Six Frequently Asked Questions When Your Car is Damaged in a Baltimore Car Accident
1. Do I have the right to choose whether to repair, replace or receive payment for my damaged vehicle?
A. An insurance company does not have to replace your damaged vehicle with another vehicle.
B. Insurance company only has to pay to repair your vehicle or pay the fair market value of the vehicle, whichever is less. The choice is the insurance company’s choice and not the car owner.
C. If the vehicle can be repaired, and the cost of repair equals or is less than 75% of the actual cash value of the vehicle prior to the damage, the insurer is required to pay for repairs up to the coverage limits less any applicable deductible. The cost of any cosmetic repairs is not included in determining the cost of repairs.
D. If the insurance coverage available to repair the car which is not considered a total loss, is less than the amount necessary to fix the car, than the insurance company will pay out the policy limits it has available to fix your car. Then you can attempt to obtain from your own insurance the balance necessary to fix your car if your insurance coverage limit for property damage is greater than the amount of property insurance coverage the at fault driver has. Therefore, it is extremely important to make sure that the amount of collision coverage you have on the policy of insurance for your car is enough to cover the value of your car.
E. If your vehicle is damaged but can be repaired, you may elect to repair your vehicle or receive payment from the insurer for the damages.
F. If there is a bank lien-holder on the vehicle, the bank lien-holder will require that you repair the damage in order to protect its security for the loan, or the lien-holder may require that you pay off the balance of the loan if you wish to keep any portion of the money you receive from the insurance company instead of using it to repair the vehicle. This is how a bank protects their interest in making sure the loan is repaid.
G. If the damage to the vehicle cannot be repaired or if the cost of repairs exceeds 75% of the actual cash value of the vehicle, the insurer will declare your vehicle a “total loss”. When your vehicle is declared a total loss then the insurance company must pay you the fair market value of the vehicle before it was damaged.
H. You have the right to elect to retain salvage of the damaged vehicle. This means that you receive a payment and get a salvage title to your damaged vehicle. If you believe you can fix the vehicle for less than the insurance company has suggested it will cost to fix, this may be an option. However, beware often once a car repair has started other damage is often discovered which will make the repair of the car more expensive than originally anticipated and there will be no way to ask the insurance company for more money. Under those circumstances you will have put all of your money into the car to fix the salvage and the car still not be operable or safe to drive.
I. Please be aware that most insurers sell totaled vehicles for salvage in order to recover some of the monies they pay out. Therefore, the salvage value will be deducted from the amount you receive from the insurer in payment of the total loss if you decide you want to keep the damaged vehicle. Any money deducted for salvage will result in less money available for repair. Before you decide whether you want to keep the damaged vehicle, you should ask the insurer what the salvage value is and the amount of money you will receive if the vehicle is salvaged by the insurer as opposed to the amount of money you will receive if you keep the damaged vehicle.
2. Am I required to use a specific auto body shop for the repairs to my vehicle or can I choose the shop I want to use?
A. You may have your vehicle repaired at the shop of your choice. Maryland law prohibits an insurer or an adjuster from requiring that a certain repair shop be used or from recommending a particular shop without notifying the claimant or the insured that their vehicle may be repaired by the auto shop of their choice.
B. Once you pick a shop, the insurance company will have an appraiser look at the vehicle to determine the costs of repair.
C. The amount of the estimate will vary depending on whether insurance is paying for a repair. The insurance industry has worked out an agreed schedule of the amounts they will pay for repairs and parts and all shops that want to do business with the insurance companies are parties to this agreement. If you go to the same shop and insurance is not paying for the repair, then the estimate is likely to be much higher. This is similar to doctors and health insurance.
D. Once an appraisal of damages has been completed, then the shop of your choice can complete the work for the agreed upon price. If during repairs, additional damage is discovered, the appraiser will be called upon again to approve any supplement. If the additional damage is related to the accident, then the insurance company will issue a supplemental check to pay for the additional damages
E. If you use your own shop, and they complete the repairs in an unsatisfactory manner, and the insurance has paid for those repairs, getting the repair shop to make good on those repairs will be our responsibility and not the insurance company
F. Insurers have a list of pre-approved shops that they deal with. If you choose one of these pre-approved shops the insurance company will usually stand by the work done by the pre-approved shop and take the responsibility to make sure the shop fixes sub-optimal work.
