Customer Car Totaled.... Insurance Claim higher than payoff


I had a customer just lease a BMW from me last month, unfortunately, it flooded and was totaled out. I made sure to tell the customer to tell the insurance company that the value is higher than the payoff. His payoff is 37k (don’t know if this includes tax or not). Insurance valued the car at 40.3k.

However, Insurance is refusing to pay him the difference and wants to deal with BMW directly in just paying the 37k. Is there any way for him to get the difference?

Insurance should be paying “replacement” cost. If that replacement cost is high, insurer gets to keep the extra since he might have done a high upfront payment or if the replacement cost is low, insurer puts more money to cover liability…Will the insurance pay more if the insurer had higher loan and/or higher payout? this is crazy!

If the opposite way around, and the customer didn’t have gap insurance, they’d have to cover the difference.

So it should work both ways around. Dealer told me yes, and the adjuster said yes. Claims department didn’t

How is the payoff much smaller than the replacement cost for a month old car? Did he put in a lot of money upfront? Or did he get a good deal? If he got a good deal, they could claim that is the market price and thus he is not entitled to that money… Their blue book is not accurate anymore as the market price is much lower…

Maybe it’s time your client seeks legal counsel.

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Any chance your client could consult with a lawyer? They’ll probably do a consult with him for free at first to see if they’ll take the case.

OTOH, that 3k is going to get eaten up pretty quick if legal fees aren’t recoverable.

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Exactly. If customer is paying his premiums based on the “market value” he should be paid out based on the market value. The fact that insurance company would ask for the difference in the opposite scenario makes me think they calculate premiums based on the “market value” , NOT based on the pay-off.

Corporate greed…

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This happened to my FIL but Insurance paid off Audi Financial Services and then sent my FIL a check for the difference. Something seems off. What insurance company is this?

Liberty Mutual is the insurance comapny

The insurance company has to pay for a like replacement. I feel sometimes junior reps do not know the legal implications so asking for a supervisor may help. I can’t imagine they even thinking to let the customer go the legal route.


I agree - sounds like the confusion is they don’t understand the leasing process. Should be escalated to a supervisor. They’ll also likely lose if they go to Court - Court’s don’t look favorably upon insurance companies not paying out.

The value of the car is independent from the payoff. If it exceeds the payoff, the customer gets the difference. If it is below the payoff and the customer has GAP, then that’s the show.

Both… He put a few thousand in taxes and fees upfront, however he is getting the tax and dmv back (as only a portion was used). Still on the hook for the acquisition fee, first month, and tax on rebates.

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There are a bunch of opinions in this thread about what the insurance company is obligated to do or not do. However, these obligations are governed by contract. So the first step in this dispute is to request a copy of the entire insurance policy from the carrier. Then ask the adjuster put in writing what language the carrier is relying on in paying the $37k and not the $40.3k.


I like the name. It’s almost like you might do this professionally.

Anyway, I would be curious if the 40.3k is based on a new car replacement clause vs. actual value. If it is the former, I wonder if New Car Replacement has a clause for dealing with leases where you don’t actually own the car vs. financed cars? I’ve never paid extra for it because both of our cars are leased and dramatically under water, so all I care about is GAP.

It’s all guesswork until you see the policy. And even if the policy calculates payoff by ACV, you never know. Just a few months ago, on a no significant money down 2017 Chevy volt lease my client received a $5,000 check when his car was totaled, after the lease was paid off.


Not New car replacement. Market Value based on a vehicle 1000 miles

If a car is negotiated well with much lower transaction price, that transaction price seems to drive the payoff amount… I would not surprised if they claim that that is the replacement cost of the car since there is at least one transaction at that price! That leaves acq. fee and tax on rebates… if taxes are coming back, tax on rebates should also be coming back? Perhaps that is why you don’t pay acq. fee upfront and keep upfront payment minimal

Well they don’t know what the sales price is as they don’t ask for the contract. For all they know, the client could have put 10k down.

We know a thing or 2, because we’ve seen a thing or 2.


That would be a different insurer :slightly_smiling_face:

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