Limit of Liability Language Can Help Turn Totals Into Fixable

Earlier this year, a Texas public adjuster used GEICO’s own policy language to prevent the insurer from totaling a vandalized Cadillac with an actual cash value greater than the cost of repairs.

The incident shows how a carrier’s contractually established liability limits and the common right to appraisal can be exploited by an auto body shop or a customer who would prefer not to total a vehicle. Particularly in Texas, which does not consider a vehicle a total loss until the repair bill reaches 100% of the car’s cash value.

Auto claims specialists recently provided us with data from over 700 total loss assessment claims that the vehicles were actually worth about $ 3,500 more than the insurance company said. had initially estimated. This discrepancy is large enough to suggest that invoking the valuation clause may reduce some ostensibly totaled vehicles to be repairable.

For example, say a body shop writes a car for $ 10,000 and the insurer values ​​the car at $ 9,000. It seems like a total loss. But the customer invokes the appraisal clause, and the insurer and consumer representatives conclude that the car is actually worth an additional $ 3,500. It is now cheaper for the insurer to repair the vehicle for $ 10,000 than to purchase it altogether for $ 12,500.

If the insurer’s policy limit of liability indicates that the carrier owes the lower of the two prices – the cost of repairing a vehicle versus the actual cash value of the car – then the store and the consumer may require such a vehicle to be repaired. (The insurer too, by the way.)

Cash surrender value and repair cost

Auto adjusters recently dealt with a total loss decision and valuation dispute that exemplify these concepts. In this case, GEICO had in fact initially estimated the cash value of the vehicle to be higher than the repair bill from a Texas workshop. The consumer’s invocation of the valuation clause produced an even greater disparity – yet GEICO initially insisted on totaling the vehicle.

GEICO had estimated that it would cost $ 6,649.21 to repair the vandalized 2014 Cadillac CTS. Scott’s Collision, based in Paris, Texas, calculated the cost of the repair at $ 13,600.79 (after tax).

Scott’s Collision owner David Norris called the damage to the CTS “just vandalism”. No vehicle safety issues existed, he said.

According to Auto Claims Specialists chief executive Robert McDorman, GEICO still totaled the vehicle – only for CCC in January to calculate its actual dollar value at $ 15,041.

“A quick glance at the calculations clearly shows that $ 13,600.79 is less… Yet GEICO resisted and told the insured that they had no options and that the vehicle was considered a total loss, ”McDorman wrote in an email on May 22. in the middle of the repair and had already ordered all the parts. Scott’s Collision referred the customer to us, we invoked the right of expertise in the context of the repair or replacement competition.

Norris said the customer viewed the CTS as their last vehicle and their last hurray. The customer felt, “I want to drive this car before I die,” Norris said.

Under the typical “right to appraisal” (ATR) process, the client or insurer can use a “valuation clause” in a policy to resolve a dispute over the amount owed in a claim. Both parties hire separate appraisers, such as auto claims specialists, to assess the total damage to the vehicle or repairable vehicle. If the appraisers of both parties agree on a dollar value, this amount is binding on the client and the insurer. If the reviewers fail to come to a resolution, they agree to hire an “arbitrator”, who also performs their own review. If both appraisers agree or if an appraiser and arbitrator agree on an amount, that value is binding.

In this case, McDorman and GEICO’s designated appraiser, SCA Appraisal, agreed in March that the CTS was worth $ 19,500, beating the estimate of CCC and GEICO by over $ 4,000 and the repair bill by nearly $ 6,000.

“CCC’s valuation solution provides customers with fair and market-oriented valuations,” CCC said in a statement. “CCC uses detailed data from local US markets to derive individual values ​​for the loss vehicle. “

Limitation of Liability

Still, GEICO refused to let the vehicle be repaired, according to McDorman. “GEICO has always maintained that the Cadillac will remain a total loss,” he wrote in an email.

Auto Claims Services sent GEICO an ultimatum to cover the remainder of the repair bill or it would recommend that the consumer take legal action. McDoramn cited the insurer’s own limits of liability as being compelling for the repair of the vehicle:


1. Our limit of liability for loss will be the lesser of the following:

a. Actual cash value of stolen or damaged goods.

b. Amount necessary to repair or replace the good with another of the same nature and quality; or

vs. Amount stated in the statements of this policy. (The original formatting is unclear.)

“GEICO is contractually obligated to comply with the appraisal process and pay the amount determined to be the lesser of the actual monetary value of the damaged property or the amount required to repair the property,” McDorman wrote in the letter.

The insurer finally accepted the compensation. “This is what we all want,” Norris said.

Norris said GEICO paid the vehicle owner the full full value of the loss anyway.

“They overpaid the claim for redress,” he said. The store issued a refund check to the customer.

“He drives his car,” Norris said.

Norris noted that the “beautiful part” of the result implied that GEICO covers all operations and rates for which the insurer says they “never pay”.

“They paid for everything,” he says. They paid for everything and then some.

GEICO did not respond to a request for comment.

“I’m not here to make amends for a total loss,” Norris said. Instead, he objected to situations where a vehicle is “portrayed and forced into total loss” but “they really are not.”

Scott’s Collision does not often encounter situations where a total loss is reduced to a recoverable loss as a result of the use of an appraisal clause. He said the store repairs around 35 cars a month and that “the vast majority of them are very repairable vehicles.”

However, “it does happen,” Norris said, estimating perhaps a dozen incidents in the past 1.5 years. He said he refers clients to McDorman, and “it has always been a success.”

Norris said he wanted stores to know that there are “a lot more vehicles to fix out there.” It’s about finding out what a customer’s really really got, “Norris said. If they want their vehicle fixed, it can be done and the stores will have more work to do. “It’s that simple,” Norris said.


Norris said he is currently fighting an insurer for a truck at risk of being declared total, even though he was “100% confident” that it will ultimately be resolved repairable. Although the repair will be expensive – “north of $ 40,000” – it is still thousands of dollars cheaper than the vehicle’s value, according to Norris.

But besides this compelling argument in favor of repairing the truck, there is another reason why the consumer would want to repair the vehicle. Norris said the owner bought the truck when 0% financing was available – a “good deal”.

Even though the insurer paid the owner an appropriate settlement for the total truck, “the consumer still takes it in shorts,” Norris said. Today’s vehicle market means consumers will never get such favorable financing terms, nor will they have an easy time finding a replacement truck, according to Norris.

“It’s a bad deal all around,” he said.

Meanwhile, the insurer could charge a good price for the total truck in the salvage market, according to Norris. Indeed, as the repair cost is lower than the vehicle’s cash surrender value, the the state of Texas would allow the carrier to sell the truck without a salvage title, even if it totaled it.

“There is no doubt that GEICO’s estimate was less than the actual cash value. GEICO probably would not have transferred the title to its name as a salvage title if the total loss had occurred,” wrote McDorman on the Cadillac claim. “Which means that this vehicle would have been marketed by the salvage auction as having title proper. The chances of this vehicle falling into the hands of an unreported rebuilder increase dramatically.…

“(I) it was in their best economic interest, regardless of what their LIMITATIONS OF LIABILITY stated in the policy. “

GEICO did not respond to a request for comment.

Norris suggested that a repair bill approaching the total loss threshold makes an insurer think, “What makes more sense to us? “

Featured Images: This vandalized 2014 Cadillac CTS was originally declared a total loss by GEICO despite having a cash value greater than the cost of repairs. (Provided by Scott’s Collision)

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