A recent business column in Colorado’s The Gazette explores the steps consumers need to research before accepting a total loss settlement from an auto insurance company. 

Jim Flynn, a columnist and attorney with Colorado Springs firm Flynn & Wright, says that a vehicle owner recently filed suit against her insurance company, claiming it had breached a Colorado statute. 

The suit claimed her insurance company failed to reimburse her for license and registration fees she paid before the crash that covered a time period after the crash, the column says. 

“However, the vehicle owner did not prevail in her lawsuit,” the column says. “That’s because the Court of Appeals decided the statute in question did not allow for a ‘private right of action’ — that is, a private lawsuit — and only the Colorado insurance commissioner could enforce the statute.”

Progressive Marathon Insurance Co. recently settled two consolidated class action lawsuits in Michigan for $71.8 million.

Both suits claimed Progressive allegedly failed to pay sales tax and title and registration transfer fees.

Flynn says in his column that the Colorado lawsuit made him question how insurance companies deal with totaled vehicles. He notes the first step is when an insurance company decides a vehicle is a total loss if the cost to repair the vehicle exceeds the “actual cash value” of the vehicle. He says this could be the vehicle owner’s insurance company or the at-fault driver’s insurance provider. 

When an insurance company decides a vehicle is totaled, it must “establish a fair and consistent method for determining total loss,” Flynn writes. He says, the method “shall include consideration of unique characteristics of the… vehicle and a credible source of valuation.” 

The insurance company is not allowed to use different sources of valuation for the purpose of determining the lowest amount payable, Flynn writes.

Alameda County District Attorney Pamela Price’s Consumer Justice Bureau filed suit in May against USAA, Progressive, CCC Intelligent Solutions, and Mitchell International over alleged total loss undervaluations in violation of several California laws.

The bureau accused the companies of working together to create and use altered automobile valuation software that systematically undervalues totaled vehicles and pays California insurance consumers “lowball” settlements that are less than the actual value owed under their policies, according to a news release.

Flynn writes that unique characteristics could include but are not limited to classic status, unique finishes, mileage, and special accessories. 

“It may not surprise you to know that an insurance company and the owner of a totaled vehicle don’t always agree on what constitutes ‘actual cash value,’ especially if the vehicle in fact has unique features,” Flynn says in the article. “I had a dispute years ago with the insurance company for an at-fault driver over the value of a much loved and rare five-cylinder Audi sports sedan that had been totaled when I made the mistake of stopping at a red light and was rear-ended. It took a county court jury trial to resolve the dispute wherein I recovered an additional $1,000 from the insurance company.”

In 2021, a Texas public adjuster’s data from more than 700 Texas total loss appraisal clause proceedings show insurer estimates of customer vehicle value were on average around $3,500 too low.

Consumers need to do their homework when dealing with a totaled vehicle’s unique value, Flynn says. He notes that some insurance policies include an appraisal clause to settle disputes between the vehicle owner and the insurance company. The clause allows each side to obtain an appraisal. An umpire makes the final decision between the two appraisals. 

“If you do find yourself dealing with a totaled vehicle, most insurance companies have useful information on their website about their claims procedures and other things you need to worry about, like towing and storage expense, renting a substitute vehicle, closing out your loan or lease, etc.,” Flynn says in the closing of his column.

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