The Insurance Company says my car is totaled, what if I don’t agree?

After a Texas car accident, the company insuring the at-fault driver usually must pay for repairs to the vehicle.

  • If you caused the accident that damaged your own vehicle, your collision insurance will often cover the cost (although your insurance premiums may go up if you make a claim.)
  • If another driver caused the accident, that driver’s insurance company usually must pay for damage to your vehicle.

When a Texas auto collision results in major damage to a vehicle, sometimes the insurance company declares that an automobile is totaled.

  • It is also sometimes referred to as a salvage vehicle, because the damaged automobile can only be used for salvaging parts.

What Does It Mean When A Car Is Totaled?

The term totaled stands for total loss.

It means the cost to repair your vehicle is more than the value of your vehicle right before the accident.

When Is An Automobile Totaled Under Texas Law?

Under Texas Transportation Code Section 501.091(15), insurance companies can declare a vehicle is totaled (or is a salvage vehicle) when it is so damaged (or missing an important component) that the cost of repairing it is more than the actual cash value of the vehicle before the accident.

  • The insurance company does not want to pay to repair a car that will still be worth even less than the cost to fix it.
  • For example, if your car will be worth $5,000 after repairs, but repair costs are $4000, the insurance company may decide to total the vehicle.

Texas Court Law Has Confirmed How To Determine When A Vehicle Is Totaled

In the case of Canal Ins. Co. v. Hopkins Towing, the Texas Court of Appeals ruled that an insurance company can declare a vehicle is a “total loss” if:

[A] reasonably prudent uninsured owner, desiring to restore the property to its preincident condition, would not utilize that property for such restoration.
Logic dictates that, absent other factors, a reasonably prudent uninsured owner would not repair a vehicle where the repair costs exceeded the vehicle’s preincident fair market value.

The Court’s ruling restates the Texas law that a damaged vehicle can be considered totaled if repairing it costs more than the vehicle was worth before the accident.

How is The Cost of Repair Calculated Under Texas Law?

Texas Transportation Code Section 501.091(15)(a) states that the cost of repairing the vehicle includes:

  • Replacement Vehicle Parts
  • Labor by the Repair Facility
  • Repainting the Vehicle

However, under the Texas Transportation Code, the repair costs do not include sales tax.

When Can A Texas Insurance Company Declare A Damaged Vehicle Has Been Totaled?

The Texas Transportation Code states that a vehicle is totaled if fixing it costs more than the car is worth. But insurance companies do not have to follow this.

In Texas, insurance companies can declare a vehicle is totaled, even when repair costs are less than its actual cash value.

  • Many insurance companies will even total a vehicle when repair costs are more than 50% – 70% of the value of the car.

What Happens If My Vehicle Is Totaled Under Texas Law?

If you were in a Texas auto accident and the insurance company says your vehicle was totaled, you can accept their decision.

If your vehicle is totaled, insurance companies will usually offer to pay you what they decide is the actual cash value (also called the fair market value) of your vehicle at the time it was damaged.

How Is Actual Cash Value (Fair Market Value) Calculated Under Texas Law

There are several Texas laws that determine how a damaged vehicle’s actual cash value is decided.

Definition of Actual Cash Value Under Texas Law

Insurance companies and Texas law defines actual cash value as the value of the vehicle (purchase price), minus any loss in value, known as depreciation.

Actual Cash Value Is Equal To Fair Market Value Under Texas Law

In the case of U.S. Fire Insurance Co. v. Williams, the Texas Court of Appeals stated that the term actual cash value (used in Texas laws) is the same as fair market value.

  • Many insurance companies and others use the Kelly Blue Book to help decide a vehicle’s value. Kelly Blue Book has information and entries for most vehicles, including an explanation of a vehicle’s possible depreciation (loss in value over time.)

A Vehicle’s Actual Cash Value Includes Depreciation In Texas

After a Texas auto accident, if a vehicle is totaled, the owner may be able to receive money from the at-fault driver (or that driver’s insurance company.)

The insurance company or court sets the value of the totaled car at the time of a car accident. This includes the automobile’s depreciation in value.

What Is Depreciation In Value Of An Automobile Under Texas Law?

After you purchase a car, its value begins to go down.

Even a used automobile that has not been driven much usually cannot fetch the actual purchase price of a new vehicle:

  • Many people want newer vehicles
  • The warranties on parts and the vehicle have begun to run after it was sold
Factors That Determine A Vehicle’s Depreciation In Value

When an insurance company or court determines the purchase price of a vehicle at the time of a car accident, this will be reduced by the vehicle’s depreciation. The insurance company may consider:

  • The age / year of the automobile
  • The vehicle’s mileage at the time of the accident
  • Wear and tear on the vehicle (dents, scratches, missing parts)
  • If the vehicle has been in other accidents and repairs (prior accidents can reduce the value of a car)
Actual Cash Value Is Usually Less Than What You Paid For The Vehicle

Actual cash value is almost always less than the amount you purchased the car for, especially if you purchased it new. The longer you have owner the vehicle, the higher its depreciation (the less it is worth under the law.)

Sentimental Value Not Included

You usually cannot include any special or sentimental value of the automobile. It will be valued at the price that someone else would have paid for the car before the accident.

What If I Don’t Think My Vehicle Is Totaled?

If you do not believe your automobile should be declared totaled, you can either:

Negotiate with the insurance company’s valuation of your vehicle

Ask the insurance company how it decided your automobile’s value

Offer your own evidence of its value:

  • Quotes from Auto Dealers In Your Area
  • Online Prices For Similar / Same Vehicles In Your Area
  • Documents Showing the Particular Value of Your Car (Special Features or Custom Parts)

Try To Have It Repaired

After a Texas auto accident, if you want to try and repair a vehicle the insurance company determined was totaled, you should notify the insurance company.

The insurance company will usually subtract the salvage value of the vehicle from the amount of money the insurer is paying for your property damage.

Salvage value is the amount of money the vehicle is worked if it was scrapped and salvaged for its parts and materials.

Salvage Title For Vehicles Under Texas Law

If you repair a vehicle the insurance company declared was totaled, the vehicle may be issued a salvage title.

Salvage titles are a special kind of vehicle registration in Texas with limits on how it can be sold. It can be difficult to sell a vehicle with a salvage title in Texas.

If the vehicle has been properly repaired, you can apply for a proper title to replace the salvage title. In Texas, this is usually known as a rebuilt vehicle.

File A Lawsuit Against The Insurance Company or At-Fault Driver

If you were in a Texas auto collision and want to challenge the insurance company’s valuation of your vehicle in court, under Texas law you can file a lawsuit to recover for the damage caused by the at-fault driver.

Winning a lawsuit or even negotiating a settlement usually requires understanding:

  • Rules of Evidence
  • Rules of Tort Liability
  • Texas Insurance Law
  • How the Texas Legal System works
  • Auto and Safety Engineering

This is not easy to do on your own. You may want to speak with a Texas auto accident attorney before trying to negotiate with the insurance company.

Warriors For The Injured

If you were in an auto accident in Texas and suffered a property loss like a severely damaged vehicle, speak to a Texas personal injury attorney at Justinian & Associates to understand and protect your rights.

The Texas auto accident lawyers at Justinian & Associates have represented hundreds of injured victims in a position similar to yours. We know the system, and will fight to make sure you receive all the compensation you are entitled to under the law.

Call, text or email us for a free consultation with a seasoned Texas personal injury attorney. Tell us your story, and we will explain your options under Texas state law and Medicare regulations. There is no obligation.

And unless we get you money for your injuries, you owe us nothing. Your rights can be lost if you wait. Call us for a free consultation.