Menefee: Navigating Insurance Coverages for the Vehicle in Your Shop 

April 19, 2024
Having some knowledge of various insurance policies can prepare you for a coverage limit issue and allow you to advocate for your customer.  

Some standard insurance knowledge is key when dealing with auto insurance claims. Everyone has some basic insurance knowledge, but there is some insurance knowledge I think that is critical to know to help your customer. 

Insured vs. Claimant: It is important to know if your customer is the insured or the claimant when you are dealing with an auto insurance repair. If the customer is the insured, he or she is going to have the limitations of the insurance policy he or she purchased. If the customer is the claimant and goes through the responsible party’s insurance, they will have the limitation of the responsible party’s property damage liability limits. This is important for the repair shop to know when the customer is the claimant because you could run into property damage limit issues, where the full repair will not be covered, if it is a larger repair.  

Property Damage Liability Limit: The property damage liability limit only applies if the customer is the claimant going through the responsible party's insurance or if they are going through their insurance under uninsured motorist property damage. It is important to know your state minimum property damage limit in case your repair is getting close to the state limit. Then you need to inquire with the insurance what policy limit applies to the claim. You never want to get into a situation where you are knee-deep in a repair or done with a repair to find out the policy is going to be maxed out. This leaves you and your customer in a precarious situation of figuring out if they need to go through their own insurance or if they are going to have to pay something out-of-pocket for the repairs. 

State in Which the Accident Occurred: You may think this has nothing to do with you, but it could. If you have a customer who is the claimant, (again, going through the responsible party's insurance) and the repair is going to be a larger repair, you may need to know this information. If the responsible party has the state minimum property damage liability limit, like in New Mexico, where it is only $10,000 and the accident occurred in another state where the state minimum property damage liability limit is higher, then the responsible party’s limit automatically increases to the state minimum limit for the state the accident occurred in. This could make a difference to your shop if, as in this example, the vehicle repair is over $10,000 and the state the accident occurred in had a higher liability limit. I bring this point up because a lot of the times, the insurance company will fail to increase the limit unless it is brought to their attention. This is a standard insurance clause in all policies in the United States. That’s why we can legally drive our vehicles over state lines without having to get insurance for that state. 

Uninsured Motorist Property Damage: If you have a customer who was hit by a driver who did not have insurance and your customer has this coverage on their own policy, then instead of your customer going through their collision coverage, they can go through their uninsured motorist property damage coverage. In most states, this is a predefined coverage with set rules. The beauty of uninsured motorist coverage is for many states, the deductible is dropped to $250. The claim is not surcharged on the customer’s insurance, meaning it won’t make their rates go up and a rental vehicle is provided. It may also be used if the responsible party’s insurance coverage is maxed out and there's money left owed to repair or to total the vehicle. In some states, uninsured motorist coverage also applies to hit-and-runs. Please note that often, the customer must have filed a police report and request the insurance company to change the claim over to this coverage and not their collision coverage. Customers may have this coverage without having collision coverage on their policy. The details of uninsured/underinsured motorist coverage vary by state. 

Rental Vehicle Coverage: No matter if the customer is the claimant or the insured, the insurance company does not have to set up direct billing with a rental car company. They can make the customer pay for their own rental and then submit for rental reimbursement. A lot of companies are starting to go to this if the customer is the claimant. If you have a customer where the insurance wants to do rental reimbursement and not set up direct billing, then I would encourage the customer to ask to be paid out for loss of use. Often, insurance will pay out for loss-of-use by calculating the type of vehicle times the repair days they are figuring to fix your vehicle. By requesting loss-of-use to be paid out, it can help the customer get a little bit of money to help with the upfront cost of the rental vehicle. Then if the repairs go over the number of days allotted by the insurance company for the repair, they can submit the rental vehicle invoice to the Insurance to have the difference reimbursed.  

Overall, it’s important for you to know how to set up the proper fail-safes with your staff to ensure you don’t get into a situation where there’s a coverage limit issue and that you advocate for your customer.  

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