Date: Wed, 6 May 1998 09:59:32 -0400
Reply-To: Derek Drew <drew@INTERPORT.NET>
Sender: Vanagon Mailing List <Vanagon@vanagon.com>
From: Derek Drew <drew@INTERPORT.NET>
Subject: Insurance--The Real Dope (article by me, PART 1 of 2)
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This is my first posting of this gem, and somebody might want to stick
it in the archives as a separate item (or I can send it as a
formatted HTML file). It was written in 1991 and is kind of a companion
piece to my article Refrigerator Madness (in the archives under the
mis-labeled title "Refrigerator Manual"). At the end is the prize, the
letter I sent asking the insurance company to ignore their own appraiser's
estimate of the value of my camper and instead value it at $18,000 plus 8%
New York Sales Tax, a letter to which they gladly agreed at a time that the
blue book value of the car was around $11,000. The secret to why this
letter worked is explained in the text below.
----------------------AUTO INSURANCE MADNESS--------------
What follows is a story about my insurance investigations, the crash of my
beautiful 1987 Westfalia, and what I found out about the wacky way
insurance companies decide how much to pay out in the event of an accident.
It also explains why my model insurance letter worked and how to use it to
your best advantage.
When I bought my 1987 Syncro Westfalia camper in 1989 it was one year old,
was in mint condition, and had less than 10,000 miles on it. The owner had
added about a thousand dollars of aftermarket goodies to it (such as car
alarms and a great stereo) and the car carried a $26,000 list price. The
blue book value of the car was only about $16,000. I certainly couldn't find
a used Syncro Westfalia anywhere else for sale so we agreed on $20,000
as the purchase price and I was glad to pay it.
Over the course of the next year I put several thousand dollars into the
vehicle by adding things like winches, awnings, screen rooms, a hot water
shower, extra interior lighting, rust proofing, two-way
radios, etc. I became aware that the value of the vehicle was rapidly going
down in the insurance company's eyes as I built up the mileage, but that
its value to me was going the other direction. In essence, I was becoming
uninsured before my very eyes. I think the final straw was when I spent
about $400 to buy and install a set of in-body mounted Oettinger fog lamps
made in Germany.
SEEKING ADDITIONAL COVERAGE
Accordingly, I made up a list of the improvements I had made to the
vehicle, along with receipts, and sent this list to my insurance agent
asking him if these $6,000+ of improvements would be covered in the event
of a loss. The agent wrote back stating that the improvements would be
covered provided I kept the receipts. I kept his letter but something
about it suggested to me that he didn't know what he was saying. I called
him by phone and asked him how the improvements would be valued and how he
could be sure that the insurance company in question would pay me for them.
He didn't seem all that sure of his ground and so I pressed him to call the
insurance company for an answer. If necessary, I stated, I would be
willing to pay an extra amount to receive extra coverage. A week passed
before the agent returned my call.
He said he had been busy researching my problem and the answer was not
optimistic. No insurance company he could find would allow me to
explicitly declare my added equipment and pay to ensure it was covered.
The amount I would receive if the car were stolen, he said, would be
determined based on the "book value" of that type and year of car at the
time of the loss. The agent then confused me, however, by stating that I
should keep the receipts for the improvements I had made to the vehicle so
that I could show them to the insurance company should I experience a loss.
I then asked the insurance agent how these receipts could possibly be
useful to me if the added equipment wasn't covered. The agent wouldn't
give me a precise answer but mysteriously repeated that the receipts would
be "useful" in the event of a loss.
STATED AMOUNT COVERAGE
The agent told me that "stated value" or "stated amount" coverage was the
normal way to agree to the amount of coverage prior to a loss. But he said
no US insurance company would issue such a policy to cover anything other
than a collector car or an antique. The policies generally state that they
will only cover vehicles more than ten years old, owned by families with a
least one other car for every adult with a driver's license, and which are
driven only a few hundred miles per year. I couldn't qualify on any of
these criteria, let alone all three.
The agent then said that if I insisted on having an explicit agreement on
the amount I would be paid in the event of a loss the only way would be
through Lloyds of London. They would charge about 8% of the amount covered
annually, insist that the policy would be in addition to my regular
insurance (which I still had to purchase), and would insist on a $15,000
minimum coverage. All this would cost me about $1,000 annually over and
above the amount that I was already paying for my regular coverage. Since
I had receipts for what I had added to the car, he said, why bother?
His case was convincing, and I dropped the idea.
What I was only beginning to grasp was the weird truth about how the auto
insurance business works that he was trying to tell me. My insurance
company didn't want to agree to pay me for my loss ahead of time in any
kind of explicit way, but if I did lose my car, they would take into
account my receipts. In other words-the insurance company actually
preferred to keep the amount I would be paid in the event of a loss fuzzy.
