What happens when there is a dispute regarding an insurance claim settlement? One party often files a lawsuit against the other, which can lead to costly and lengthy litigation.
When settlement amounts are in dispute, the parties involved become frustrated, communication deteriorates, and misunderstandings about coverage and limits increase, rather than diminish. Lines get drawn, and settlement negotiations come to a halt with no evident path to resolution.
The Appraisal Clause
This may be the time for either party to consider resolving differences through the Appraisal Clause provision found in most insurance policies. The Appraisal Clause establishes a procedure that allows disputed amounts to be resolved fairly and equitably by independent, impartial, and disinterested parties. This avoids and the excessive and burdensome time and costs of legal proceedings.
The Appraisal Clause, as defined in most policies, is straightforward and binding. Both parties agree to be bound by the final award. There is no need for lawyers, and the length of the process is governed solely by the complexity of the loss along with policy terms and conditions. The result of the Appraisal Clause is less formal than arbitration or mediation, and it’s far less costly and time-consuming than litigation.
To begin the process, each party, or “principal”, finds and appoints an independent, disinterested, and impartial appraiser. From that point the principals are no longer involved in the dispute resolution. Each appraiser must independently assess the loss-related damages and attempt to reach a consensus with the other appraiser for a reasonable and equitable resolution or settlement.
If the two independent appraisers cannot reach an agreement, they will submit their findings to a chosen umpire, according to the terms of the policy or agreement. The independent and disinterested umpire, selected and agreed upon by the two appraisers, will then review the information prepared and submitted by the two independent appraisers, and render their final decision. That decision is binding upon the participating principals.
To be an effective umpire, the umpire must also be impartial and willing to listen. They must ask questions, perform independent research, and be of good moral character and reputation. An umpire who has any vested or undisclosed interest in the outcome of the resolution must be disqualified and avoided. If necessary, Vehicle Value Experts will act diligently to help retain the services of a truly unbiased and independent umpire.
The most difficult task required by the Appraisal Clause is ensuring that each party’s chosen appraiser is truly independent, unbiased, and disinterested. Because our services are provided to individual consumer; self-insured organizations; risk management groups; insurance carriers; local, state, federal governmental and judicial entities; as well as legal professionals and their clients, Vehicle Value Experts’ activities remain unbiased and truly independent. Most other so-called “independent appraisers” do not provide services to such a wide range of parties.
At Vehicle Value Experts we believe that everyone deserves to be properly and fairly indemnified after suffering an insured loss. We do not believe anyone deserves to be over-indemnified for a loss. We pay insurance premiums like everyone else, and we have no desire to see our premiums increase because insureds profit from having accidents. The purpose of insurance is to return individuals or businesses to their pre-loss financial condition following a covered loss, and Vehicle Value Experts can play a critical role in that process.
The spirit of the Appraisal Clause demands that principals resolve disputes fairly, timely, and cost-effectively. When compared with mediation, arbitration, and litigation, Appraisal Clause disputes can be resolved relatively quickly, economically, equitably, and amicably .
We have found instances where one party selected an employee or long-term service provider of their company as their chosen appraiser. That is not a reasonable or prudent choice, because that appraiser cannot possibly be considered independent, impartial, or without prejudice. While such a selection may in rare instances be contractually allowable, it does not fit within the fundamental spirit and purpose of the Appraisal Clause. Such a selection may also open the imprudent principal to additional and avoidable liabilities. Vehicle Value Experts will work diligently to ensure the true spirit and purpose of the Appraisal Clause is maintained throughout the process.
Vehicle Value Experts’ representatives have served as appraisers and umpires in many Appraisal Clause-related matters. As a result of our interacting with a wide variety of independent appraisers and umpires across the country, Vehicle Value Experts has earned a reputation for fairness, expedience, and professionalism.
Vehicle Value Experts firmly believes the Appraisal Clause form of claim resolution provides a rational and prudent solution at a reasonable cost for those parties who participate in a practical and principled manner. We have successfully participated in thousands of Appraisal Clause activities across the country, and we stand ready to assist you.
The Role of Public Insurance Adjusters
In most appraisal clause language both the insurer and the insured have the right to invoke appraisal when the value of a loss is in dispute. In addition, a Public Insurance Adjuster (PIA) working on behalf of the insured can also invoke appraisal.
Unlike other insurance adjusters, a PIA works only for the insured. But what is the role of the PIA? Why might you choose to include a PIA in your settlement dispute, even after you have already obtained a certified appraisal from Vehicle Value Experts showing that your insurance settlement has not fully indemnified you for your loss?
Having a certified appraisal is necessary to resolve auto insurance claim disputes, but it is not sufficient by itself. Insurance companies have a formidable and daunting toolbox of tactics to delay, evade, and suppress challenges to their settlement offers.
