Auto Insurers and Total Losses

Auto Insurers and Total Losses

Is it legal for an insurance company to abandon the salvage of a vehicle they deemed a total loss?

“Is it legal for an insurance company to abandon the salvage of a vehicle they deemed a total loss? Insurance companies are using this more and more to get out of paying the fees incurred.” — Brice Thies, sales, Midtown Body & Paint, Lincoln, Neb.

Thank you for your question. First of all, I am not an attorney and cannot and do not offer legal advice or counsel. What I do offer is my collective experience, training and knowledge in such issues.

An insurer attempting to abandon a vehicle is not an isolated issue or a recent trend, as I’ve fielded this very same question many times over the past two decades. Insurers abandoning cars (and their responsibilities) goes as far back as the existence of auto claims, and even though this practice is generally considered unethical at best, it may also be contrary to most state laws and regulations governing insurance practices — and as such, viewed as illegal. However, there is a simple and very effective solution without getting into a protracted legal battle with an insurer.

The quickest way to handle this when this occurs, and one that is sure to get the swiftest response, is to contact your customer by certified mail or e-mail with read confirmation advising him or her of the situation the insurer has placed that person in and that, as your customer, he or she will be personally responsible for any and all charges, fees and cost associated with the collection of your billing and for all services rendered to him or her, including related administrative costs as may be applicable. Be firm but offer to assist the customer in the matter however you may (other than you eating the charges!).

It’s important to keep in mind that although the insurer’s handling of the situation may not be right or even legal, you are not party to its policy and as such have no right to hold the insurer accountable. As such, you must look to your customer for the payment of your company’s bills. 

Trust me — when you inform customers of what their insurers have done to them and the resulting costs that they themselves will be responsible for, your customers will likely resolve the matter with the insurers and do so quickly to avoid receiving a bill for your services.

Note: In some states, it’s important to understand your lien laws, as oftentimes there are time limits that must be adhered to in order to continue to charge for storage. You should know what they are and develop internal company policies and procedures to avoid forfeiting any rights and abilities to assess storage and administrative fees.

Of course, each repairer should have a well-crafted repair authorization/contract clearly showing all potential responsibilities of the customer. Developing a repair authorization/contract is one of the very first tasks that my company, Auto Damage Experts, undertakes with each of its clients. This requires gaining a thorough understanding of local and state regulations and statutes relative to the repairer’s responsibilities as well as those of insurers regarding proper good-faith claims handling and practices.

Understanding where each party stands in the repair/claims process is vitally important to safeguarding the repairer and consumer in such business dealings and shifting responsibilities and accountability to the appropriate parties. 

Thank you for your question, and I hope my answer provides you and others information to help you in the operation and success of your business — and to avoid unnecessary abuses and liabilities. 

Remember who you work for! While the customer may be “king,” he or she is also responsible for his or her property and conduct … as well as the conduct of the insurer.

Also, “It’s not about doing one thing 100% better — it’s about doing one hundred things 1% better … and doing it consistently.”

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