Help us not to get screwed on the total loss of our vehicle
June 28, 2021 12:00 PM Subscribe
Husband purchased a new vehicle from the dealer with additional insurance to top up the payout from our government insurance corporation in the event of a total loss. Now the providers of the total loss insurance are saying they can only pay out the funds to the dealer and not to my husband, even though my husband paid for and is the sole beneficiary of the policy. What can we argue here, if at all?
Ten days before our wedding, my husband's vehicle was totaled by a truck running a red light. We are very lucky my husband wasn't seriously hurt. The government insurance coverage is all settled. They found him not at fault and my husband accepted their offer for the FMV of his vehicle. The vehicle was financed, but my husband made a substantial down payment at the time of purchase, so the FMV payout covered the loan entirely. It was explained to him that the additional coverage would ensure he gets the full replacement value for a new vehicle over the FMV of a used vehicle, as the government's insurance policy will only cover FMV.
The provider of the additional insurance, which I'll call "L Insurance," has established that my husband's case is eligible for the top up. They'd normally apply the top up to any residual lease or loan not already covered by regular insurance first, but in this case the loan is already covered. The top up should be to my husband free and clear. However, they refuse to issue the funds to him. They will only pay out the funds to the dealer where the vehicle was purchased. Essentially they are giving him a store credit at the dealer.
My husband enjoyed his vehicle for the time being, but he never intended to keep it long term. He is not interested in another similar vehicle, and the particular make does not offer a more utilitarian vehicle which he would like to purchase next. He will have no use for a credit unless they happen to get in a traded-in vehicle that is the exact make, model, age, and specs that he was hoping to purchase.
My husband tried arguing with L Insurance, and with the dealership where the vehicle and insurance was purchased. He spoke with the manager at the dealership who was of no help at all. He is incensed that this policy, which he paid for and is supposed to be the beneficiary of, and which the dealer also received a kickback for, is really only of benefit to the dealer. It feels unethical and scammy, though we realize that doesn't mean it's illegal.
We've had a tough time lately and I just wish I could do something to fix this. My husband is out of a vehicle through no fault of his own, he's been in pain from the collision, he's no longer eligible for a rental since the government insurance is settled and paid, and he needs a car to get to and from work. There's not much available to purchase as it's a total seller's market for cars right now. We've had to spend our days before and after our wedding dealing with the whole quagmire and all that stress when it should be a happy time. Maybe these feelings are coloring our perception of the fairness of this situation, I don't know.
What would you do? Is there anything else we should try?
Ten days before our wedding, my husband's vehicle was totaled by a truck running a red light. We are very lucky my husband wasn't seriously hurt. The government insurance coverage is all settled. They found him not at fault and my husband accepted their offer for the FMV of his vehicle. The vehicle was financed, but my husband made a substantial down payment at the time of purchase, so the FMV payout covered the loan entirely. It was explained to him that the additional coverage would ensure he gets the full replacement value for a new vehicle over the FMV of a used vehicle, as the government's insurance policy will only cover FMV.
The provider of the additional insurance, which I'll call "L Insurance," has established that my husband's case is eligible for the top up. They'd normally apply the top up to any residual lease or loan not already covered by regular insurance first, but in this case the loan is already covered. The top up should be to my husband free and clear. However, they refuse to issue the funds to him. They will only pay out the funds to the dealer where the vehicle was purchased. Essentially they are giving him a store credit at the dealer.
My husband enjoyed his vehicle for the time being, but he never intended to keep it long term. He is not interested in another similar vehicle, and the particular make does not offer a more utilitarian vehicle which he would like to purchase next. He will have no use for a credit unless they happen to get in a traded-in vehicle that is the exact make, model, age, and specs that he was hoping to purchase.
My husband tried arguing with L Insurance, and with the dealership where the vehicle and insurance was purchased. He spoke with the manager at the dealership who was of no help at all. He is incensed that this policy, which he paid for and is supposed to be the beneficiary of, and which the dealer also received a kickback for, is really only of benefit to the dealer. It feels unethical and scammy, though we realize that doesn't mean it's illegal.