To avoid the frustrations of fighting a battle with the odds stacked against them, many insureds hire professional licensed PIAs with experience in overcoming the tricks and delaying tactics of insurers. Vehicle Value Experts can work with a knowledgeable PIA of your choosing to smooth the process of seeing that you are made whole for your loss.
Only a licensed Public Insurance Adjuster (PIA), not a licensed appraiser, is legally able to step into the shoes of the insured and represent the insured all the way up to the courthouse steps. Should legal action become necessary, the PIA may also have an established plan to make the legal process proceed as quickly and successfully as possible.
At this time, we know of only one Public Insurance Adjuster Agency that specializes only in auto claims: Auto Claim Specialists. Auto Claim Specialists is licensed in most states, and Vehicle Value Experts has worked side-by-side with Auto Claim Specialists in thousands of insurance claim cases, including total loss, diminished value, and repair disputes.
Total-Loss insurance appraisals
If your vehicle has been in an accident and deemed a Total Loss, and the settlement offer from your insurer doesn’t seem fair, Vehicle Value Experts can appraise your vehicle’s true Actual Cash Value to either help you get a fairer settlement, or give you peace of mind that the settlement offer you received is fair. In addition, if you would prefer to keep your vehicle, and if it can safely and economically be repaired, a conclusive valuation report from Vehicle Value Experts may alter your insurer’s repair/replace decision.
Diminished Value insurance appraisals
Diminished Value (DV) is the loss in market value of a motor vehicle from its pre-wreck fair market value. Diminished value may be attributed and applied to various motor vehicle claims.
Diminished Value should in no way be confused with Depreciation.
Depreciation is defined as an anticipated decrease or loss in value sustained over time due to age, wear, or market conditions.
Diminished Value can best be defined as the result of a sudden and unexpected loss in economic value resulting from a sudden and unexpected loss or occurrence.
Who is Entitled to Diminished Value?
If someone else’s negligence causes your damages, you may be able to collect your loss from diminished vehicle value from the at-fault party or their insurance carrier.
Diminished Value Claims are recognized by most states.
“An insurer also may be obligated to pay a third-party claimant for any loss of market value of the claimant’s automobile, regardless of the completeness of the repair, in a liability claim that the third-party claimant may have against a policy holder. Further, an insurer may be obligated to pay first party claimant under the uninsured/under-insured motorist coverage provisions of the policy, for any loss of market value of the first party claimant’s automobile, regardless of the completeness of the repair.”
–April 6, 2000: Commissioner’s Bulletin #B-0027-00 by David Durden, Texas Department of Insurance.
“The difference between the value of the chattel (personal property) before the harm and the value after the harm or, at the plaintiff’s election, the reasonable cost of repair or restoration where feasible, with due allowance for any difference between the original value and the value after repairs, and the loss of use.”
–November 4, 1997: Legal Memorandum by John R. Dunphy, Florida Department of Insurance
“After an accident, and after repairs have been made, if a vehicle is worth less than it was before the accident, its value has diminished. That difference in market value is called diminution of value. Most auto insurance policies exclude coverage for diminution of value.”
–As per the State of Oregon, Division of Insurance.
“The difference in the dollar amount of what your car would have sold for without damage, and the amount it will likely sell for with the repaired damage.”
–From a “Fact Sheet” prepared by the Washington State Insurance Commissioner
If your damages are being paid by the “at-fault” driver’s insurance, you may be owed compensation for diminution of value. You must prove that the value of your vehicle diminished as a result of the accident, using evidence such as:
- Before and after photos
- Blue Book and/or NADA value
- CarFax Report, before and after
- Appraisals
- Receipt for the fair market value sale of the vehicle
Three Basic Types of Diminished Value
INHERENT DIMINISHED VALUE in motor vehicles is based upon the widely held belief that “once damaged, it will never be the same again.” This is attributed to vehicle owners’ common experiences over time, where “inherent” appearance and operational deficiencies often persist, even after proper and thorough repairs have been performed.
Additionally, inherent diminution of value occurs at the precise time of the loss and resultant damages. The true measure of a damaged vehicle’s inherent loss in value can be measured as the difference in the value of the vehicle before the loss, to the value of the vehicle after the loss and subsequent repair. Repair activities only aid in the recovery of a vehicle’s appearance, function, and value relative to the quality and thoroughness of the performed repair.
Inherent loss or diminution in value is real and continues to exist simply because, for the most part, no reasonable and prudent buyer is willing to pay the same price for a vehicle with a history of damages as they would for one never having sustained damages. It is an industry standard for appliance and electronic outlets to offer deep discounts for reconditioned appliances and electronics. Basic consumer thinking would equate the same thought process to a wrecked and repaired motor vehicle.
Inherent Diminished Value is based on public awareness that even if a damaged vehicle is repaired to the best of human ability, it may still exhibit enduring deficiencies and inconsistencies from the pre-loss condition of the vehicle prior to the wreck.
