The actual cash value of a car post-accident may not pay off a creditors loan in New York.

New York – June 6, 2021

New York insurance adjusters will inspect a car after an accident and if it is declared a total loss, the adjuster will utilize an equation to determine the car’s actual cash value (ACV).  N.Y. Comp. Codes R. & Regs. tit.11, §§ 216.0 through 216.12 (2000) (Regulation 64) contain the provisions relating to unfair claims settlement practices and claim cost control measures. N.Y. Comp. Codes R. & Regs. tit.11, § 216.7 (2000) (Regulation 64) prescribes the standards for prompt, fair and equitable settlement of all first party motor vehicle physical damage claims. If the ACV is less than what the accident victim owes on a creditor car loan, they will come up short and still be required to pay off the loan.  An insurance attorney in New York may be able to assist in this process.  

Totaled vehicle.

A “totaled” vehicle situation occurs when an insurance company estimates the costs to repair are not worth the total value of the vehicle, and/or the vehicle will not be safe after repairs.  The insurance company is not required to pay off any vehicle loans.  They must only pay the policy holder the ACV of the car at the time of the accident.  The insurance company generally will calculate the value of the car utilizing the Kelly Blue Book, or National Automobile Dealers Association Used Car Guide for example. To avoid a situation where an accident victim is making car payments on a non-drivable vehicle, they need to make sure the ACV the insurance company has represented is correct.  Input from a qualified insurance attorney may be beneficial to the accident victim.

Valuation method.

Accident victims may challenge an ACV by using the same guides for private sale situations.  Make sure the make, model and mileage are correct, as well as notifications of any previous accident information that impacts value utilizing computerized calculations.  Utilize several reputable valid automobile websites to calculate used car values, and come to a number that the accident victim can bring back to the insurance company to reduce the outstanding car loan balance.  If the insured purchased gap insurance, they may submit a claim, or contact the bank holding the note on the auto loan so they can deal with the insurance company directly.  An insurance attorney may be instrumental in submitting this claim for accident parties and dealing with the bank.  Accident victims who did not previously purchase gap insurance should continue paying car loan payments to avoid negative credit impacts.    

No fault versus third party.  

New York is a “no fault” state meaning that legitimate claims can be paid out through the policy owner’s insurance, reducing wait times for vehicle replacement.  Because of the possibility of insurance fraud in New York, there are requirements that need to be met for insurance companies to pay a no-fault claim.

1. Complete a no-fault application  (an NF-2 form) from your insurance carrier.
2. Make sure to file the application within 30 days of the date that the accident occurred. Failure to miss the deadline will make your application null and void.
3. Ensure that you send the no-fault application to the right insurance company. The application should be sent to the insurance company of the car that hit you, the one you were driving, or a riding as a passenger in.  

Hire an insurance attorney to assist with the insurance claim for property replacement of a totaled vehicle as well as other named damages.  Legal counsel may be able to help accident victims with insurance claims and/or take action to have the negligent driver’s insurance company cover the difference between the ACV and what is still owed on a vehicle that was totaled. 

Sources: 

Settlements of Total Loss Motor Vehicle Damage Claims | Department of Financial Services (ny.gov)

https://www.dfs.ny.gov/apps_and_licensing/property_insurers/nofault_history

https://www.dfs.ny.gov/apps_and_licensing/property_insurers/nofault