Written by attorney Jon Ethan Lewis

Car Accident in Alabama - Property Damage

A lot of your damages depend on whether or not your car is totaled or whether it can be repaired. If the car can be repaired, you will be entitled to recover for the cost of repairs, loss of value, and loss of use (which could include rental car costs). In this situation, let’s assume your car is worth $10,000.00, and you have $5,000.00 worth of damage. The insurance company will pay for the $5,000.00 repair along with any rental car expense or loss of use of the car – let’s say one week or $250.00. In addition, the insurance company should pay you some compensation for the loss of value to your vehicle, but they will argue that if the car is repaired there is no loss of value. We all know that is a false statement, but they will argue it anyway.

If your car is totaled in the accident, you are entitled to the value of the car before the accident less the value of the car after the accident. The question becomes: what is a total loss to your car? In Alabama, a total loss is damage to the car which is 75% or greater than the value of the car. See Section 32-8-87 (d) Code of Alabama:

(d) For the purposes of this section, a total loss shall occur when an insurance company or any other person pays or makes other monetary settlement to a person when a vehicle is damaged and the damage to the vehicle is greater than or equal to 75 percent of the fair retail value of the vehicle prior to damage as set forth in a current edition of a nationally recognized compilation of retail values, including automated data bases, as approved by the department.

For example, if your car was worth $5,000.00 at the time of the accident and the cost to repair your car equals $3,750.00, or more, your car will be deemed a total loss. These figures of value are subjective and typically determined by the insurance company and based upon some “fair" market value. If you financed your car and it was bought not long before the accident, you could be underwater. What do we mean by "underwater"? Let's say you bought the car for $5,000.00 with $500 down and 6% interest over 3 years. You might owe $5,750.00 to the finance company. If your car is only worth $5,000.00, that's all the insurance company for the person who hit you will owe you. Therefore, you still owe $750.00 to the finance company, i.e.: you are underwater $750.00.

In such situations, if there is no bodily injury, you probably don’t need an attorney unless the insurance company is unreasonable. The reason? If an attorney charges you a contingent fee of 1/3 of the amount recovered, you could be even further underwater, i.e.: in the example above, if the attorney recovered the $5,000.00 for you and charged you a 1/3 fee, the insurance carrier would pay the $5,000.00 to the attorney, the attorney would get his $1,666.67 fee, and you would have $3,333.33 to pay the $5,750.00 you owe to the finance company – a $2,416.67 deficiency. Are you better off with a $750.00 deficiency or a $2,416.67 deficiency? Obviously, $750.00 because you can probably negotiate with the finance company over $750.00 easier than you can over the $2,416.67 deficiency.

This example also helps explain the significance of GAP insurance. GAP insurance would pay the deficiency for you, and you don’t have to worry about this problem.

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