Appraising the ‘Totaled’ Value of Wrecked Cars Can Be Tricky

Insurance companies “total” millions of vehicles every year, giving policyholders a lump sum that is supposed to represent the true market value of their wrecked cars and trucks. In many cases, however, motorists charge that their insurers low-ball them.

With billions of dollars at stake, determining the value of totaled vehicles can sometimes become contentious.

All too often, motorists say, settlements fall far short of the prices of comparable vehicles for sale in the used-vehicle market. Nationally, tens of thousands of disputes a year result in arbitration or lawsuits, and California regulators receive hundreds of formal complaints annually.

The process of determining the value of a used car or truck is tricky for even the most expert appraiser. And because the procedures used by insurers to determine the value of a totaled vehicle are shrouded in secrecy, it is often difficult to determine whether they are conforming to state regulations.

Owners of totaled vehicles should understand that California law gives them explicit legal rights in dealing with their insurers--and know how to play the valuation game.

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In theory, the payout from an insurer is supposed to enable a policyholder to replace a vehicle with a comparable one from the used-car market, whether from a dealership lot or from a private party.

Under rules set by the California Department of Insurance, insurers must base total loss payouts on “comps,” the average of at least two comparable used vehicles sold or listed for sale within the last 90 days, said Tony Cignarale, supervising compliance officer at the department.

In practice, however, many insurers use valuation services to determine how much they will pay for totaled vehicles. The leading such company in the Southern California market is CCC Information Services Inc., according to industry sources. Among its clients is State Farm Mutual Automobile Insurance Co., the largest auto insurer in California, State Farm spokesman Dave Hurst said.

These valuation services provide their numbers exclusively to the insurance industry. That means that there is no way for a typical customer to examine whether CCC is providing fair estimates.

“It is a very complex and sophisticated process,” said Susan Jablonski, a spokeswoman for Chicago-based CCC. The company has 300 field representatives in 250 local markets and reviews auto ads from 1,800 publications.

The company said its estimates, compiled under a system called Total Loss 2000 Solution, benefit insurers by providing “claims process cost reduction and customer satisfaction.” Jablonski said CCC stands behind the accuracy of its prices.

CCC declined a request to provide The Times with 10 sample valuations of cars or trucks that could be compared with those of competing valuation services.

Widely known providers of publicly available auto valuations--such as Irvine-based Kelley Blue Book, Edmunds.com of Santa Monica, the Red Book of Chicago and the Black Book of Atlanta--generally are not used by the insurance industry.

Charles Vogelheim, editor of Kelley Blue Book, said CCC typically provides valuations lower than those found in his publication. Vogelheim said Blue Book’s prices are also based on comps taken from local markets.

“If you bought a new truck yesterday and it blows up tomorrow, you should get what you paid for it. That’s what retail Blue Book is from Kelley,” he said.

John Heffinger, director of industry relations at the Black Book valuation service and a former editor at the Red Book, said that after 20 years in the business, he believes that CCC values are typically lower than those found in publicly available rate books.

“It is so hard to determine what those values are,” Heffinger said of CCC, “because they don’t publish anything.”

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If you receive what you consider a low-ball offer for a totaled vehicle, you do have recourse.

Under California regulations, a motorist can demand to see the comps used by the insurer, said Cignarale of the Department of Insurance.

“It will have the actual vehicles used in the valuation,” he said. “We have seen comps with 130,000-mile difference. There is a give-and-take on each one of these.”

If you and your insurer cannot agree on a fair value, the law allows you to provide copies of your own comps to the adjuster, based on ads from the local market.

Look for auto sale ads for your make, model and year, along with comparable mileage and options. That can sometimes be tough, but Southern California is one of the biggest used-car markets in the world, so you should be able to find some comps.

Spokesman Hurst said State Farm will consider such rebuttal documentation from its policyholders when there is a disagreement. In 85% of cases involving totaled vehicles, he said, customers accept State Farm’s initial offer. After some haggling, 13% more agree to settle. In the remaining 2% of cases, the dispute goes to arbitration, Hurst said.

If you don’t urgently need your settlement check, time can be on your side. If your vehicle has been towed to a storage lot, the insurer is paying a significant amount every day--after a few weeks, those storage fees can exceed the amount of money in dispute.

Under California regulations, insurers also have the option to provide a replacement vehicle. If you can’t agree on a cash amount, ask your adjuster to shop for a car for you. That’s probably the last thing the insurance company wants to do.

You also have the right to reopen your claim within 30 days of settlement if you find it is not possible to replace your vehicle with the offer made by your insurer, Cignarale said.

Finally, unresolved disputes can go to arbitration. Under California rules, the insurer and the insured each select one arbitrator and those two arbitrators select a third. The three form a panel and their final decision is binding.

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Ralph Vartabedian cannot answer mail personally but responds in this column to automotive questions of general interest. Please do not telephone. Write to Your Wheels, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. E-mail: ralph.vartabedian@latimes.com.