As VC readers know, I was in a car accident a few weeks ago. As a consequence, I received a wealth of solicitations from lawyers and chiropractors. I also learned how total loss valuation works in practice when an insurance company decides that your vehicle is not worth repairing and should be scrapped — and that this practice does not always conform to the relevant legal requirements. The sordid details are below the jump, but my bottom line is that it pays to investigate how an older vehicle was valued before accepting an insurance company’s estimate. If my experience is any indication of how vehicle valuation is typically conducted, lots of people may not be getting what they are owed.
Up until the accident, I had been driving a 2002 Saab 9-3 SE hatchback. I kept the car in fairly good condition and, like many owners of older cars, had an attachment to my vehicle. As a consequence, disappointment with the insurance company’s valuation of my car was inevitable. Sure enough, when I received the call informing me that the damage to my car was sufficiently extensive that USAA (the at-fault driver’s insurance company) had determined I had suffered a total loss, I was dismayed at what they told me it should cost to replace my car. The figure they initially gave was quite a bit below my car’s bluebook value, so I asked how the value was determined. This is where the fun began.
I was informed that USAA, like many insurance companies, contracts with an independent company (CCC One) to perform vehicle valuations, and that these valuations are based upon local market research. Basically, CCC One looks at the sale prices of equivalent vehicles in local markets and uses these sale prices to estimate the cost to replace a vehicle that is to be scrapped, accounting for mileage, options, etc. This seemed fair enough, but there was a problem. When I hopped on auto sale websites to see what 2002 Saab 9-3 SE’s were selling for, every vehicle within 100 miles of where I live was being offered for substantially more than what CCC One estimated my car was worth. I told this to the adjustor, and asked to see some documentation of the adjustment. And, as it happens, Ohio law requires insurance companies to maintain documentation on how a vehicle’s value was determined and to share such information with the claimant.
I soon received a copy of the valuation report, and boy was I in for some surprises. The Ohio Administrative Code requires the value to based upon comparisons with comparable vehicles offered for sale in the local market, if such vehicles are available. Yet that’s not what CCC One did. For starters, even though there were lots of 2002 9-3s to use for comparison, about half of the vehicles used for comparison were 2003s. Why does this matter? Because 2002 was the last year Saab made hatchbacks, so the 2003s used for comparison were a different body type. And, as it happens, lots of Saab owners preferred the hatchbacks and this is reflected in their respective resale values. The average price of the 2003s in the report, though newer, was substantially below the average price of the 2002s. But that was not all. Although the valuation must be based upon the local market, not all of the cars were all that local. One was from California! And, to top it off, the report omitted some of my vehicle’s options that can affect a car’s value.
After much grousing, I was able to get USAA to have CCC One redo the report — twice — to correct errors and use more appropriate vehicle comparisons. In the end I was still unconvinced that my vehicle had been valued fairly — and I had to spend too much time convincing them that I should not have to bear the costs of their mistakes insofar as I couldn’t be expected to purchase my replacement vehicle until they had accurately valued the one they had declared a total loss — but it had been adjusted by approximately 15 percent, which was well worth a few hours of my time.
If any of you are unfortunate enough to be in a total vehicle loss situation, my advice would be that it pays to ask for details and to make sure that the valuation is based on the relevant criteria (whether defined under state law or the relevant insurance policy). If my experience is indicative of how totaled cars are valued, it’s a very sloppy process, and it can pay to make sure that the job was done right.