3. May my insurer repair my vehicle with used parts?
A. An insurer is not required to pay to have your vehicle repaired with original equipment manufacturer (OEM) parts unless the policy provides this coverage.
B. Most policies only pay for repairs with parts of like kind and quality. Parts of like kind and quality can include after-market and used parts.
C. However, if your policy only provides coverage for after-market or used parts, and you want to use OEM parts, you can use them if you pay the difference in the cost of repair.
D. If your vehicle is being fixed by the at fault drivers insurance, then you are likely to approve parts of like kind and quality can include after-market and used parts.
E. If your insurance policy allows for original equipment manufacturer (OEM) parts and the at fault party only allows Parts of like kind and quality can include after-market and used parts, you may want to use your insurance and let them subrogate the claim against the other insurance company.
4. What if my insurer determines that my car is a “total loss”?
A. An insurer may determine that your car is a “total loss” if the cost to repair the damage (excluding cosmetic damage) equals or exceeds the vehicle’s actual cash value.
B. An insurer will determine what your vehicle’s actual cash value was by establishing its actual cash value immediately before the damage from the accident occurred.
C. If you are the insured under the policy and your insurer has determined that your vehicle is a total loss as a result of a covered claim, your insurer has 10 business days to make you a cash settlement offer.
D. If your vehicle was stolen and is not recovered, your insurer is required by law to make you a cash settlement offer for your vehicle within the later of 30 days after receiving notification of the claim or the time period provided in the policy. During this 30- day period the insurance will determine if in fact the vehicle was actually stolen. In addition, efforts will continue to try and locate the vehicle.
E. If you are not the insured, but are a claimant under another’s insurance policy, and the other driver has been determined to be at fault, the insurer for the other driver has 10 days to make you a cash settlement offer for your vehicle after it has completed its investigation, determined its insured was at fault for the accident, and determined that your vehicle is a total loss.
F. The offer from the insurer must be in an amount that reflects the retail value for a “substantially similar motor vehicle” using a nationally recognized valuation manual or computerized data bank that produces statistically valid fair market values for a substantially similar motor vehicle.
G. A “substantially similar motor vehicle” means a vehicle that:
1. is the same make and model as the damaged vehicle;
2. is the same year as, or more recent year than, the damaged motor vehicle;
3. contains at least the same major options as the damaged motor vehicle;
4. is in a condition substantially similar to or better than the condition of the damaged motor vehicle immediately before the damage occurred; and
5. has mileage that is within the greater of 4,000 miles or 10 percent of the mileage on the damaged motor vehicle at the time that the damage occurred unless the vehicle is limited in production, specialty in nature, or older than 10 model years at the time of total loss.
H. Insurers refer to the National Auto Dealers Association (NADA) Official Used Car Guide, Kelley Blue Book or CCC database to determine your vehicle’s fair market value. The offer will be based on that value plus the applicable taxes and transfer fees, less the amount of your deductible, if applicable and only up to the limits of coverage on that vehicle. If there is insufficient coverage, you can attempt to make a claim for the difference under your own policy.
I. Alternatively, the insurer may determine the fair market value of your vehicle by obtaining a quote for a substantially similar vehicle from a qualified dealer at a location reasonably convenient to you. If the insurer uses the quotation to make its offer, it will add the applicable taxes and transfer fees and then subtract the deductible, if applicable and only up to the limits of coverage on that vehicle. If there is insufficient coverage, you can attempt to make a claim for the difference under your own policy.
J. If a vehicle is damaged by collision, fire, flood, accident, trespass, or other occurrence to the extent that the cost to repair (excluding cosmetic damage) the vehicle for legal operation on a highway exceeds 75% of the fair market value of the vehicle prior to sustaining damage, by law, the vehicle is considered “salvage.”