We've had a tough time lately and I just wish I could do something to fix this. My husband is out of a vehicle through no fault of his own, he's been in pain from the collision, he's no longer eligible for a rental since the government insurance is settled and paid, and he needs a car to get to and from work. There's not much available to purchase as it's a total seller's market for cars right now. We've had to spend our days before and after our wedding dealing with the whole quagmire and all that stress when it should be a happy time. Maybe these feelings are coloring our perception of the fairness of this situation, I don't know.
What would you do? Is there anything else we should try?
By the way, this "top up insurance" sounds a lot like gap insurance, which covers the difference between FMV and the loan balance. Gap insurance is often sold at purchase time by dealers; it is a profit maker for the dealer. Further, it covers situations similar to yours where the loan balance is underwater and an insurance payout will only pay for fair market value. In your case, the loan balance is not underwater. If you do indeed have gap insurance, there's no gap to cover, and your policy is worthless anyway.
You may look into cancelling the policy - especially because there is no longer a covered car. In that case, you may be eligible for a refund of the premiums that have be paid (at purchase time) covering the remainder of the term of the policy.
posted by saeculorum at 12:13 PM on June 28, 2021 [6 favorites]
You may look into cancelling the policy - especially because there is no longer a covered car. In that case, you may be eligible for a refund of the premiums that have be paid (at purchase time) covering the remainder of the term of the policy.
posted by saeculorum at 12:13 PM on June 28, 2021 [6 favorites]
This is good advice for the US (the state AG or the state insurance commissioner, depending), but I think the OP is in Canada?
posted by praemunire at 12:26 PM on June 28, 2021 [1 favorite]
posted by praemunire at 12:26 PM on June 28, 2021 [1 favorite]
This might be a situation for an investigative news reporter to do a story on "Dealership Set to Profit Mightily from Local Man's Misfortune".
posted by Dashy at 1:37 PM on June 28, 2021 [2 favorites]
posted by Dashy at 1:37 PM on June 28, 2021 [2 favorites]
Have you definitely talked to the right person at the dealership? And that person confirms that the policy *will* pay the claim, but only to the dealership, AND the dealership is not willing to send the funds to you? I have seen situations in the US where insurance checks might be written out to both the owner and the lienholder (tbh that's not usually the dealership, but it's not impossible), and those situations are generally easy to sort out.
So I'd start by making sure there's no misunderstanding (like, you spoke to someone who doesn't know anything about this just as they were closing for the day, when really you should have talked to Brenda in accounting who would have said "oh yes, that check will be made out to both of us and mailed to our office, but as soon as I verify that the loan is paid off I will have it signed over to you.")
posted by zibra at 1:37 PM on June 28, 2021 [1 favorite]
So I'd start by making sure there's no misunderstanding (like, you spoke to someone who doesn't know anything about this just as they were closing for the day, when really you should have talked to Brenda in accounting who would have said "oh yes, that check will be made out to both of us and mailed to our office, but as soon as I verify that the loan is paid off I will have it signed over to you.")
posted by zibra at 1:37 PM on June 28, 2021 [1 favorite]
Something doesn't add up here for me. If this is replacement value insurance, why would the dealership ever be involved? Unless the car was locally financed through the dealer? Or the dealer is the insurer? If the dealer is neither the lender nor the insurer, this seems like a pretty shady insurance policy to lock you into working with them on the replacement.
posted by primethyme at 2:26 PM on June 28, 2021
posted by primethyme at 2:26 PM on June 28, 2021
Mod note: Folks - OPs profile says they are not in the US. Please try to answer generally or applicably to their situation. Thank you.
posted by jessamyn (staff) at 5:04 PM on June 28, 2021 [1 favorite]
posted by jessamyn (staff) at 5:04 PM on June 28, 2021 [1 favorite]
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This is not a sarcastic answer - you should try reading your insurance policy.
There's no inherent rule that a policy has to be payable to policy-holder. That's common, but not universal. What does your insurance policy say? If it's payable only to the dealer, then there's nothing here for you to do. If it's payable to the insured party, and the insured party is you, you should have your insurance company follow the insurance policy.
posted by saeculorum at 12:05 PM on June 28, 2021 [7 favorites]