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driving concerns

Our 2007 Buick was hit by a flatbed truck while parked in a shopping plaza. I did all the right things: I filed a police report, I called Intact, our insurance company, and I even found video footage showing the accident. The car was assessed at Intact’s preferred body shop as needing approximately $3,800 in repairs. Based on this quote, Intact declared the car a “total loss,” ended our coverage for a replacement rental and offered a $4,500 payout – $4,000 for the value of the car and $500 for HST. In my conversation with the body shop, they confirmed that the damage was cosmetic and 100 per cent fixable. In this market where inventory shortages have driven used car prices way up and consumer options way down, for Intact to deem a repairable car that has no structural or mechanical damage a total loss is unconscionable. For them to expect that anything can be purchased for $4,000 is pure fantasy. Why would they write off a car that can be repaired? Can we make them fix it? – M., Ontario

Insurance companies have a right to write off your car in Ontario – and there’s no way to make them fix it instead, insurance experts said.

“In the Ontario Automobile Policy (OAP1) used by all auto insurers in the province, the right to repair or replace rests solely with the insurance company,” said Alex Gemmiti, service team leader for Mitchell & Whale Insurance Brokers Ltd. (Mitch), an insurance broker based in Whitby, Ont. “In a strict sense, the insurer can choose to either repair or replace, regardless of the value of the vehicle or cost of repair. Normally they will pay the lesser of the two.”

So why would an insurance company decide to write off a vehicle with just cosmetic damage?

Anne Marie Thomas, director of consumer and industry relations for the Insurance Bureau of Canada (IBC), which represents the insurance industry, said she couldn’t specify a threshold at which an insurance company will decide to write off a car.

“I can tell you that if it costs more to repair it than what it’s worth, the insurance company will write it off,” she said.

George Iny, president of the Automobile Protection Association, an automotive consumer advocacy group based in Toronto, said insurance companies will typically write off a car if the cost of repairs is 70 to 80 per cent of the market value.

Easier to write off?

“Most consumers are happy with the decision [to write it off] when repairs are that extensive because they don’t have the same level of confidence in a substantially rebuilt vehicle,” Iny said.

Unfortunately for those drivers who have kept their “old, boring sedans,” such as Buicks, Chevrolet Impalas and Ford Crown Victorias, in tip-top shape, low demand for these vehicles means their value is considerably less than more popular SUVs, Iny said. So they tend to be written off with relatively little damage.

“These vehicles could give many more years of service, are hard to duplicate in equal condition, and are usually worth less than $7,000,” Iny said.

Although the insurance company has to give you the market price for the vehicle, they don’t have to give you more than that – even if you can’t find anything in that price range.

“Your insurance policy is designed to put you in the same financial position you were prior to your loss,” Thomas said.

The rules vary by province. While they’re similar in most regions, there are exceptions. In Quebec, for instance, an insurance claim allows for the “reasonable cost of repairs.”

“In exceptional cases like this one, [we’ve] argued [in Quebec] that ‘reasonable’ could even exceed the market value of a vehicle, and insurance companies have accepted it,” Iny said.

When contacted, Intact said it couldn’t comment on this specific case without permission from the reader. “If a customer disagrees with the outcome of a claim, avenues exist for them to dispute it,” said Katrina Caguimbal, an Intact spokeswoman.

Value added?

If you can prove that your car is worth more than the insurer says, the company might agree to increase the payout, IBC’s Thomas said.

“If, by some miracle, you had had your vehicle appraised just prior to the loss and it said it was worth $6,000 [instead of $4,000], you could bring that to the insurance company,” Thomas said. “Or you can do your own research and dispute it.”

For instance, you could look at a used car site such as AutoTrader to determine the prices being asked right now for cars in your area that are the same make, model and year, with similar mileage and options.

You could also get an estimate from a car dealer, if you can find one who will co-operate, Iny said.

If they’re selling for significantly more on average, you could bring that to your insurance adjustor – but there’s no guarantee that they’ll agree to it, Thomas said. “It could be a tough road.”

But, typically, the offer reflects the current value of the car in your area, Desjardins spokeswoman Jessica Spina said.

“We are constantly following the evolution and the trends of the automobile market,” she said. “Adjustments are made for the different condition and options among vehicles.”

If the loss is cosmetic, you may be able to get a reduced cash settlement and keep the vehicle, Mitch’s Gemmiti said.

“This would allow a client to use a portion of the vehicle’s value to repair it if they wish,” Gemmiti said. “These options may be more limited if there is structural damage to the vehicle that does not allow for it to be driveable by Ministry [of Transportation] standards.”

But if your insurance company agrees to give you the car, make sure that you’ll be able to legally drive and register it, IBC’s Thomas said. If you can’t register it, you won’t be able to insure it.

“It can be a slippery slope,” Thomas said. “Each province has legislation around salvage branding.” In Ontario, for instance, insurers must determine whether vehicles they have written off (in other words, categorized as a “total loss”) should be branded “irreparable” or “salvage.”

Salvage means it can be repaired but it won’t be deemed “fit to drive” or insurable unless it has been rebuilt and passed structural and safety inspections, Thomas said.

But if it was branded as irreparable, it can only be used for parts and can never be driven again in Ontario, she said.

“If it’s irreparable, that means this car is now a vehicle organ donor,” Thomas said.

Ask for an umpire

If you’re still not satisfied with the insurance company’s offer, Ontario’s Insurance Act protects a consumer’s right to dispute the car’s value, Gemmiti said.

If it goes to arbitration, you would have to get a written appraisal of your car, the insurance company would do the same, and an independent umpire would look at both and decide on a final resolution, Gemmiti said.

Have a driving question? Send it to globedrive@globeandmail.com and put ‘Driving Concerns’ in your subject line. Emails without the correct subject line may not be answered. Canada’s a big place, so let us know where you are so we can find the answer for your city and province.