Auto Physical Damage (Comp and Collision) and Property Damage Liability (PD)

Comprehensive and Collision

Referred to as “comp” (comprehensive) or “collision” coverage, these two separate coverages pay for losses to an insured vehicle and its equipment. Both coverages are optional in Florida. The goal of these coverages is to pay for insured vehicle damage from all causes not excluded, with comprehensive being just that, a coverage meant to pay for anything not resulting from a collision. The major exclusions are for wear and tear, freezing, mechanical or electrical breakdown, although other exclusions apply, such as for intentional acts, racing or speed contests and diminished value. (Note: diminished vehicle value claims may be brought against the person or business responsible for causing the accident.)

Collision coverage pays for loss or damage to an insured vehicle caused by that auto’s collision with another object, or the covered auto’s “overturn”. Towing and storage, usually in a stated amount, is provided with collision coverage, as is limited rental car or “transportation” expense coverage. Collision coverage extends to vehicle equipment, however policies vary greatly as to what equipment is covered. The trend is to cover only “factory equipment”, which is defined as that equipment permanently installed in a factory provided opening or space. Many policies cover custom equipment, but usually with a stated sub limit of coverage. Some insurers offer insureds the ability to insure custom equipment at a greater limit with special forms and endorsements.

Comprehensive coverage generally pays for vehicle damage caused by causes “other than collision”, such as vandalism, theft, windstorm, hail, flood, and collision with a bird or animal. (Note: when a vehicle is stolen, most policies provide limited “transportation expense” coverage, usually $15 per day, to a maximum of $450 which limited coverage begins 48 hours post loss.) The list of covered causes of loss under the comprehensive coverage is generally held to not be exhaustive, and a cause of loss not listed as a “specified cause of loss” will not typically result in a denial of coverage. There are exceptions and exclusions to comprehensive coverages which are the same as those for collision losses.

The loss payment provision under Comprehensive or Collision coverage limits the loss to the lesser of the actual cash value (ACV) of the damaged or stolen property or the amount necessary to repair or replace the property with like kind and quality (LKQ). Disputes arise over whether original equipment manufacturer’s (OEM) parts are used in a repair, or over the quality of the repair (especially where the insurance company directed an insured to a body shop or repair facility).

Further, disputes arise under collision and comprehensive coverages in determining what constitutes excluded wear and tear, mechanical breakdown or electrical breakdown. Insurance companies are not uniform in their application of these exclusions. Further, what is insured equipment varies from insurer to insurer, depending on internal claim handling guidelines. Some insurers consider car baby seats to be equipment, and others may cover dash mounted GPS units or custom stereos, and expensive after-market wheels or rims.

Collision and Comprehensive coverages typically contain deductibles, chosen by the insured. In Florida, by law, no insurance deductible may be charged for damage to windshield glass.

As with UM and other first party coverage claims, any dispute with an insurer, not resolved through informal negotiations, would result in an insured to bring a lawsuit directly against the insurer as defendant, which again, is a first party case. The insurer paying a collision or comprehensive claim may pursue a claim for subrogation (collection) against the person or business causing the vehicle damages paid for under the policy.

NOTE: To avoid litigation, expedite the resolution of claims, and to save money, automobile insurance policies contain an “appraisal clause”, which, if invoked by the insurance company or the insured, will usually result in an auto damage claim being resolved short of litigation. If invoked, the appraisal clause provides that each the insurer and insured pick an appraiser at their own cost. Then, those two appraisers choose a “competent and impartial” umpire to hear the dispute, if they cannot agree on the amount or value of the loss. The umpire may have to be chosen by the court if the two appraisers cannot agree on the umpire. Once chosen though, the umpire will decide the disputed issue as needed, and the umpire’s decision, if agreed to by either of the two selected appraisers, will be binding on the parties. Appraisal does not determine coverage issues, so if an insurance company has a coverage defense, based for example on a policy exclusion, that defense is preserved pursuant to the express language of the policy.

Banks and other financial institutions which make vehicle loans are listed as “lienholders” on the vehicle’s title, and as such, are also named as additional insureds or “loss payees” on the insurance policy purchased to insured the vehicle. Insurance policy “payment of loss” provisions states that, “loss or damage under this policy shall be paid, as interest may appear, to you and the loss payee shown in the Declarations”. To make sure that a dishonest insured doesn’t take a loss payment check and cash it without making repairs to the vehicle, loss payments are made directly to the repair shop under a “direction to pay” signed by the insured before repairs are begun. When the vehicle is stolen or deemed a total loss, the insurance company issues payment jointly to the insured and lienholder, which generally ensures that the bank or loan holder is paid to the extent of its interest in the vehicle. Situations arise however where an insured commits fraud by intentionally destroying (usually by arson or an arranged theft) the insured vehicle. In such situations the insurance company must still pay the lienholder pursuant to the “loss payee clause” of the policy.

Property Damage Liability Coverage - In addition to bodily or personal injury third party claims under the BI coverage, claims are commonly brought under the property damage liability coverage (PD).  Property Damage liability coverage is mandatory in Florida in the amount of $10,000 for private passenger automobiles.  (Greater amounts may be necessary for commercial vehicles, based on their size, weight or cargo under state and/or federal law.)  In addition to paying for loss or damage to a covered vehicle and its equipment, property damage includes loss of use and payment for a vehicle’s diminished value, which type of claim has become a hot issue in Florida.

A person may recover for the diminished or lessened value of their tangible property when that property has been damaged by the negligent acts of another person.  Referred to as “diminution of value claims”, liability insurance covers such damages claimed against an insured, so a third party claim (against someone else’s insurance) for diminished vehicle damage may be made, while a first party (against your own insurance company) was disallowed by the Florida Supreme Court in the 2002 opinion of Siegle v. Progressive Consumers Ins. Co. “for a satisfactorily repaired car”. (No reported cases have assessed whether decreased in value of a unsatisfactorily vehicle, where the insurer selects the repair facility, might be covered under either collision or comprehensive insurance.)

The determination of the decrease in value of damaged property is often not easily determined.  With the advent of CARFAX, Inc. and other vehicle history and value search services, the fact that a vehicle is involved in a reported accident could mean a diminished resale value down the road. To make a successful claim for diminished value, the supporting documentation of the value of the car or property pre and post accident should be obtained.  (See, for example a sample CARFAX report .) To prevail on a diminished vehicle damage claim, evidence must be presented as to the amount of value lost, which usually means a live witness, and not the report of an auto valuation service.  A diminished value claim could have greater merit where the repairs were conducted at an insurers chosen shop, as faulty repairs by the shop chosen by a claimant may be the source of a defense (faulty repair) or third party claim against the shop which performed repairs.