Determining When a Vehicle is a Total Loss

November 29, 2016 - Articles

If you’ve been in a motor vehicle accident in Florida, then the at-fault driver’s insurance provider will conduct a thorough inspection of your car.  Should extensive repairs be required to fix the car, then the insurance provider may assess your car as a “total loss,” and will pay out the full value of the vehicle.  Should less significant repairs be required to fix the car, then the insurance provider may decide to pay only for the cost of repairs.

Though it may seem like having your vehicle declared a total loss is a good thing, in some cases you may be better off having the cost of repairs paid for.

Why?

The key differentiating factor between handling a total loss and a partial loss situation is the preservation of a diminished value claim.  If your car is declared a total loss, then you will not have a diminished value claim.  Diminished value claims only survive if the car has been repaired.

A diminished value claim is – as its namesake suggests – a claim requesting damages for a vehicle’s reduction in value after an accident.  Essentially, the plaintiff in a diminished value claim asserts that by virtue of the accident, the market value of the car has reduced.  Even if the car were repaired and returned to its original condition, the market would devalue the car because it has an accident history.

Thanks to the pervasiveness of various digital accident history report services, it’s easier than ever to check a car’s accident history.  As such, today’s cars tend to experience a much more significant “diminished value” effect.

In Florida, the at-fault driver’s insurance provider is required to pay out the diminished value claim linked to your car.  A diminished value claim can be worth anywhere from thousands to tens of thousands of dollars, depending on the model, age, and prior accident history of your vehicle. 

To recover in full on your diminished value claim, work with an experienced attorney who knows how to determine the diminished value of a car after an accident.

In Florida, insurance providers follow certain strategic guidelines for determining whether to declare a car as a total loss.

Strategic Considerations for Total Loss

Insurance providers base their determination of total loss on a balance of different factors, but quite simply, the insurance provider is trying to figure out how to pay you less.  They will therefore try to make the cheapest – not the fairest – decision.

Florida law requires that insurers pay out for total loss in the event that cost of repairs will equal or exceed 80% of the cost of replacing the vehicle with “one of like kind” (the same, or similar vehicle).  Still, insurers are given discretion to declare a total loss at a lower percentage. 

For example, even if the cost of repairs will only be 50% of the cost of replacing the car, the insurer may choose to declare a total loss and pay out the full value of the car.  Thus, the assessment of total loss in many cases is purely a business decision.

There are primarily two reasons why insurers will declare a total loss even if the cost of repairs is less than the Florida threshold: a) escalating repair costs; and b) shielding against a potential diminished value claim.

First, insurers are well aware that repairs can quickly get out of hand.  Initial estimates for repairs are likely to be inconsistent with the actual cost of repairs, as mechanics may tack on additional costs throughout the process.  If the insurer believes that there is a risk that the repairs could be complicated, and therefore that the cost of repairs might soar past initial projections, then a declaration of total loss may be the safest option.

Second, in some circumstances, the insurer will want to prevent the possibility of a later diminished value claim.  If the insurer pays only for the cost of repairs, then you could ostensibly “double down” on your damages.  Not only would they have to pay you for the cost of repairs, but you could file a diminished value claim and be entitled to damages for the lost market value of your car.  With a total loss declaration, insurers prevent any future diminished value claims.

Whether or not your car is declared a total loss, you should seek the support of an experienced team of attorneys who will ensure that you receive fair and full compensation for your damages.  Our team at Coffey Trial Law is committed to the success of your claims.  Contact us as soon as possible.