STATED VALUE AUTOMOBILE INSURANCE
(IT'S NOT WHAT YOU THINK IT IS)
© This article appeared in the October 1999 issue of The Brickline, the quarterly magazine of Bricklin International (www.bricklin.org).
Formatted for the Morgan Web by John T. Blair WA4OHZ
Last update: Nov. 18, 2000
(ED. On numerous occasions I've had discussions with Terry Tanner and others of unusual or collector cars. We, Bricklin owners, need to be very careful about our car insurance. We've run an article on the Hagerty Classic Insurance Company back in the Jan. 1999 issue. Unfortunately, many of us don't quite know what to ask for or about when we purchase car insurance. It's also unfortunate that the insurance companies don't really want to help. When I finished restoring my '65 Morgan 4/4, in 1993, I wanted to drive it. So I called my insurance company and tried to get them to insure it. When I first described my Morgan to them, I was told to contact my insurance companies "classic car" underwriter, so I did. They would only ensure the car for show, and the car could not be driven more then 2,500 miles per year. I told them, "I want to drive the car". They said they couldn't help me, and referred me back to the primary insurance company. This time I was told, "OK we'll insure it, but if you have a loss - all you'll get is about $200 for a 30 year old car". I told them that this was unsatisfactory, and that the car was appraised for $24,000. This began a 3 week series of phone calls to various people in the company, until someone finally said that they'd ensure the car for what ever I wanted. I settled on $15,000. I couldn't understand why they were so reluctant to insure my Morgan for $15,000 when this is less than the average price of a new car, and I had the paper work to prove its value. Luckily I never had to submit a claim. Eventually, I decided to show the car, and put antique insurance on it.
When I drug (trailered actually) my Brickline VIN #0887 home, I called my homeowners insurance company to inform them that I had just acquired a Bricklin and would be restoring it over the next several years (5 so far) and what did I have to do to my homeowners policy to cover the pieces of the Bricklin that would be scattered all over my garage, shed, attic, and the rest of the house. They informed me that since is was a car, they would not cover it or its pieces. So if my house were to burn down, I'd lose everything that I had in the Bricklin (now at over $9,000). The homeowners insurance company told me to call my auto insurer. I did; and for $25 a year, my Bricklin and parts are insured - I think!).
Finally, I know of at least one Bricklin that is sitting in a junk yard in Florida because the owner just gave up, and didn't want to fight with the insurance company. This fellow bought his Bricklin and it needed work. So he started having the car fixed, a little here and a little there. He ended up with something over $7,000 in the car. One day while driving, he was involved in an accident and the Bricklin was hurt. He called me to ask what to do, and how to get his car fixed. I gave him several ideas, but the one thing I told him was: "Watch out for the insurance company. They don't care about you or the car, they are in business to make money, and they are going to low ball you with the settlement." They did. He ended up with a check for $3,500 for his repairable Bricklin, and now it sits rotting in the junk yard.)
The following article was provided by Terry Tanner.
STATED VALUE AUTOMOBILE INSURANCE (ITS NOT WHAT YOU THINK IT IS)
CENTERVILLE VA March, 14 1990 - Instead of purchasing a standard indemnity insurance policy for your classic or antique car, did you decide to pay an additional premium and purchase a stated value policy? Anything to prevent having to hassle with claims people. Right? After all, your agent said they would pay the stated amount in the event of a total loss. Right? WRONG! WRONG! WRONG! If any of this sounds familiar, you may have been mislead by one of the most widespread misconceptions that exists today in the automobile insurance industry.
In 1985, Mr. J Bradlley Flippin of Centerville Va. purchased a $3,000.00 stated value policy from Nationwide for his 1965 Mustang Coupe. Just to be sure there was no misunderstanding he asked the agent to be very specific as to how a claim would be handled in the event of a total loss. The agent reassured him he would receive the stated value in the event of a total loss. You mean if I have a total loss they will write me a check for $3000.00?; Mr. Flippin asked. Well not exactly replied the agent. You will have to prove you have that much in the car. Then, YES they will pay the $3,000. I recommend however, you keep all your receipts and be ready to submit them if the need ever arises. That seemed fair enough. Mr. Flippin was required to bring the car by the agent's office so he could inspect it and photograph it for the file. Mr. Flippin paid $205.00 for six months of basic coverage, including the $3,000 STATED VALUE DECLARATION. (A standard indemnity policy on the same car would have cost only about $175.00)
On July 29, 1989, Mr. Flippin neglected to watch the green left turn light at an intersection and turned directly in the path of an oncoming car. The impact was so great his head shattered the passenger's side window. (Moral: wear your seat belts.) The claims adjuster declared the car a total loss, so Mr. Flippin sent him a copy of all the receipts for the restoration work, which to date had totaled about $5500.00. The adjuster said he was willing to settle for $900. Nine hundred dollars! exclaimed Mr. Flippin. "What happened to the $3,000 stated value for which I have been paying additional premiums?
