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'I-Can' Warns Consumers About New Auto Policy Changes

15 November 1999

'I-Can' Warns Consumers About New Auto Policy Changes

               (Diminished Value ... Now Covered ... Won't Be!)

    DENHAM SPRINGS, La., Nov. 12 -- The Insurance Consumer
Advocate Network ("I-Can") an Internet based insurance consumer advocacy
effort (http://www.ican2000.com), is warning motorists about an auto insurance policy
revision being filed with the Departments of Insurance in various states.  The
Insurance Services Office (ISO) is in the process of making these filings on
behalf of the auto insurance companies they represent.  These new policies
will specifically exclude coverage for the post-repair Diminished Value of
Insureds' vehicles.
    Diminished Value is the reduction in resale value a vehicle suffers when
it has a history of significant damage.  Optimum repair quality results in
minimal Diminished Value.  Sub-standard repairs result in Increased Diminished
Value (more than double, according to "I-Can" consumer surveys).
    The prospect of having to pay for additional Diminished Value on vehicles
that have received inferior repairs has been a leverage pro-consumer body
shops have used to encourage less-than-ethical insurance companies to pay for
thorough and proper repairs.  The CCRE, a national coalition of pro-consumer
body shops (http://www.theccre.com), has been informing consumers about their right
to collect Diminished Value for several years.  Now it appears that many auto
insurance companies would rather diminish the policyholders' rights than pay
for proper repairs.
    Jeff Albright, Executive vice-President of the Independent Insurance
Agents of Louisiana, has cautioned the Louisiana Department of Insurance to
carefully study the market value issues and the impact on policyholders.  Mr.
Albright states, "One good example of a significant Diminished Value loss
would be common in flood damage claims.  We are aware of several instances
where a vehicle has been submerged during a flood.  The entire electrical
system has experienced both current and potential damage.  Instead of the
insurance company declaring the vehicle a 'Total Loss' they would replace
defective components to restore current function.  This work is usually done
at a dealership that identifies the vehicle as being 'Flood Damaged' on a
nationwide data base.  The resale value of that vehicle immediately plummets
to pennies on the dollar."
    According to Chris O'Hara, an attorney with Hagens, Berman & Mitchell in
Phoenix, Arizona, "For most people, an automobile is their second most
significant financial commitment.  When they purchase insurance on that
vehicle they expect they are protected against catastrophic loss of value."
Mr. O'Hara goes on to say, "Removing the obligation to restore the vehicle to
its pre-loss value would, in effect, void the policy."
    Both "I-Can" and the CCRE have taken a pro-active stand in opposition to
insurer fraud and encourage consumers to express their feelings about this
matter to their legislators and Departments of Insurance.
    State Departments of Insurance can be accessed online by going to either
of the web addresses referenced above ... click on "Depts of Insurance" then
scroll to and click on the listing for your state.