Auto Insurance Claims: Total loss with Lienholder - Third Party, total loss with lienholder on third party claim

Question
Hi Ron,

My car was recently totaled by another party. His insurance has accepted liability and have deemed my vehicle to be a total loss. I have a lien on the vehicle in which I owe more than the value of the vehicle.

The insurance company is telling me they have to pay my lienholder for this vehicle as they say the lienholder can come back against them if they dont receive payment for the vehicle. I just want the check to be sent to me.

Does his insurance company have to pay my lienholder? Is there any law that says they have to do this? Or are they just making things more difficult for me?

I am in Indiana.

Thanks,

Answer
Hello Jim,

Have the adjuster put it in writing and ask him to cite that law that requires this. Did you have to give the adjuster a copy of your loan papers? If there is no Indiana law on this and your vehicle loan papers don't address this issue, then the money goes to you and you are "on your honor" to continue the loan payments.

Think about this, if you were the lienholder, wouldn't you put a clause in your sales contract that requires insurance, and that the leinholders interest be paid if there was a total loss claim and that "you" the borrower agreed that the lienholder be paid separate if there was a total loss? Look in your loan papers first. The loan papers may also cite some Indiana statute on this.

I would think the insurer should name you and the lienholder, since both of you could sue the insurers policy holder and both of you have an interest in the vehicle. But your state law may override this.

I don't know Indiana law on this so you may want to repost this question in the law section for Indiana. Also, this question is simple enough that you could telephone any local "Accident Attorney" in the yellow pages and get a free answer. You may also get the law on this from a clerk in your local county law library for free. Also it is possible that the small claims court advisor, who is usually an attorney, and free in most areas, may be able to answer the question. Also take a look at your sales contract with your leinholder to see if it has a clause addressing insurance claims, or total loss claims.

I can tell you that if it was with your own insurer that the insurer would have to include the lienholders name on the check and the lienholder is probably named on the Declarations page and there may be a policy clause and or endorsement that talks about lienholders.

In liability claims, 3rd party claims, it is the insurers duty to protect their policy holder from someone who could sue their policy holder for negligence. But state laws may override this.

Also, perhaps if you can prove what is still owing on the car, the insurer will issue 2 checks, one to both you and the lienholder for the amount still owed, and one to you for the left over amount. Now if you are sure that your lien is over the value of the car, then this will not apply.

Make sure that the insurer's total loss valuation of your car is not lowballed. You can get help with this with an eBook on Total Loss Auto for Claimants at UClaim.com in the Products page in the Auto section.