R.I. Regulators: Insurers Must Pay ‘Fair Market Value’ for Total Loss Vehicles

March 27, 2014

Rhode Island’s Department of Business Regulation, Insurance Division, issued a bulletin Monday stating that pursuant to the state law, auto insurers must pay the “fair market value” for a vehicle that is declared a total loss.

R.I. Gen. Laws § 27-9.1-4(25) defines “fair market value” as “… the retail value of the motor vehicle as set forth in a current edition of a nationally recognized compilation of retail values commonly used by the automotive industry to establish values of motor vehicles.”

But the department said in the bulletin that it has received numerous consumer complaints over the past decade concerning the amount consumers are offered by insurers for total loss vehicles.

In virtually every situation, the department said, the conflict resulted from arbitrary deductions taken from comparable vehicle values when calculating the total loss value.

In implementing R.I. Gen. Laws § 27-9.1-4(25), the department said it amended the state’s Insurance Regulation 73 and requested that a filing be made by, or on behalf, of any entity that advocated that it had a program that qualified under the statute. Following review of the filings, the department concluded that the minimum “fair market value” can be derived from the compilation of values provided by National Automobile Dealers Association (NADA) and Kelly Blue Book (KBB).

The department said insurers may not pay less than the NADA or KBB value adjusted pursuant to the state’s Insurance Regulation 73(8)(A)(4). Insurers may not — under any circumstance — use valuations that reduce the minimum value for items such as dealer preparation, reconditioning or an amount that a dealer might accept in sale of a comparable vehicle (i.e. “take price”).

The department said insurers are, however, required to pay the actual loss and if that amount exceeds the minimum value the insurer must pay the higher amount. In cases where NADA or KBB do not have a listing for a particular vehicle, insurers may use services that provide comparable vehicles. However, insurers may not vary those comparable vehicle listings other than by mileage, options and condition, the department said.

Source: Rhode Island Department of Business Regulation, Insurance Division

 

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