How Will I Get Compensation for Property Damage that Occurred During the Accident?
An important and early question many individuals have is how they will get compensated for a vehicle that has been damaged and repaired, or a vehicle that is damaged so severely it cannot be repaired. The answer to this question ultimately depends upon whether or not the vehicle can be repaired.
If the vehicle can be repaired, then the insurance company for the at-fault party is responsible for paying the full costs of repair. Many individuals rightly recognize, however, that the value of a vehicle has decreased after an accident. This is particularly problematic when an individual goes to sell their vehicle and the purchaser pulls up a report indicating that the vehicle has previously been involved in a significant collision. In these circumstances, the owner of the damaged vehicle has a claim for the “diminished value” of the vehicle. This type of claim is also known as “Diminution in Value.” Automobile insurers for at-fault parties often offer very little compensation to vehicle owners for diminished value. When there is a dispute as to the proper amount of this diminished value, an owner of a vehicle may be able to exercise rights available under North Carolina law to obtain appraisals of the vehicle for a more expert determination of diminished value. While such an appraisal can cost money, the net recovery an owner can expect for diminished value after such an appraisal is usually more than the at-fault party’s automobile insurer originally offered.
When the costs of repair of a vehicle exceed 75% of the pre-collision fair market value of the vehicle, then North Carolina law requires that automobile insurers render the vehicle a “total loss.” In this circumstance, the automobile insurer is responsible for paying the pre-collision value of the vehicle. If the vehicle has been financed and the owner is still making payments, the automobile insurer will first make payment to the lienholder on the vehicle, up to the amount of any outstanding loan. If the value of the vehicle exceeds the outstanding loan amount, then the remainder of the value of the vehicle is paid to the owner of the vehicle. Many times, however, a vehicle owner may actually owe more on a car than it is worth. This is a condition known as being “upside-down” in the car. In this circumstance, the automobile insurer will pay the fair market value to the lienholder, and the vehicle owner will receive nothing. To add insult to injury, the owner of the vehicle will still have an outstanding balance owed to the lienholder, even though the owner no longer has a vehicle. This situation can be avoided through the acquisition of GAP insurance which can be purchased at the time of the original purchase of the vehicle. Alternatively, if the owner makes a sufficient down payment on the vehicle, then the owner can avoid entirely ever being “upside-down” in the vehicle as the fair market value of the vehicle will always exceed the outstanding loan amount.