100 percent confident” it’ll ultimately be resolved repairable. Though the repair will be pricey — “north of $40,000” — it’s still 1000s of dollars cheaper than the vehicle value, according to Norris.
But on top of that compelling argument for repairing the truck, there’s another reason the consumer would need to fix the vehicle. Norris said the dog owner bought the18 wheeler when 0 percent financing was available — a “good deal.”
Even if the insurer paid the owner an effective settlement for the totaled truck, “the consumer continues to be taking it in the shorts,” Norris said. The hot vehicle market right now means the consumer would never get financing terms that good, nor are they going to have an easy time finding a replacement truck whatsoever, based on Norris.
“It’s a bad deal all around,” he said.
Meanwhile, the insurer could command a good price for the totaled truck on the salvage market, according to Norris. Actually, because the cost to repair is lower than the vehicle’s cash value, the state of Texas would enable the carrier to market the truck with no salvage title — despite totaling it.
“There is little change doubt because the GEICO estimate was underneath the Cash Value GEICO would most likely haven't transferred the title into their name as a salvage title when the Total Loss went through,” McDorman wrote of the Cadillac claim. “Meaning this vehicle would have been marketed through the Salvage Auction as using a clean title. The chances of the vehicle falling in to the hands of a under reputable rebuilder increase substantially. …
“t was in their best economic interest regardless of what their LIMITS OF LIABILITY within the policy stated.”
GEICO didn't respond to a request for comment.
Norris suggested that a repair bill creeping up close to the total loss threshold tempts an insurer to consider, “‘Why is more sense for us?'”
