In Alabama, the measure of personal property damage is the difference between the reasonable market value of the property immediately before it was damaged and its reasonable market value immediately after it was damaged. In cases where an automobile is damaged but is not a total loss, the cost of repair is considered when determining the difference in market value. In addition to the cost of repair, any diminution or decrease in value of the automobile resulting from the damage will be considered. When the damage to the vehicle is merely cosmetic or the vehicle is older, there may not be any diminution in value after appropriate repairs are completed. In cases of newer model cars with substantial damage, the claim for diminution in value can be significant.
Alabama courts have ruled that an owner of property is qualified to state his or her opinion as to value of property before and after injury. Chambers v. Burgess, 281 So.2d 643 (1972); Parker v. Muse, 250 So.2d 688 (1971). However, in many cases, it is beneficial to use experts to assess the diminution in value to a vehicle. Experts can be particularly helpful when assessing the impact of damages to antique, classic or exotic automobiles. Other states utilize a statutory formula using a base loss value, damage modifiers (severe, moderate or minor) and the vehicle’s mileage to assess the diminution in value.
Alabama does not have any laws that designate the type of replacement parts that must be used when repairing a damaged vehicle. As long as the replacement parts are similar in fit and quality as the damaged parts, used parts or aftermarket parts may be used to complete repairs.
When the cost to repair a damaged vehicle is equal to or exceeds 75% of its reasonable market value, the vehicle will be considered a total loss. Ala Code Sec. 32-8-87(d) If a vehicle is a total loss, the owner is entitled to recover the total reasonable market value of the vehicle less the salvage value of the vehicle. When an insurance company pays a total loss settlement, it essentially purchases the damaged vehicle for its reasonable fair market value before it was damaged. When making this purchase, an insurance company must pay all applicable taxes, license fees and other fees incident to the transfer of the automobile. Alabama Dept. of Insurance Adm. Code Chapter 482-2-125.08 Upon receipt of payment for a total loss, the owner must provide the insurance company with the title to the vehicle. Any liens on the vehicle must be paid from the total loss settlement.
Most insurance companies generate or hire a service to produce a valuation report to assess reasonable market value. These reports note the specifications of the vehicle as well as the mileage and overall condition. Valuation reports also include the sales prices of comparable vehicles in the same geographic area. In some instances, errors on these reports may significantly impact valuation of a vehicle. When there is a dispute over reasonable value, it may be beneficial to carefully review the valuation report and correct any erroneous information.
In the event a total loss, any liens on the property must be resolved from the settlement proceeds. At times, the amount owed to a lienholder may exceed the reasonable market value paid in a total loss settlement. This situation most often arises when a newly purchased vehicle is damaged or a vehicle is purchased through a dealer that provides financing to persons with a poor credit history. Unfortunately, the responsible party and/or his insurance company are not obligated to pay for any amounts owed on a vehicle in excess of the reasonable market value. Some financing agreements provide for Gap Insurance that will protect the property owner in this situation. Gap Insurance will pay the difference in the amount owed on the vehicle and the reasonable market value. This type of coverage is only beneficial when the amount owed exceeds the reasonable market value so it should be terminated as soon as the loan amount is less than the reasonable market value.
When a vehicle sustains damage, or is determined to be a total loss, the owner is entitled to compensation for the loss of use of the vehicle. If a vehicle is being repaired, the “measure of damages for loss of use is the reasonable cost to rent a similar vehicle for the reasonable period of time” necessary to complete repairs to the vehicle. Damages for loss of use can be recovered even if the owner does not rent a substitute vehicle. Alabama Pattern Jury Instruction 11.36. In the event a vehicle is classified as a total loss, the owner may collect “the amount of money that compensates the owner for its loss of use during the period of time reasonably necessary to get a replacement vehicle.” Alabama Pattern Jury Instruction 11.38.
The attorneys at Siniard, Timberlake & League, P.C., have extensive experience with cases involving property damage to automobiles and other personal property damage claims. If you or a loved one has property that has been damaged by another person or a company, we can help.