I didn't understand why until a lot later.
THE UNTHINKABLE HAPPENS
The last day of November, 1990, I swerved in an attempt to avoid a deer
that had stepped out right in front of the van on a lonely, unlit back road
near the Taconic Parkway. The van turned on its side. The police and an
ambulance showed up and I was taken to the hospital for x-rays on my ribs.
Meanwhile, my vehicle was left on the highway full of all kinds of goodies
like ham radios, a radar detector, etc. I was worried sick about this
stuff and got up at six a.m. to drive to the compound where the police had
told me the vehicle was towed. Sure enough, an employee of the towing
service was already leering over the vehicle at daybreak casing out the
goodies.
THE EVIL STORAGE YARD
He looked quite startled when I arrived and guilt was written all over his
face. He bantered good naturedly until his nervousness subsided and then
he walked away to other business. I felt it was obvious that had I not
shown up promptly, my van would have received a good scavenging.
Horror number one was averted, I told myself. Now what could be horror
number two. Storage fees by any chance?
Sure enough, I had already spent $10 on the first day's storage and my
mission was to get the car out of there as soon as possible! I called my
insurance agent to report the loss and then arranged to have the vehicle
towed immediately to the most expensive, classy, and excellent body shop I
could think of.
HOW TO MAKE MONEY ON AN ACCIDENT
I knew from past experience that it is important to get your estimate at
the most expensive body shop you can find. One should never, ever, be
pressured by the insurance company into taking the vehicle to one of their
own shops since they use these places to produce low estimates. Typically
insurance companies pressure you to go to one of their own shops by telling
you it will be quicker or somehow better.
Anyway, the insurance company is basically forced to pay the fee of
whatever body shop you select for the estimate. Most state laws also
explicitly state that you don't have to have your vehicle actually repaired
at that facility, but are free to subsequently have the repair done at a
lower priced facility if you so choose. The game is to get a high
estimate, get the check from the insurance company, and only then decide
how much you want to pay and where you want the repair to be done. Road
Warrior fans can even amuse themselves by depositing the insurance
company's check and then driving what is left of the vehicle around town
without any repair at all. The insurance company has nothing to say about
the matter.
MY CAMPER IS DECLARED DEAD
Now, unfortunately, this game was not for me to play this time. The body
shop guy starting adding up the cost of various parts on the van and within
a short period of time it became apparent the thing was a total loss. I
was quite dismayed because with an average of only two Syncro Campers per
state per year having been sold in the United States, I felt there was slim
chance of me finding another used Syncro Camper for sale.
I barely noticed it at the time, but the body shop guy seemed strangely
quite willing-a little too anxious, even-in taking the wreck off my hands.
He also told me what kind of money to expect to get from the insurance
company. He opened a "blue book" guide to the value of all vehicles and
announced that I'd be lucky to get $10,000.
I was stunned. I couldn't believe my ears. I knew that in no event was I
likely to find another Syncro Camper for sale, and if I did, it would
probably cost me at least $20,000. In the one-and-one-half-years that I had
possession of my car, I couldn't believe that it I had put $5,000 into it
and it had lost $10,000 in value.
I then explained to the body shop guy that there were only 1,200 Syncro
Campers in the US and that the market value of one such as mine was surely
more than $10,000. I was sure, I told him, that the $10,000 figure in his
book was based on the guess of someone in some publishing company that
published the book.
THE HORROR OF THE USED CAR PRICE BOOK
He responded that he had a good familiarity with these kinds of cases, and
that the published books were reliable because they were based on actual
sale prices of vehicles. And even if someone had guessed at a price-as I
contended by adding a small amount to the price at which two wheel drive
campers trade-he said no insurance company would be inclined to believe me.
"If you try to fight them on this," he said, "they'll spend any
amount-even $20,000-to fight you. I know. I've seen it."
I asked him about all my valuable accessories. Forget it, he responded, if
the insurance company decided to pay me for them they'd pay 20 cents on the
dollar, maximum. I looked forlornly at my brand new $400 fog lamps from
Germany as he spoke and decided to remove them from the vehicle before
leaving the place. As I was taking the lights out a funny thing happened.
EVIL BODY SHOP TRIES TO STEAL MY CAR
The owner of the body shop seemed upset at what I was doing. "Are you
removing parts," he asked? "You can't do that!" He then seemed to resent
me being near the vehicle at all and sort of shooed me away. "This belongs
to your insurance company now," he explained, "and you can't do anything to
it."
