Is it legal to file a damage insurance claim then not fix the damage?

March 1, 2006 1:00 PM

Is it legal to make an insurance claim for legitimate damage done to your car if you have no intention of fixing the damage? If I state this intent, can the insurer deny my claim?

This would be in California, if that makes a difference. Can you recommend a good online resource for plain-speak on insurance issues that leans towards consumer rights?

posted by anonymous to law & government (22 comments total)

So... you just want the money?
posted by jerseygirl at 1:13 PM on March 1, 2006

Afterthought... Why would you state it? If you were at fault in the accident, you file a claim, they assess the damage, cut you a check minus your deductible. This is pretty standard right?

From a Massachusetts experience, which may or may not apply, but at least it's perspective... The checks usually come with a statement of sorts that says if you don't repair the car and provide proof of repair, the check amount is deducted from the overall replacement value of the car if it were, say, stolen.
posted by jerseygirl at 1:18 PM on March 1, 2006

Not sure about legality, but people do it all the time. I'm sure that insurance companies know that it happens.
posted by elquien at 1:21 PM on March 1, 2006

I dunno, is that standard, jerseygirl? When my car got trashed (at a MeFi meetup, but not by Mefites), the insurance company would have paid the repair bill directly except for some minor timing issues.
posted by jacquilynne at 1:24 PM on March 1, 2006

I think it depends on the amount, now that I think of it. I had a car near-totalled and the check went directly to the body shop.
posted by jerseygirl at 1:25 PM on March 1, 2006

not the exact same but a similar situation

when a rear ending bent the frame on my sweet '73 monte carlo the insurance "totalled it out" and gave me a check but i continued to drive the car for many more months.
posted by BSummers at 1:28 PM on March 1, 2006

Yes, of course it is. The money is to make you whole. If you don't fix the damage, the car will be worth less when you sell it. Imagine if the other person had smashed your car into little bits. Obviously you wouldn't be repairing your car with the money you would receive, but you would still be owed it, right?

You don't have to state any intent when filing the insurance claim. Generally the insurer will come out, eyeball your car, perform some mystical calculation as to how much they think it would cost you to fix the damage, and send you a check. There's no way they can force you to use that check to repair the car, nor do they care. In some cases people who DO want their car repaired go ahead and have it done, and the insurance pays the repair place directly, but that is more a convenience than anything else.
posted by jellicle at 1:31 PM on March 1, 2006

I am not positive, but from what I remember from insurance class, insurance operates on the principle of indemnity -- when you suffer a loss, you're entitled to compensation. As a result, the dent in your car is an injury to you, and whether you use the money to fix it or buy booze or set the check on fire, you're entitled to be "made whole", or paid back for your damages.

The same situation happened to me last year, which I referenced in another thread. I took the money and ran. The other party's insurer seemed to assume I would fix the damage, but it was never stated straight out that I had to.

However, one exception to this, at least in Georgia, is that if a car is totaled, it's done with. No repairs, just a check for the "value" of the car. So BSummers was fortunate not to live here when his car was hit.
posted by SuperNova at 1:40 PM on March 1, 2006

IANAL, If your car was hit by someone else, I don't see any reason why the money they would give you has to go towards car repairs. Basically, their payment is a "Oh shit, I fucked up your car for $xxxx of damage." They did that much money of damage towards your property, once you have the check in your had, it's your discretion.
posted by drezdn at 1:40 PM on March 1, 2006

I have to point out that this was the subject of an episode from Season 5 of Curb Your Enthusiasm.

In fact, I suspect that anonymous is Larry David.
posted by ludwig_van at 1:43 PM on March 1, 2006

Is it legal to make an insurance claim for legitimate damage done to your car if you have no intention of fixing the damage?

Yes.

If I state this intent, can the insurer deny my claim?

Maybe. Check the paperwork for the policy, but since you don't have to state this intent when you make the claim, it doesn't matter.

Keep in mind that if the damage is so great that fixing the car will cost more than the car is actually worth, your policy may provide the insurance company with a buy out clause where they just cut you a check for the estimated value of the car before the accident.
posted by frogan at 1:46 PM on March 1, 2006

In fact, I suspect that anonymous is Larry David.

Nah, Larry doesn't have the tact to post anonymously.

Also, I didn't hear any tubas.
posted by sluggo at 1:53 PM on March 1, 2006

I have a friend who worked in insurance, and he once told me that insurance companies often hope people will do this. When an insurance company estimates the damage, it'll often low ball the repair cost and issue a check. Sometimes it covers the repair shop's cost, and sometimes they'll have to pay the repair shop the difference or write a new check. If you cut and run, they're saving money.
posted by lunalaguna at 2:42 PM on March 1, 2006

In New York, you are under no obligation to get the car fixed. It's an asset which has been devalued as a result of the accident. The insurance company took the "gamble" and lost. You are entitled to the payoff -- insurance compensation. Whether you choose to repair the car or not is your business.

