Limits of Liability

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PostPosted: Fri Nov 12, 2010 5:09 pm   Post subject: Limits of Liability  

For over 150 years, insurers had three options under the limits of liability.

1. Pay for the damage in money

2. Repair and replace the damage property by taking control over the repair

3. Pay the acv and total loss the vehicle or replace it with like, kind, quality.



Many court cases over the years defined when the insurer was electing which option and they could not co-mingle the options and it had to be made clear at the outset of the claim which option they were taking.



New language in the limits of liability have distorted the original language.

Generally under the contract of limits of liability first party, the language has been changed in most policies to read. (Paraphrased) Our limit of liablity wil be the lessor amount of either the actual cash value of the stolen or damaged propety OR The amount necessary to repair or replace the stolen or damaged property. In determining the amount necessary to repair the damaged property, our estimate will be based on

1. the prevailing or competitive labor rates charged in the area where the property is to be repaired as reasonably determined by us and,, 2. the cost of replacement parts and equipment which may be new, refurbished, restored, or used,a. original manufacturer and equipment and,

b. non original manufacturer and equipment.



In the experts opinion here, when the insurer prepares an estimate on which the loss is paid and the repairs are made, do they become liable for the repairs as if they selected the option to take control of the repairs. Or,

does the liability defer to the repairer on whom the vehicle owner selected?

Is the insurer, from the outset, choosing the take control of the repair option when they write the estimate and specify the parts but not name the repairer, wherein the vehicle will be repaired. Or do the experts here believe they are exercising the option to simply pay for repairs and has no liability in the repair of the vehicle. First party question only, as we know insurers only indemnify policy holders and pay settlement on losses to third parties.



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PostPosted: Fri Nov 12, 2010 6:19 pm   Post subject:   

Most states will not allow an insurer to require, and only pay for, non OE parts. Most states must allow the insured a choice as to OE or non-OE parts. So, I do not believe that the aftermarket parts issue within your post will be playable in most states due to current law.



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PostPosted: Fri Nov 12, 2010 6:49 pm   Post subject:   

I don't see how the insurance company estimating the damages somehow makes them liable for the repairs. Isn't anyone who owes money allowed to determine the amount owed? The appraisal is not a promise of repairs or an end all amount of the loss. Well all know that.



A body shop can prepare an estimate but it may not be what is owed under the terms of the policy. So who else can apply the repairs needed to what is owed under the policy other then the insurance company?



You are attempting to make an appraisal the end all amount a carrier will pay. It never has been, never will be.



There is also no law (that I know of) that states an insurance company can't use prevailing rates when paying a claim. They _do_ need to be able to show that several qualified shops would repair the vehicle for the amount they list. _That_ is the key!

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PostPosted: Sat Nov 13, 2010 12:16 am   Post subject:   

What is proof of loss? An amount that an insurer claims it should be or could be repaired for OR the amount of the final invoice from the repair shop that peforms the repair for a reasonable amount and is on the hook for all the liability. The courts and case precedent have determined that an insurer has the opportunity to control the costs by taking control of the repair or they contractually required to just pay for repairs. You can't legally do both. If you could, you would be price fixing and in violation of rico statutes.



The oem / non oem isn't the paramount question here. It's contract law and selecting an option under the policy as courts have interpreted an insurers options. Preparing an estimate and telling someone "here are three shops that will repair it for our price" is stepping out of the business of insurance and into the business of repairing vehicles or property by fixing prices.



It's not difficult for a sharp group of attorneys to show that prevailing rates are bogus, because insurers specify parts and the amount they will pay. Have you ever seen your company's own survey of how they determined prevailing rates and practices? It's been reported that no insurer other than one even produces a survey of competitive rates and how the prevailing price was determined in court. They only look to one company which seems to set the benchmark for rates in an area.



These three cases predicate how an insurer must select which option they are taking.



1. The insurer must clearly and unambiguously notify the insured at the outset of the claim as to which payment option it's exercising.

Howard v. Reserve Insurance Company, 117 Ill. App. 2d 390, 254 N.E.2d 631 (1st Dist. 1969). And if the insurer fails to do so, it will be deemed to have waived its direct-repair option. Id.

2. The two repair options are mutually exclusive and, therefore, an insurer generally cannot purport to pay a claim in money based on the amount that it believes it could have had the property repaired for if it had exercised its direct-repair option at the outset of the claim.

Keystone Paper Mills v. Pennsylvania Fire Ins. Co. et al., 291 Pa. 119, 139 A. 627 (Pa. 1927).

3. If the insurer does exercise its option to repair the property, it must accept direct responsibility for the quality and safety of repairs performed by the contractors it hired.

Mockmore v. Stone, 143 Ill. App. 3d 916, 493 N.E.2d 746 (3rd Dist. 1986).



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PostPosted: Sat Nov 13, 2010 1:09 am   Post subject:   

By writing an appraisal the insurance company is not "taking control of the repair". Does the appraisal state where the repairs should be done? Is it labeled as a settlement amount? It contains no such information.



The insurance company has a legal obligation to give a breakdown of what is being paid on a claim. In this case, the repair cost that is covered under the terms of the policy. Would you rather have the insurance company just mail a check for $xxx.xx and give no explanation on how the amount was arrived at?

Quote:
Preparing an estimate and telling someone "here are three shops that will repair it for our price" is stepping out of the business of insurance and into the business of repairing vehicles or property by fixing prices.
Don't know that I agree with that at all (read above) but the insurance company is not preparing an estimate. They are providing an appraisal. It's a decision on what is being paid under the policy. An insurance company can't give out an estimate... as they don't make the repairs. This goes right into your whole point of the thread.
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PostPosted: Sat Nov 13, 2010 1:27 am   Post subject:   

So, an estimate or an appraisal of the loss is just a guess. The final invoice IS the amount of the loss unless the insurer can show that the amount is unreasonable since they are not taking control of the repair?



Court cases have recently stated that prevailing rates do not mean the lowest rate an insurer can pay.



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