How Do Insurance Companies Value a Totaled Motorcycle?

Following consumer allegations that insurance companies routinely undervalue car and motorcycle claims following total loss accidents, at least one company is now facing an investigation.

The Massachusetts Division of Insurance has decided to investigate allegations that motorcycle and car appraisals may frequently be assessed incorrectly, costing drivers hundreds to thousands of dollars on their total loss car and motorcycle insurance claims. The firm at the center of the Massachusetts investigation is Chicago-based CCC Information Services, which assesses the value of total loss vehicles for many insurance companies, including Commerce, Allstate, Farmers, Geico, and Liberty Mutual.

According to a complaint filed against the company, CCC frequently makes unreasonable adjustments to the values assigned to consumers’ vehicles, resulting in incorrectly low appraisals. The complaint against CCC claims that the company routinely estimates the damage to vehicles to be higher than it actually is, resulting in appraisals that are hundreds or thousands of dollars too low. In some cases, CCC may even have falsified reports of damage to vehicles by writing up descriptions of wear and tear without even inspecting the vehicle. As CCC is used by multiple insurance companies, countless consumers may have been affected by these inaccurately low vehicle valuations.

While these appraisals affect all types of vehicles, low appraisals may especially affect motorcycles. As motorcycles are often subject to extreme damage after collisions with other vehicles, it may be more likely for motorcycle owners to experience a total loss insurance claim.

An insurance company may pay less for a totaled motorcycle that it would cost to replace it, basing the value of the loss its assessed value at the time of the motorcycle accident. However, there have been cases in which insurers fail to take into consideration sales tax, title, and tag transfer fees and other expenses. This issue has been a cause of action in class action lawsuits against major insurance companies.

What is the definition of “Total Loss”?

When a vehicle is “totaled,” it means that the cost of repair and restoration exceeds the vehicle’s “fair market value” – not necessarily that it is irreparable.

Suppose someone has an accident with a shaft-drive motorcycle. The consequences of an accident may be that the drive shaft has been bent. If the motorcycle was worth $1000 before the accident but a replacement for the driveshaft would cost $1200, it would be considered a total loss.

What Will an Insurer Pay For a Totaled Motorcycle?

The compensation an insurance company offers for a motorcycle that is considered a “total loss” is generally not what it will cost to replace it – nor does it reflect how much is owed on the machine or how much has been invested.

Legally, the insurer is only required to pay the “fair market value” – which is what it would be worth if put up for sale in the condition it was in just prior to the accident. In this case, the “fair market value” is determined by the NADA Guide which has been an industry reference since the early 1930s.

What About Modifications?

A fair number of devoted riders make extensive aftermarket modifications, such as custom handlebars and/or wheels and extra chrome fittings. While it is true that such “mods” can increase the sale value of any vehicle, such investments are not taken into consideration when determining fair market value.

According to Investopedia, the claims adjuster does not care how much you have invested in the totaled motorcycle; s/he is only required to consider how much it will cost for the insured party to purchase one that is like the one that was lost.

What if I Still Owe Money on it?

You may be out of luck unless you have purchased what is known as “gap insurance.” It may seem unfair, but the fact is that people who finance their vehicles find themselves “upside down,” owing more on it than it is worth. Gap insurance or a gap rider makes certain that if you are upside down, you will not have to continue making payments on a totaled motorcycle.

What About Tax and License?

This is the controversial question that has sparked class action lawsuits. These lawsuits assert that sales tax and licensing fees are indeed part of the replacement cost, but some insurers have failed to consider these – which may be a violation of their own contracts.

Join a Free Total Loss Car Accident Class Action Lawsuit Investigation

If you were insured under an auto insurance policy, experienced a total loss car accident, and were not reimbursed for sales tax and other fees by your insurance company in the last 5 years, you may qualify to join a total loss car accident class action lawsuit investigation.

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