Yes, I agree it would be very interesting. Whether the OP would have any $ left after paying their legal expenses (assuming they even prevail to begin w/) would be even more interesting (as you had already mentioned).
And, even then, would the party to be sued be LAPD or Audi?
If the OP’s wife is fine and if they can afford to easily get another car, I would say that a “rational actor” would just let it go and let someone else go to the trouble of finding out the answer…
Defendant’s lawyer: “What lost equity? The owner of the vehicle received the full value.” 
LAPD. Audi doesnt have anything to do with it.
The value isnt in the vehicle, but the contract itself.
Hence why it would be a very interesting lawsuit to see argued.
Perhaps we should think back at why we lease cars instead of financing them besides the immediate financial aspect (a lower payment than financing)
If the car is worthless at the end of the lease term, you walk from it. You’re not stuck trying to sell a paperweight.
I guess the reason why this whole thing bothers me is that the whole point of insurance is to make the insured “whole” i.e. if I get in an accident get me a replacement that’s comparable (less deductible, etc.). So there is a bit of a paradox here in this world of inflated used car prices (which I think has never happened before?) I am unable to get a replacement car that is equal to what I was insured for. At least that’s what I would want an entrepreneurial lawyer to argue.
Then it has nothing to do with who’s at fault and we go back to “I want my equity back!”
Who is ultimately the insured on a car that you didn’t own?
Well, the argument would be that the actions of the at-fault party are what resulted in the removal of the option.
To be fair, Audi built equity into these cars unknowingly when we were giving them away. I’m thankful for the business it generated but thought it was a silly amount of rebates to throw at a car that should have been able to sell itself.
If we close this thread, we will be forced to look at the share deals thread that has a 3 series for 800 a month with 16k down, a civic for 350 a month and a kia for 450 a month. Those are far more painful to read than this.
Just came here to say that in my experience AFS is the worst company in the entire world. I would expect so much less than nothing from them.
Yeah, but still - the vehicle owner was made whole and you only lost an “option” and not the actual $$.
Not quite. In this case, the purpose of insurance is to make the lien holder (AFS / VW Credit) whole.
I feel your pain, but internet strangers can’t offer much in legal advice (I am no lawyer).
Customer in 2020: HAHAHA AUDI LOSING 20K ON MY ETRON $398/mo thanks Sam you da man!
Audi in 2022: Hello, Progressive?
Customer in 2022: 
After reading all your responses (thank you) and having spoken to a couple lawyer buddies, I’ve already written this off in my head. But I have one question to determine whether this was an expensive lesson (and I can blame myself) or if this was bad luck (and I can blame my wife or LAPD depending on the result of who’s fault it is): would I have even been able to exercise the option to buy after the insurance deemed it a total loss, or was I at the moment of the accident SOL?
Why did you sign that you agreed that all the insurance overages would go to audi fs if this happened when you started the lease?
Come on, let’s not pretend we are all lawyers and we read and understand every contract we sign.
You could have bought it out, failing to disclose the accident as you were obligated to do in your lease contract, and essentially committed insurance fraud. Would you have been caught? Probably not, but the potential consequences if you had been would have been very unpleasant.
What is interesting is if this can be pursued in court:
Did AFS actually said it to Progressive? And if they did then they must pay back, I’d think.