"Oh I don't know anything about that I only settle the claims; You will have to talk to someone else about that" was his reply. But he did say he would be willing to consider any other information that might be provided to him. " If I can get an appraisal showing the car was worth $3,000 would that be enough? The adjuster replied with, "Well, we will certainly take it into consideration". He was about as non-committal as one could be.
At this point Mr. Flippin decided to do some research. He began by reading his policy, which nobody ever reads. (Have you read yours?) The basic policy said, Nationwide would pay "the actual cash value of the property at time of loss". (This is the way all standard indemnity policies read), Nationwide's Virginia endorsement 2004 for stated amount insurance replaced the wording in the limit of liability section with words saying they would pay the lesser of the stated amount in the declaration or the actual cash value of the stolen or damaged property. The words at time of loss were not there. They had been dropped. This appeared to be reasonable because the value of the car had been agreed to in advance. Thus, the value of the property at the time of loss was not an issue (or so he thought).
The Nationwide claims adjuster, and Nationwide itself, would have nothing to do with that interpretation. Although no one could explain why the words were missing. Nationwide maintained that it really did not matter. Their position was simple: nowhere in the contract (policy) did it state Nationwide would pay the stated amount in the event of a total loss. Mr. Flippin considered this wording to ambiguous and although the claims adjuster agreed, he would not change his position.
Additional research revealed there are in fact, two types of stated polices. One is a stated amount policy in which the premium is based on a amount stated by the insured. Losses, however are still based on the actual cash value (ACV) of the property at the time of loss, but not to exceed the stated amount. To pay the stated amount automatically would create a moral hazard in that policy holders could overvalue their cars, thus making a profit. This is contrary to the basic principle on indemnity which is to restore a person to the position they were in before the loss. (Mr. Flippin contends, however, Nationwide effectively removed the moral hazard by having their agent inspect the car prior to issuing the policy).
The other is a stated value policy, which is a true valued type of policy where both parties agree, in advance, as to the value of the property. In the event of a total loss, the company will pay the full face value of the policy. It turns out this is an Inland Marine type of policy generally used with works of art, boats and other marine equipment. There are a few companies, however, that do offer it as an automobile policy. This difference may be the reason for the wide misconceptions about stated value policies. Mr. Flippin asked eleven different Nationwide agents how the company would settle a stated value policy. None of them corrected him by saying they were actually stated amount policies, five of them said the company would pay the full stated amount in the event of a total loss, five of them did not know. Only one actually knew the company would not pay the stated amount in the event of a total loss. He said he chose not to sell that type of policy because the insured pays an additional premium and receives no additional protection. In fact the insured receives less protection. The standard indemnity policy pays the actual cash value at the time of the loss with no limit on the company's liability. The stated amount still pay the ACV at the time of the loss, but the company's liability is limited to the stated amount. For example, assume a car has an ACV at time of loss of $10,000. For an $8,000 stated amount policy, the company would only pay $8,000, where they would pay the full $10,000 under a standard indemnity policy. The insured pays an additional premium for the "privilege" of limiting the insurance companies liability.
ADVICE TO OTHER OWNERS
In the strongest possible terms read your policy paying particular attention to the section entitled "limits of liability". The words STATED AMOUNT on the declaration page is a red flag. READ THE RESPECTIVE ENDORSEMENT VERY CAREFULLY. (ED. In fact, it maybe worth the money to have your lawyer look over the policy.)
IE: "The limit of the company's liability for loss shall be the LESSER of:
a) the stated amount shown in the declaration.
b) the actual cash value of the property or
c) the amount necessary to repair or replace the damaged property.
The best advice is to obtain insurance from a company writing stated value policies.
Remember to have your agent give you - in writing - a statement that the insurance company will pay the stated value of the policy in the event of a total loss.
(ED. BI has no financial ties, nor endorses any one of these companies. They are listed as a service only.)
Some of the "Classic/Collector" car Insurance Companies are:
American Collectors Insurance
P.O. Box 8343
Cherry Hill, NJ 08002-0343
Classic Collectors Insurance
Great American Ins. Co.
Classis Owners Ins. Agency
Dr. Ronald T. Anderson,
CPCU, CLU, CIC
Newport Beach, CA 92662
Condon & Skelly
121 E. Kings Highway Suite 203
Maple Shade, NJ 08052
(800) 257- 9496
Hagerty Classic Insurance
Post Office Box 87
Traverse City, MI 49685-0087
Peerless Ins. Comp.
J. C. Taylor
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