K. If you decide to keep the damaged vehicle for salvage, there will be a deduction in the settlement offer for the amount of the vehicle’s salvage value.
L. You may request that the insurer put, in writing: (1) its settlement offer; (2) an explanation of the method used to arrive at the offer; (3) a detailed explanation of the calculation of the motor vehicle’s total loss value, including the calculation of any value added to the motor vehicle by options; (4) a list of all the deductions that will be made from the value of the motor vehicle; and (5) a copy of the inspection guidelines relied on to determine the condition of the vehicle at the time of the loss.
M. An insurer is required by law to respond within 7 business days of your request. Upon receipt of the insurer’s written settlement offer, you may either accept or, in writing, reject the offer and make a counteroffer based on quotes you have gotten from dealers for a substantially similar motor vehicle, ads you have found for a substantially similar motor vehicle, or any other source of valuation for a substantially similar motor vehicle.
N. If you make a counteroffer, the insurer has 5 business days within which to accept your counteroffer or to provide you with a written explanation as to why the information relied on in making your counteroffer does not provide a more accurate valuation of the vehicle than the information relied upon by the insurer in making its offer.
O. Once you accept a settlement offer, the insurer will ask you to send it a copy of the vehicle’s title. After the insurer receives the title, it will issue a check in the amount of the offer. If there is a lien-holder on the vehicle, the lien will either be paid directly, or a joint check will be issued to you and the lien-holder.
P. If you choose to retain a damaged vehicle that has been declared “salvage”, the insurer will request that you send your original title before it will send you a settlement check. The insurer is also obligated to notify the MVA that the vehicle has been declared salvage and that the owner is retaining possession of the vehicle. The MVA will then issue a salvage certificate to the owner.
5. What if I disagree with my insurer’s decision to total my vehicle?
A. It is important to remember that when you purchase insurance, you enter into a contract and are bound by its terms. However, you have options available if you do not agree with the decision to declare your vehicle a total loss.
B. If all attempts to resolve the issue of whether your vehicle is a total loss are unsuccessful, many policies provide the option of appraisal. You should check your policy to see if this is an option, and if there are any requirements.
C. You may hire an independent appraiser to evaluate your loss, and your independent appraiser, along with the insurer’s designee, would then select a person to referee the dispute (an umpire). Agreement by any two establishes the amount of the loss.
6. What is diminished value (diminution of value) and can I make a claim for it?
A. Diminished value or diminution of value occurs when a vehicle loses value after it has been damaged in an accident and is subsequently repaired.
B. An automobile may suffer from diminution in value even if the repairs have been done properly.
C. Whether you can present a claim for diminution in value depends on who is at fault for the damage to your vehicle.
1. Generally, if you are at fault for the accident and you are making a claim pursuant to the collision coverage on your auto policy, you should check your insurance policy to see if diminished value is covered or excluded. Most automobile insurance policies exclude coverage for diminished value.
2. If you were not at-fault for the accident and the at-fault driver’s insurance company has accepted liability, you can present a claim for diminution in value after all the repairs have been completed. In this scenario, you can make a claim because the claim is being paid pursuant to the liability section of the at-fault driver’s insurance policy (rather than under the collision coverage), and the insurance company must pay all sums for which its insured is legally liable.
3. Maryland case law recognizes diminution in value as a valid claim under these circumstances. Simply advising the insurer that you want to claim diminished value is not enough. The claimant must be able to provide proof of diminished value.
4. A claimant can provide proof of diminished value in a number of ways. Two common ways are to:
a. obtain a written estimate from a sales manager at an automobile dealership that indicates what would be offered for the vehicle if it had not been in an accident, and what would be offered now after the accident and repairs. The difference, if any, would represent the diminished value; or
b. hire an independent appraiser to conduct an appraisal of the vehicle to determine the amount of diminished value.
c. Once you have gathered your proof, this information should be presented to the insurer in support of your claim for diminished value. The company can either accept your evidence and pay you, or reject it in favor of its own appraisal.
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