One caveat applies to all this. If you still owe money on the car, then things are a little more complicated. The car itself is the security for your car loan. As long as you owe on the car, and aren't interested in paying off the loan yet, you have to get it fixed. That's why in some places they make the check out to you AND THE INSURANCE COMPANY. The insurance company has a say in the car as long as you owe them money.

Here's an example. While I am not a lawyer, I have unfortunately **cough** have had dealings with car insurance companies on several occasions.

Someone caused about $8,000 worth of damage to a VW Golf that I had. The car was about 4 years old with a five year loan. The car looked terrible, yet it was supposedly fixable. The day before I was to drop the car off at the body shop, I decided that I'd never be happy or feel safe in that car, so I took my insurance check (the result of the agreed upon cost of repairs between the body shop and my insurance compnay), paid off the remainder of the loan and sold the car to the body shop that I had intended to use -- for salvage value. I don't recall it being much of an "upside down" loan, so I more or less broke even and went out and bought a new car.

p.s. What, you may ask, is the disincentive for a person to drive carelessly given they have car insurance. I believe it's called adverse behavior (or something like that) in economics. You rates will go up if you have too many accidents. And you've got to have car insurance.

Good luck on straightening things out.
posted by bim at 2:45 PM on March 1, 2006

One more thing. This was fine with the insurance compnay, since they had to change who they made the check out to as a result. No biggie. I even went over and picked it up to keep things moving.
posted by bim at 2:47 PM on March 1, 2006

It really depends on your contract. That said:

You didn't mention whether you have a lienholder or own the vehicle outright, but most insurance companies will only issue a single party check if you hold a clear title. If the vehicle is financed, you can expect them to write a two party check to the body shop/you or to the lienholder/you.

So if you own the vehicle and can furnish a clear title, they'll cut you a check to do with as you will. Frankly, they really don't care whether you have the damage repaired or not.

Oh, and if your vehicle is a total loss, depending on the insurance company, they'll want to retain the vehicle in return for cutting you a check, but you can purchase it back from them as salvage, and pocket the difference.
posted by mewithoutyou at 3:02 PM on March 1, 2006

Many insurance companies will get an estimate and pay you half, their rational being that the bodyshop was going to make a profit fixing your car and that you only need to be payed for your loss and don't deserve that 50% profit. It seems unfair because you can't go out get the car fixed for what they pay you, but you can get them to fix it (they write a check to the bodyshop directly). Not sure if individual states have laws specifying what the percentage can be.
posted by 445supermag at 5:25 PM on March 1, 2006

I personally look at it this way: this is what people pay insurance companies for. When your insurance pays out on a claim, you're essentially getting the service you're paying for. I don't know the legalities, but I don't think you're under any ethical obligation to use that money other than how you want to. That money is owed you under the terms of the insurance policy. The insurance company sure as hell will hold you to the letter of your policy, so you are ethically free to do the same to them.

That said, insurance companies will do anything they can to weasel out of paying a claim. They only want to know your name when it's time to collect premiums, not when you actually want to use the service you're paying for. Therefore, the least wise thing you could do would be to announce that finally you can get that Alienware PC you've always wanted.
posted by middleclasstool at 7:26 PM on March 1, 2006

I had an accident with my Jeep, and I asked my insurance agent this question. He told my that I could keep the money for anything, but they wouldn't let me keep collusion coverage if I didn't get it completely fixed.

The damage was mostly the hood, a fender, and a wheel. I took the cash, bought replacement parts from a junkyard (paint matched!), and bolted them on. Total cost was about $400, I pocketed the $2700, and canceled the collusion.
posted by Marky at 7:30 PM on March 1, 2006

p.s. What, you may ask, is the disincentive for a person to drive carelessly given they have car insurance.

The deductible.
posted by SuperNova at 11:29 PM on March 1, 2006

Yup. I forgot about the deductible. Though in my case, I was less concerned about the fixed $200 deductible than having to pay increased premiums year after year. Been there, done that. It's the gift that keeps on giving.
posted by bim at 4:41 AM on March 2, 2006

That said, insurance companies will do anything they can to weasel out of paying a claim.

Not true. There are laws that prevent these types of practices, and unless the company wants to be put out of business, they'd better be paying their claims. Insurance companies will pay the claims that they owe. It's a lot more common that drivers will try to weasel out of having (legally required) insurance in the first place, or will try to place fraudulent claims for payouts that they don't actually qualify for.
posted by mewithoutyou at 2:53 PM on March 2, 2006