REPLACEMENT VALUE- DIMINISHED VALUE
Bob Paladichuk
Well, we had an occurence last week where we were able to help a client settle a collision claim with an Insurance Company.
It started with a complimentary consultation on the phone with a lady who was involved in a collision where she was rear ended and the force of the impact sent her vehicle into the car in front of her. Her car suffered a major impact to the rear and minor damage to the front.
The police call was received by a tow firm that is also a Collision Shop. We understand that the shop took it upon themselves to take photos and prepare an estimate without getting the owners authorization or having a work order signed. They said that the car was repairable even though it was not torn down for a complete inspection and the visual damage was 62% of the Actual Cash Value of the car. This information came from an Independent Appraiser who was sent by the Insurance Company to appraise the damages.
She immediately had the car moved to her mechanic so that they could inspect for hidden mechanical damages. Her Insurance Company told her that if she did not get the car to a Collision Shop for the repairs, that her rental car coverage would be cut off.
The lady felt that because of the extent of the damages and the fact that a decision was made to repair it with out looking any further into the damages, that the car should be considered a TOTAL LOSS.
Enter ABConsult. We suggested that she have the car moved at her own expense to a qualified Collision Repair Centre of her choice. The local dealer that sells her brand of car did not have a Collision Centre on site and farmed out their work to local body shops. She chose a Centre that repaired multi brands and was part of a co-operative collision repair shop for several new car dealerships.
We met her at the Collision Centre and the staff willingly removed sone of the damaged parts so that we could have a better idea of the extent of the damages. The idea was that if the car was indeed repairable that they would proceed with the repairs so that the car could be returned to PRE-LOSS CONDITION. Secondly if we felt that the damages exceeded the value of the car that we would contact her Insurance Company and justify that the car was ECONOMICALLY BEYOND REPAIR.
We were able to compare the appraisal from the Independent Appraiser hired by the Insurance Company to the actual damages that we could see. The impact to the rear of the car damaged the rear panel, both taillights, right and left quarter panels and the trunk floor beyond repair. All 4 doors were out of alignment indicating misalignment of the main unibody. The appraisal had several hours allowed to repair the rear unibody rails. Both the right and left unibody rails were KINKED NOT BENT. The I-Car and ASE ( Automotive Service Excellence) standards of collision repair indicate that if a structure is kinked that it would need to be replaced not repaired in most cases.
The Insurance Company had the Independent Appraiser re-attend while we were doing our inspection and at that time agreed with our findings and recommended to the Insurance Company that the car be treated as a TOTAL LOSS. There were several other items that were missed on the appraisal.
Now that we had that problem out of the way, the financial issue arises. The car owner had "replacement value" insurance coverage on her policy. This is commonly refered to as OPCF 43 endorsement. Ask your Broker for a qualified answer on this.
The car was under 1 year old, had approximately 10,000 kms and was under warranty. If it was repairable and she went to trade it in or sell it privately, the severity of the damages would show up on a search in any of the "search" company's findings. This car would have a Diminished VALUE of what some experts say could be 10 to 30 %. This would be caused by a collision that was no fault of her own. Internet research of Ontario law and Insurance Company policy does not show cut and dried coverage or liability for DIMINISHED VALUE caused by a collision loss. PLEASE CONTACT YOUR INSURANCE BROKER TO HAVE THEM EXPLAIN COVERAGE FOR DIMINISHED VALUE, as we understand that this is not covered under a 43 endorsement.
Here is the example exposure figures from the insurer. Lets say the car cost $28,000. This could be the replacement value unless the cost of that new car had been reduced by the manufacturer. Since the time the car was purchased and 10,000 kms put on the car, the value of the car went down to $18,000. ACTUAL CASH VALUE.( according to the insurer). The damages were approximately $14,000. The "repair/total loss decision" should be based on the ACV not the replacement value.
So the Insurance Company pays out possibly $28,000 in replacement cost, instead of $14,000 to repair the car. Can you see the numbers at work here? The Insured says that she purchased coverage from this Company because she wanted protection on her investment for replacement value because she was borrowing money to buy the car.
So in the end, the Collision Shop got paid for the time they spent on disassembling the car for proper inspection, the insured settled with the Insurance Company. The car will be sold branded "salvage". The insured was satisfied with the outcome but not the channels that she had to go through to obtain the settlement.
Please do your research when you have a collision claim and remember that you are entitled to have your your car repaired at the qualified Collision Repair shop of your choice. Be diligent of signing work orders with out understanding what you are signing. Should you have a problem or need questions answered, ask your Certified Insurance Broker or contact a Qualified Collision Consultant. This blog expresses our opinions based on actual experiences.
Reader Comments (1)
Damages is car is quite common these days and it is because of the accident. Car insurance is quite helpful for a car operator after his/her car getting affected by accident. If, You have your car insurance policy and you are depositing the insurance premiums regularly in time, then you can claim for the insurance money of your damaged car.