I then called a friend who was just entering the body shop business to see
what advice he had for me. "Get that car out of there!" he said on the
phone. "Don't you know how these things work? That guy at the body shop
is going to make a deal with the insurance company to dispose of the car
for peanuts and he plans to keep all the parts himself. He's probably
already calculating where he's going to sell everything of yours and how
much profit he is going to make."
My friend added that if I even parked my car at the body shop for a few
weeks so many parts would be missing at the end that I wouldn't even
recognize it. Furthermore, he said the shop would virtually own the car
within a short time because of outrageous storage fees they would charge.
Sure enough, I checked with the front desk at the body shop and they said
they charged $25 a day in storage. Assuming it would take the insurance
company two weeks to get an agent to the shop there'd be a bill of almost
$400 just on storage!
Needless to say, the next morning I showed up with a hired tow truck
operator and had the vehicle towed away to my father's driveway.
THE PARTS SWITCHEROO GAME
Next I called some Long Island Volkswagen friends who advised me that I had
only a few weeks to get all the goodies off the car that I wanted to retain
before the insurance company sent a tow truck to take my prize away. My
alloy wheels, they said, were worth $330 each. I should remove them and
install cheap $25 wheels. They advised me to get the battery out and put
in an spent one, etc. So long as I did these things before the insurance
adjuster came to look at the car, they said, the insurance company wouldn't
know the difference and I'd get paid the same amount. This is what the
body shop would have done anyway, I was advised, which is why the insurance
company would have been so willing to let the body shop keep the car.
I would have had to consider carefully the advise of these people except
that I was after bigger game. What I really wanted was to retain the
vehicle for parts and buy another one just like it. The questions were:
how could I convince my insurance company to pay me more than book value of
my car-what I felt to be its actual value-and how could I convince them to
let me keep my car.
For help I turned to Hemmings Motor News where I saw an ad from Terry Shaw,
who advertised himself as "Automotive Legal Service." I called Terry in
Pennsylvania (215-659-4947) and he was most helpful and I would recommend
him to anyone reading this article. Terry's feeling was that I'd probably
end up having to resolve my dispute with the insurance company on the basis
of appraisals-that is, his appraisal vs. the appraisal of the insurance
company. That would cost me somewhere in the area of $200 plus travel
expenses, he said.
He further advised me that in all relations with the insurance company I
should correspond by certified mail and that my insurance company was
unlikely to want to pay me more than their initial appraisal of the value
of my vehicle. "Let them tell you what they think your car is worth," he
said. "That's probably all they'll want to pay unless you fight them, and
even then, you may not get any more."
If I did want to fight the dollar amount they appraise my vehicle at, he
said, I should call him back and hire him to produce a contrasting
appraisal of the loss. The two would then meet somewhere in between the
two estimates and that would be that.
Within a few days the insurance company sent an appraisal company called
A.A.B. to my father's house to see my crashed car. A.A.B. then called me
the next day and said they would be sending a tow truck to take the car
away and that my insurance company would be contacting me about the amount
of the settlement.
On Terry Shaw's advise I did not panic but patiently explained to the lady
at A.A.B. that I was interested in retaining ownership of the vehicle and
so I didn't want the vehicle to be towed away. Remember that I had reason
to panic, since I had still had thousands of dollars of custom
modifications I wished to extract from the vehicle no matter what happened.
THE EVIL APPRAISAL SERVICE
The lady at A.A.B. was most upset and said that my request was most
irregular and angrily stated that I will be responsible for storage fees
from that date forward. Further, she said, she felt that A.A.B. should
really store the vehicle on A.A.B.'s own storage lot until the matter was
cleared.
She sounded just a little too upset given the circumstances-suspiciously
upset really-and I began to see that A.A.B. itself was looking forward to
making a profit off of my wreck! All these companies were licking their
chops over the spoils from my own misfortune! Anyway, the A.A.B. lady
finally stopped trying to intimidate me and she said she would pass my
request to retain the vehicle to Giantco Casualty and we'd see what they
would say.
Now in the meantime, I decided to do some more work to try to figure out
how much I should receive for the vehicle. I obtained one negative and one
positive piece of information. The negative piece of information was that
Consumer Reports' auto price service, which reports via touch tone phone
the value of any used car, informed me that a used Syncro Camper like mine
was worth about $11,000.
The positive piece of information was really an observation: my odometer
had been replaced not too long before the accident and showed only 10,000
miles. Meanwhile, the driver's side door had been crushed permanently shut
in the accident so it was unlikely the insurance company's appraiser would
be able to see the sticker placed on the door showing the odometer had been
changed. I realized then that I had a chance of getting more than $11,000
given the low reading on the odometer but I didn't know how much.
