Motor Vehicle Property Damage
Property damage claims following a motor vehicle collision can cause irritation, confusion, and frustration. When a vehicle is damaged or destroyed by a crash, the person often needs a replacement vehicle as soon as possible for things as basic as getting to work, driving children to school, and buying the family groceries. “Fair market value” is the legal standard in Oregon for determining property damage for a totaled vehicle.
Fair market value is in theory the price a willing seller and willing buyer in the area would agree upon for the vehicle in the condition it was in just before the crash. (In real life, fair market value is unfortunately often less than might be suggested by commercial sources of information, such as what might be found on the internet, and the value put on a “totaled” vehicle is often less than what it would cost to buy a reasonably comparable replacement vehicle).
Sometimes, people have added specialty items or have made custom modifications to their vehicle. It’s a good idea to keep receipts for new tires, new sound systems, and other vehicle upgrades. But when a car with those additional items is damaged, people are often disappointed that those items do not add more to the property damage assessment.
While those items may increase the property value somewhat, and many custom improvements bring pleasure to their owners, the market may not put the same value on those things. Some people buy extra insurance coverage for custom vehicle items, but the actual fair market value of those improvements is often less than the extra insurance coverage obtained.
Similarly, people may have personal attachment to their vehicles. Perhaps their beloved grandparent gave them the car, and it therefore has special emotional value to them. Insurance companies do not have to, and do not, place a market value on those emotional values. There is no legal claim in Oregon for grief, sadness, or other emotional losses for vehicle property damage caused by a wreck.
When one hears that a vehicle was “totaled,” it may sound like it was a major crash, but all that means is that the cost of repairs would exceed the fair market value of the vehicle. If a $2,500 car was damaged in a crash and it would cost $3000 to repair it, the car would be considered a total loss (“totaled”).
If a $25,000 car got the same damage in a crash and it would cost the same $3000 to repair it, the car would not be totaled. In the case of the totaled car, the law acts as though the owner could go out and buy a replacement vehicle immediately, and there is no provision for making the at-fault adverse party (or their auto insurance company) pay for a rental car before the replacement is purchased. In the case of the non-totaled car, there will be a period of time when the car is in the shop for repairs, and the owner should be entitled to fair compensation for being deprived of the use of their car during that time (typically handled as the reasonable cost of a rental car).
After a car is repaired, while on the outside it may look as good as before, it will typically be worth somewhat less than before the crash. The market imposes a penalty on vehicles that have been in collisions and have been repaired. This penalty is called “diminution in value,” and in legal theory can (and should) be compensated. For example, if that $25,000 car were damaged and got the $3000 of repairs, after it came out of the shop it might be worth only $23,000: its value has been diminished. Insurance companies may not offer anything for the diminution in value of a repaired vehicle after a crash, but it is an element of a property damage claim that should not be overlooked.
As a practical matter, after a wreck, most vehicle property damage claims are worked out between the vehicle owner and the adjuster for the adverse insurance company. If the car was totaled, they agree to a price, the owner signs over the title, the adverse insurance company tries to make sure any liens are paid (such as an outstanding car loan), and any balance goes to the owner. If the car can be repaired for less than its pre-crash fair market value, the adverse insurance company should pay the reasonable cost of the repairs, plus something for the time the car is not available because it is in the shop. If the wreck was not caused by the fault of someone else, that negotiation is typically done between the vehicle owner and their own auto insurer (if they have coverage for this kind of a loss), with the additional factor that there will be a deductible that will reduce the amount the insurance company pays.
It’s a good idea to check one’s property damage insurance coverage with their insurance agent. Some people may not realize that they do not have the right kind of coverage, and if they cause a wreck, do not have any property damage insurance to pay for their vehicle or for repairs. Some people have property damage coverage, but do not have adequately high policy limits, given the value of their vehicle.