Earlier in my career I handled a subrogation case involving a brand-new vehicle which was lightly tapped from the rear by a careless driver. The damage to the vehicle was very minimal, yet the vehicle was declared a total loss by my client because its frame had been “jiggled” and the cost to repair the frame, together with the diminution in value of the vehicle after successful frame repair and increased salvage value exceeded the actual cash value of the vehicle. While frame damage can be repaired, it almost always will be weaker and contain more structural insecurities than before the collision. I thought the case to be an extreme outlier, but in more recent years, insurance companies have been facing not only increased costs of repairs due to the rise in vehicle complexity, but also more vehicle total loss claims.
The increase in total loss claims is playing a key role in the rise of auto insurance premiums. Together with the overall rise in the cost of doing business, labor shortages, supply chain disruption, and inflation—which are being experienced across all industries and areas of business—a sharp rise in the cost of total loss claims has become a key contributing factor in sky-rocketing auto insurance rates. And the increasing complexity of today’s vehicle technology is playing a key role in the burgeoning frequency of total loss claims. This is bad news not only for the insurance industry and the declining percentage of insured drivers, but for the entire vehicle repair industry as well.
While an increase in total loss claims on older vehicles can be expected as their actual cash value or market value decreases with time, what has been unexpected is the rapid increase in total loss claims on newer vehicles. The good news is that newer vehicles are safer and more efficient thanks to new technology. But that advance in technology has come with an unexpected cost. Repairing a crack in a windshield a decade ago could be accomplished with any individual with a strong back and an IQ hovering around that of a walnut. Today, windshield replacement requires a degree from MIT because it must be perfectly integrated with cameras, sensors, and advanced driver-assistance systems (ADAS) in order for the related assistive technology to work properly. Static or fixed ADAS calibration must take place in a specialized setting using highly sensitive equipment and perfectly level flooring. Dynamic ADAS calibration must also be performed while the vehicle is moving and during optimal weather conditions. Quite literally, improper windshield replacement can engage the life of the driver and occupants of the vehicle. This means that repairs following a stone cracking a windshield could cost hundreds of dollars more than what it did just a few short years ago.
When I was a teenager and the bumper was damaged, we used to just rip off the bumper. Today, the bumper is a highly technical and integrated piece of ADAS equipment and does much more than just protecting the vehicle in a minor collision. Today’s bumpers integrate complicated sensor technology to do things like help your car stay in its lane and keep you from hitting something in your blind spots. Replacing one of these bumpers will involve making sure this sophisticated system is calibrated, installed, and programmed correctly. Today, bumpers contain Star Wars-like technology such as blind spot monitoring, adaptive cruise control, and other advanced driver assistance systems (ADAS) utilize sensors which reside behind the bumper covers. Bumper repairs now require special caution and expertise and original equipment manufacturers (OEMs) have different levels of warnings and detailed instructions when it comes to repairing bumpers.
Brake repairs have also now entered the realm of expensive science fiction. Automatic Braking Systems (ABS) are now a major safety improvement for modern vehicles and will actually stop the car for you if you don’t react soon enough or don’t see the collision coming in the first place. But these complex systems can be expensive to repair and replace. The ABS system as a whole includes speed sensors, complicated and expensive valves, pumps, and electronic control units (ECU) which react to signals from the speed sensors. Some vehicles boast expensive four-channel/four-sensor ABS valve and sensor combinations which enable a feature known as electronic brakeforce distribution; something that detects the brake force require by each of the four wheels and supplies just as much braking power as is needed to keep the vehicle balanced.
A collision could also cause damage to advanced technology such as lane-keep assist, blind-spot monitoring, virtual exterior mirrors, smartphone integration, drowsiness detection, adaptive cruise control, vehicle summon features, night vision, tire pressure monitoring, surround-view camera systems, dual-clutch transmissions, launch control, and increasingly, electric motors and battery systems. Cadillac features a complex Super Cruise feature (world’s first true hands-free driving system) which utilizes real-time precise positioning, cameras, sensors, and LiDAR map data—all of which are expensive to repair or replace and require advanced training and experience to do either.
It should not be surprising that the rise in complexity of both technology and construction of new automobiles has resulted in higher repair costs as well as newer vehicles being written off as total losses much sooner and more frequently than just a few short years ago. The frequency of total loss determinations for vehicles less than three years old rose from 7.9% in the first half of 2018 to 8.01% in the first half of 2019. Vehicles aged 4-6 years also increased from 13.03% in 2018 to 13.41% in 2019.
For subrogation professionals, this phenomenon in a skyrocketing incidence of total loss claims means understanding the law behind third-party tort damage recoveries and being prepared to explain why—like the vehicle with the “jiggled” frame—what otherwise appears to be a vehicle with very little property damages is being totaled and its entire market value is being pursued against the culpable third-party tortfeasor.
A chart depicting automobile total loss thresholds in all 50 states and describing the nuanced differences between total loss thresholds and total loss formulas in those states, see our chart found HERE on our website. If you have questions regarding the subrogation of damaged vehicles which have been declared a total loss or auto subrogation in general, please contact Gary Wickert at [email protected].
Gary L. Wickert is an insurance trial lawyer and partner with the law firm of Matthiesen, Wickert & Lehrer, S.C. Gary has nearly four decades of litigation experience and is regarded as one of the world’s leading experts on insurance subrogation. He is the author of several subrogation books and legal treatises and a national and international speaker and lecturer on subrogation and motivational topics.