Friday, 07 May 2021 12:04

What Does it Mean to ‘Total’ a Vehicle?

Written by Gary Wickert, Claims Journal


...applies a Total Loss Formula (TLF), which is usually set forth in the policy and sometimes governed by state law.


It should also be noted that in some TLT states, rental costs are also considered in determining whether a vehicle is a constructive total loss.


When a TLT is not dictated by the state, an insurance company might apply its own internal TLT or percentage, or simply default to something known as the Total Loss Formula (TLF). However, this internal TLF cannot be less than the TLT determined by state law.


This TLF can be summarized or expressed as follows: Cost of Repair + Salvage Value > Actual Cash Value. If the sum of the first two quantities is greater than the ACV, the car can be declared a total loss.


As an example, a damaged 2002 Toyota Echo with 185,000 miles in good condition has an ACV of approximately $2,800. Total repair costs are estimated at $2,000, for a damage ratio of 72%.


This car would be considered a total loss in Arkansas, where the TLT is 70%, but not in Florida, where the TLT is 80%. In Illinois, the TLF would be used and, if the salvage were worth $700, the car would not be totaled ($2,000 + $700 < $2,800).


Of course, states using the TLF rely on and defer to the judgment and opinions of licensed appraisers. In determining ACV, insurers often use data unavailable to the consumer. This information is often obtained through subscription to a private database of car values---the largest provider being CCC Information Services, used by the many of the top insurers across the country.


A chart depicting the laws of each state with regard to total loss thresholds, salvage titles and the duty of an insurance company when obtaining title to unrepairable vehicles can be found here.


Gary Wickert is an insurance trial lawyer and a partner with Matthiesen, Wickert & Lehrer, S.C., and is regarded as one of the world’s leading experts on insurance subrogation. He is the author of several subrogation books and legal treatises and is a national and international speaker and lecturer on subrogation and motivational topics. He can be reached at gwickert@mwl-law.com.


We thank Claims Journal for reprint permission.


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