These deficiencies include, but are not limited to:
- Weaker structural components that appear cosmetically sound
- Impossible-to-duplicate factory seams, sealers, and finishes
- Telltale signs of repair, such as paint missing from the heads of bolts, etc.
- The unavailability of some factory decals and markings (VIN labels, for example)
- Undiscovered, and therefore unrepaired, damage throughout the vehicle
- The increased likelihood of a mechanical failure due to direct or kinetic damage
- The effect the repair could have on the future deployment of the SRS (air-bag) systems
- The unfeasibility of duplicating immersion or robotic applied rust-proofing techniques
- The loss of factory warrantees and eligibility of Certified Pre-Owned vehicle warranty programs
- Wreck Damage and Collision Damage noted on CarFax and Auto Check Reports
INSURANCE-RELATED DIMINISHED VALUE results from remaining flaws, defects, and damage which, through their involvement, the insurer failed or neglected to fully or properly address.
Causes of Insurance Related Diminished Value may include:
- The installation of inferior replacement parts
- Mismatched paint finish (e.g. lack of consideration for paint matching activities)
- Remaining repair-related residue, dirt, etc.
- The lack of replacement decals, labels, and markings (i.e. belt routing, engine displacement etc.)
- Overlooked or disregarded kinetic damage throughout the vehicle
- Overlooked or disregarded mechanical damages
- Overlooked or disregarded safety issues (e.g., inspection-testing of belts, SRS systems, etc.)
- No allowance for application of factory sealers, sound deadening, rust-proofing, etc.
- Gaps in body seems and door jambs
- Wind noise while driving
- Water leaks when washing or in the rain
When an insurer negotiates the settlement of an automobile damage claim, they will typically provide an estimate of repair which outlines the specific procedures, parts, and materials they are willing to provide for the claimant or insured. One of the following entities will generate this itemized listing of insurer-authorized repairs:
- An “in-house appraiser” who is hired as a full-time employee of the insurer, then trained to assess collision damage in accordance with the company’s policies and procedures
- An “independent appraiser” who is hired as a subcontractor to assess the damage on behalf of the insurer and does so based upon the insurer’s mandates and guidelines
- An employee of a “Direct Repair Program” (a.k.a. DRP) body shop, who agrees to prepare the repair estimates using the guidelines (parts, labor/material rates, etc.) established by the insurer in exchange for the insurer’s direct referral of customers
In some instances, the insurer will offer to pay based on the lowest of three estimates. This may cause the level of compensation to be based upon the estimator with the least experience, inspecting the vehicle for the shortest period of time, using the poorest repair techniques, or overlooking the most damage. Additionally, there are those less scrupulous repairers who may intentionally underbid the repair to “seize the keys,” only to submit a supplement for additional costs during the actual performance of repairs.
The installation of parts and materials as needed to restore a damaged vehicle to its pre-loss condition in safety, function, appearance, and value to the best of human ability has proven time and again to reduce claims for Diminished Value and other associated liabilities including, among others, costly re-repairs and avoidable loss of use.
REPAIR-RELATED DIMINISHED VALUE focuses primarily upon flaws and defects resulting from improper or insufficient repairs which the repairer had agreed to do and was paid to complete in a workmanlike manner. Poorly performed repairs cause a vehicle to be valued less than if it had been properly and thoroughly repaired.
A few examples of such repair-related flaws and defects:
- Poor structural or cosmetic welds
- Frame/structural repair listed on the insurance estimate, but not completed properly or thoroughly
- Telltale signs of repair, such as wavy body work, sand scratches, paint overspray, etc.
- Damage or removal of irreplaceable factory decals and markings
- Undiscovered, overlooked, or disregarded kinetic damage
- Undiscovered, overlooked, or disregarded mechanical and electrical damages
- Undiscovered, overlooked, or disregarded damages to and testing of SRS systems
- Failure to replicate factory appearing sealers, sound deadening, rust-proofing, etc.
- Remaining flaws (such as paint-runs) and defects (dirt, etc.) in applied finishes
- Mismatched color after “tinting” and “blending” processes were provided for
- Sanding scratches on moldings, glass, and trim
- Gaps in body seams and door jambs
- Wind noise while driving
- Water leaks when washing or during rain
Some consumers may be able to discover some remaining damage or repair-related flaws, as well as residual defects that may result from even a high-quality auto repairs. However, in many instances only the trained eye of a professional, experienced in the repair, purchase, or sale of motor vehicles can detect or uncover such remaining flaws and defects. Let Vehicle Value Experts give you our professional opinion about the status of your wrecked-and-repaired motor vehicle.
IMPORTANT NOTICE: Vehicle Value Experts does not provide legal or financial advice and strongly recommends each user of this site seek a qualified professional familiar with any applicable legal and/or tax issues. For further clarification regarding the use of this site please visit our DISCLAIMER.