QuestionMy wife recently hit a tree with her 2001 Toyota Avalon. Thankfully, she was not hurt. It really was a low speed collison, but the estimate for damages is $11,500. The body shop says it might even be more than the estimate once they start getting into the repair. It is right on the fence of being totaled by our insurance company as the market value is between $11,000 to $13,000. Based on the damage and the cost we are somewhat hesitant to have the car repaired. My questions are "if our insurance company does not total the car and authorizes repair issuing a check for $11,000 ($500 deductible) to the repair shop & us, do we have to have the car repaired? Can we just have the repair shop sign the check to us? If so, what about the damaged car? Is it it still ours (we have title with no outstanding loan)? Can we sell the car for salvage parts?
Answer
Dear Michael,
You have all of the choices you mentioned above, and more. Here is a brief summary of five choices. Remember, though, that if your car did sustain any serious damage, especially structural damage, you will be bound to reveal that to your purchasers in most states. There is a seller disclosure form to be completed in most states now, so check that out before you start dreaming of passing off this car to someone else.
FIVE choices:
1. Keep the car if no structural damage and repair with used and/or non-original manufacturer's equipment (OEM) IF THE PARTS are NOT CRUCIAL to operations (i.e. a hood). Get a bid from the auto body shop and waive your rights to full repair. Good deal if it works. You get a gussied up car for free.
2. Keep the car and keep the repair check and figure out how much of it you want repaired or if you want to sell it for salvage. Not a good option in my opinion. Why do you want to be in the car parts business? Not a money maker for you, but a big hassle instead.
3. Let the insurance total the car and keep the cash for actual cash value. Fight for higher actual cash value.
4. Let the insurance total the car, but buy it back as salvage and repair it as you deem appropriate. Marginal choice: it has to be inspected and re-titled.
5. Let them repair the car, but make a claim for diminished value. Sorry, but this one is not going to be there if the choice between repair and totaling is close. They do not owe diminished value if they total the car, so they are likely to total the car instead of repairing it.
Furthermore, most insurers have by now removed any possibility of claiming diminished value in a first party claim such as yours by amending their own policies.
Write to me again if you truly believe you can make a diminished value claim on your policy and I will go through the rationale for the claim. In truth, it probably is not available for a five or six year old common car. Maybe a six year old Mercedes or Lexus could justify a claim, who knows even then?
You know, I think I will go ahead and pass along some of the elements of diminished value now so you can at least have them in mind. Here is what I can come up with as to the rationale for diminished value claims, which, as I say, are nowadays almost exclusively limited to third party (tortfeasor) claims.
Here are the factors that favor a diminished value claim.
1. Diminished value payments may be warranted where there is significant damage from an accident. There are three risks associated with the repair of this damage, and you may deserve compensation for these risks, BUT ONLY ON CONDITION THAT YOU CAN PROVE THEM.
2. First, there is the INHERENT RISK of diminished value whenever we have a big trauma and repair. It is very likely the case that one will have to reveal the facts of a big accident to any prospective purchaser of his vehicle. Even if you never would have to disclose this damage in your own state, there could be a record of serious repairs that was filed and will surely be picked up by outfits like www.carfax.com, which is used to check out serious damage repairs for prospective buyers. Thus, it is even more certain that a buyer will have knowledge of the fact a vehicle was in a serious accident. If the expected market value of this imaginary vehicle before the accident were $34,000 and a buyer had a choice of two twin vehicles, one of which had $7,000 worth of good competent repairs done to it, which one would be sold first? Or, conversely, what would the market penalize the one vehicle for having been in that serious accident?
3. Second, it makes a difference what was damaged: FLUFF OR STRUCTURE. What if the repairs were just sheet metal and trim and paint, as opposed to important structural members that were damaged? The existence of structural damage would reduce the value of our imaginary vehicle, even if the repairs were done competently. I don't think that bumper and exhaust repairs would really be on the same level of significance as structural repairs.
4. Third, what if the REPAIRS were NOT DONE to pre-accident standards? This would take an examination by someone knowledgeable, but it might be a good investment. They can spot things you and I would miss, such as paint being where it should not be, panel spacing not being even on trunk, hood, doors, etc, welds not being proper, or important parts being replaced with INFERIOR AFTER-MARKET FOREIGN-MADE PARTS.
That is just about it: the test is: "what would the market place do about the knowledge of the repairs?". In your case, I am not at all sure that the market would make a distinction unless the repairs were to important parts of the car. But, as I say, it is likely not available for first party claims.
I trust that my extra time here has produced some information that has been of value to you, and thus I would respectfully request that you locate the feedback form on this site and leave some feedback for me.
Best Wishes,
Dr. Settlement, J.D. (Juris Doctor)
http://www.SettlementCentral.Com