I heard the next day from Giantco. Casualty, my insurer: the appraisal
amount for my vehicle was $15,100. If I wanted to keep the wreck, Giantco.
Casualty would deduct $4,200. Giantco. Casualty wanted to know where to
send the check.
RESIST THE TEMPTATION TO SETTLE
Next was one of the most important things that I did. I asked for the
insurance company to put the amount in writing and told them I would get
back to them. I resisted the temptation to agree to anything and I allowed
things to just string along, month after month. This was what Terry Shaw
had told me to do.
On the one hand, I was pleased with the settlement amounts on both counts:
I had just heard of a rolled and demolished Syncro Camper in Indiana which
had been sold at auction for $5,500 so $4,200 wasn't bad. And $15,100 was
certainly much higher than the $11,000 figure being quoted in the official
price books. If I rocked the boat and asked for even more money, I
reasoned, the insurance company might find out the odometer had been
changed. And anyway, I wanted the money.
THE POWER OF SCREAMING
I then called another friend-Chris-for advice and Chris told me about his
experience with a BMW that he had. The vehicle had been demolished and the
insurance company had offered him book value-since it was an older model
the amount was something like $3,000. But my friend had just put $6,000
into the vehicle and he was convinced the vehicle had a value far greater
than $3,000-at least $5,000 in his mind.
This is how he explained it to me: "They called and said the amount was
$3,000 and the amount was based on the book value," he said. "I became
really mad and I told them that I didn't care what the book said, I wanted
$5,000. They tried to insist on the $3,000 and I blew up. I told them
that the figures in those used car price books were complete fabrications
with no relation to the actual value of the cars. I told them that they
were obviously kept artificially low in order to benefit the insurance
companies and I just screamed at them." A few weeks later, he said, he
received a check for $5,000 minus the deductible.
THE EVIL INSURANCE COMPANY
Another friend reported a similar incident. The insurance company made an
offer on his car. My friend then called the agent to point out that the
car was clearly worth twice the amount that the insurance company had
offered. For some reason-I cannot recall now quite why-it was not really a
matter of interpretation. It was absolutely clear that the car was worth a
lot more than the insurance company had initially offered. Since the
friend was on good terms with the insurance company adjuster he asked how
the adjuster could possibly have produced such a low estimate at first-it
seemed almost evil. The adjuster responded sheepishly, "Well, I had to
try. It's my job."
In other words, it is the insurance company's mission to see if they can
get you to agree to the lowest amount they can think up. If you agree you
are stupid. If you won't agree then they're ready to deal. It is up to
you to say what you want. The key in any dealing with an insurance company
is to make your counter proposal as high as possible but also as thoroughly
documented as possible.
And that's when I really understood the insurance business. Insurance
companies like to negotiate-even prefer to negotiate-because they know that
due to time and money pressures most people will accept the insurance
company's first offer. The few people that ask for more...well...pay them
off because that's the cost of doing business.
That's where I set about deciding how to respond to my insurance company's
offer. The next thing that I did was consult with New York State's
department that helps consumers on insurance affairs. The attorney there
said that I was on shaky ground. My contention was that the publisher of
the official used car price guide had fabricated the figure they listed for
a used Volkswagen Syncro Camper since I was sure they weren't being sold
that cheap. Even if this was true, he said, New York State law states that
the use of published price guides is acceptable evidence of the value of a
used car. Were I to litigate the case, I would definitely lose on this
point, he said.
I had to consider carefully what he was saying but I decided to pursue my
other theory-that insurance settlements are not rational things at all.
The insurance companies prefer to negotiate and sort of hedge everything.
They gauge how much to pay you on how upset you get, I thought hopefully.
I got a boost by calling a body shop that advertised Rolls Royce and
Ferrari repairs. I figured they would have experienced situations similar
to mine and would have a point of view. The owner of the body shop told me
that in cases he had seen there was a legal benefit to getting letters from
three different official Volkswagen dealers, on their letterhead, stating...
==================================
This article is continued in post part 2 to follow
==================================
===================================
The material above is copyright 1991 Derek Drew (drew@interport.net) and
may be reproduced for any noncommercial purpose and may be reproduced in
the electronic Vanagon archives and CD-ROM. Reproduction in print is by
separate permission only.
________________________________________________________
Derek Drew New York, NY & Washington, DC
drew@interport.net
'90 Syncro Westfalia...
...seen off-road at http://www.tiu.net/~des/vw/drew/index.html
Note: most valuable Vanagon site on the planet (for owners) is
http://gerry.vanagon.com/cgi-bin/wa.exe?S1=vanagon