After a serious accident, repairing a car might cost more than selling it. An insurance company might deem a car “totaled,” pay a settlement to the owner, and either keep the salvage or let the owner keep it.
Sometimes, an insurer can underestimate the pre-accident of the car accident and make a lowball offer to the owner for compensation. Rhode Island law has specific rules about when an insurance company can deem a car totaled. These rules provide a formula based on the fair market value and repair costs.
Legal advice can help you assess whether the insurer’s offer is fair. The Rhode Island car accident lawyers at Marasco & Nesselbush are on your side through the negotiation and settlement process.
How Do Insurance Companies Determine a Car is Totaled?
When an insurance company determines that a car damaged in an accident is not worth repairing, it deems the vehicle “totaled.”
Under Rhode Island’s Unfair Claims Settlement Practices Act, R.I. Gen. Laws § 27-9.1-4, an insurance company can automatically deem a car totaled if the repair costs are 75 percent or more of the car’s value before the accident. This law does not take the salvage value into account.
Under Rhode Island law, once your vehicle is deemed a total loss by the insurer. Once you have settled on the value, you can either keep or not keep the totaled vehicle.
Three numbers are essential to determine if a car is totaled:
- Actual cash value: Actual cash value, or ACV, is also called “fair market value” in Rhode Island. This value is what the car was worth just before the accident.
- Cost of repairs: This is the cost to fix the vehicle and return it to working condition.
- Salvage value: This is the value of selling the damaged car to a junkyard.
The law forbids insurance companies from deeming a car a total loss if the repair cost is less than 75 percent of the pre-accident ACV. However, if the vehicle owner requests that the car be deemed a total loss and provides express written authorization, the insurer can total the car.
For example, if your car has an ACV of $20,000 and repair costs of $10,000, your repair cost is 50 percent of the ACV. Since the repair cost is less than 75 percent of the ACV, the insurance company can only deem the vehicle a total loss in Rhode Island if you request and the insurer agrees.
Taking the vehicle’s salvage value into account can help you determine your vehicle’s asset value if you choose to keep it. For instance, suppose your car had an ACV of $20,000, $10,000 in repair costs, and a $11,000 salvage value. The salvage value would be greater than the ACV minus the repair cost. Thus, salvaging the car might make sense.
If you choose to repair a total loss vehicle, it must undergo a salvage inspection by Rhode Island authorities.
The personal injury lawyers at Marasco & Nesselbush can help you calculate what your vehicle damage might be worth. Contact us today for a free case review.
What Facts Might an Insurance Company Miss When Determining Value?
The insurance company must refer to a recognized guide of retail values, such as the Kelley Blue Book or National Automobile Dealers Association Resources for Consumers, as a starting point to determine what a car was worth before the damage.
These guides help estimate actual cash value based on the following:
- Sales figures for the make, model, and year of the vehicle in your geographic location
- Add-on features above the standard model
After that, a value estimator or claims adjustor can make adjustments to the value based on factors such as these:
- Upgrades or custom work
- Prior damage deductions
The Unfair Claims Settlement Practices Act calls these “condition adjustments” and says they must be “itemized, fair, and reasonable” and weighed using a recognized automotive guide.
Your insurance company must provide a transparent explanation of how it determined your vehicle’s ACV. It must specify what reductions in value it made and for what reason. These reasons must not be arbitrary; they must be fair and reasonable. A car accident lawyer can help determine if they made the right call.
When Might it Benefit You to Have Your Car Totaled?
You might request that your car be totaled even if the repair costs are less than 75 percent of the ACV.
If you were at fault for the accident, you would submit a claim to your insurer under your policy. If the other driver caused the accident, you would file a claim with their insurer.
If you were at fault, taking a total loss on the car might benefit you. If a car needs significant repairs, you might be without a vehicle for an extended period. Because of this inconvenience, you might prefer to have the car totaled and let the insurance company keep the salvage. The funds you receive can help you buy a new car.
The car accident attorneys at Marasco & Nesselbush can help you determine whether it might be in your best interest to have your car deemed a total loss.
When Might It Not Benefit You to Have Your Car Totaled?
Your insurance company might not offer a fair settlement for the value of your totaled car. You can end up spending more money than you should to get a new car.
You can keep the salvage, but the salvage value might be deducted from your insurance settlement. It is also a long process to have your car repaired.
Repairs can take up to five months. You cannot pick and choose which repairs to make, and a licensed salvage rebuilder in Rhode Island must perform them. The status of “reconstructed/rebuilt” will remain on the car title. If the car fails the salvage inspection, you can only sell it to a salvage yard.
A “total loss” on your car insurance history might affect your future ability to get car insurance and increase your premiums.
How a Lawyer at Marasco & Nesselbush Can Help
Marasco & Nesselbush is Providence’s trusted car accident law firm. We have one goal: to obtain the best results for every client.
A Marasco & Nesselbush lawyer can work directly with an insurance adjuster to negotiate a fair settlement for your car damage. Whether you want to keep the car or have it deemed “totaled,” we can help. We’ll analyze the circumstances, properly value your car, and negotiate with the insurer to get the maximum value.
If you have been in a car accident in which your car was damaged, contact us for a free case review.