You want to know the legislative intent of C.G.S. § 38a-353, Calculation of Settlement Amounts on Totaled Motor Vehicles.

SUMMARY

It appears that the legislative intent of the statute was to create a fairer process by which insurers determine the value of vehicles declare constructive total losses by (1) specifying a particular reference as a guide, (2) giving the insurance commissioner the authority to determine a second reference to use in determining settlement values, and (3) adding the words "at least" to indicate that the combined average values taken from the reference guides was the starting point in arriving at a final settlement amount.

CGS § 38a-353

C.G.S. § 38a-353, derived from HB 5623 of the 1987 session, requires automobile insurers to determine the settlement amount paid to the insured by using at least the average retail values given for the vehicle in (1) the National Automobile Dealers Association (NADA) used car guide and (2) one other automobile industry source the insurance commissioner approves when they declare a damaged motor vehicle a constructive total loss. The statute defines "constructive total loss" as the cost to repair or salvage damaged property, or the cost to repair and salvage such property, equals or exceeds the total value of the property at the time of loss.

The bill's statement of purpose was "to prevent insurance companies from establishing unreasonably low values on totaled motor vehicles" (emphasis added).

COMMITTEE TESTIMONY

In testimony before the Insurance and Real Estate Committee, Terry Twigg, representing the Insurance Association of Connecticut, states "we think consumers may have some discomfort when they find out #1, #2, average, end of story (emphasis added), because they will lose their present ability to go to the insurance commissioner, tell their story, and ask the commissioner to call in the insurer to justify the number." It appears that Twigg is saying the bill will require insurers to take the average values from the NADA and another reference in determining the insured's loss and no more, effectively eliminating negotiation when the settlement amount is disputed by the insured. She further stated, in response to questions posed by Rep. Metsopoulos, "...I know our claims people have told me that they use these types of sources as starting points (emphasis added). I don't know what other factors are put into the equation."

Ken Rodgersen, President of the Auto Body Association of Greater Bridgeport indicated "the NADA Manual has become a standard in this area, as most banks, credit unions, and independent appraisers have used this guide for many years for making comparison of base values, additions and subtractions (emphasis added). We advise our clients as to what they may expect in a settlement from their insurance company."

HOUSE DEBATE

In debate on the House floor, Rep. Beamon offered House amendment, "A" which inserted the words "at least" after the word "use." This had the effect of establishing a minimum requirement. The amendment was adopted on a voice vote. House Speaker Stolberg ruled the amendment technical.

Rep. Migliaro offered House amendment "B", which inserted the word "retail" before the word "values." In explaining amendment "B," Rep. Migliaro noted, "...there is a wholesale price and a retail price in the book. You can have a vehicle that can be as much as $3,000 or $5,000 or more in difference between wholesale and retail. And all this amendment says is that evaluating the loss of that vehicle, that the insurance company has to take into consideration the retail value, not the wholesale value of the car." The amendment was adopted on a voice vote and ruled technical.

Rep. Farr raised the following question in debate on the bill: "Rep. Beamon, the only concern I have with this bill is the situation where if you have an individual who has a unique car, let's say, has a car that he considers to be a classic. He restores the car. He has brand new paint job, he's rebuilt the engine, he's done a number of other things on the car and yet the blue book value, or the book value of that car is substantially less than what he thinks the value of the car is. Does this bill say that the insurance company will pay only the book value of the car and not, in fact, the actual value of that car?"

Rep. Beamon responded by saying "the commissioner's index would take care of any motor vehicle, and the NADA book as well. It would take care of a very expensive car, or a relic. It would take care of both of them."

Rep. Farr clarified his question by saying, "...as I understand these books, they have high mileage and low mileage prices on there, but I've never seen a book that shows something which might show that a classic 1958 Chevy that's been restored would be listed in any of these books as having any unique value, especially with the classic automobiles, are you representing that somehow in the book somewhere, there's going to be a listing of every car that's been restored and the restored values of cars?"

Rep. Beamon yielded to Rep. Balducci to respond to Rep. Farr's inquiry. Rep. Balducci stated, "presently, the NADA book is the one required in the legislation and any other particular book. What the first amendment did was instead of taking the average of the two, you had to be at least the average of the two (emphasis added). There are several books around which appeal to old car owners and antiques car owners and it does indicate, or give an indication as to what your 1958 Chevy might be worth. ...if you've restored a car that may not appear in the book, and I can't think of any that might not appear you would have to produce the fact that you did restore this. That a car may be worth $1,000 but you have papers to document (emphasis added) the fact that you put a paint job on it for another $1,000, did some body work for $500, etc., and generally that's acceptable and you would be paid that fair market value for the vehicle (emphasis added)."

Rep. Farr states his understanding of the statement made by Rep. Balducci as follows:

As I understand the answers to the question, and maybe I'm not reading this right, if in fact you had a unique vehicle, if you did what you do today, which was to show (emphasis added) that you put a lot of extra money into the car, you had restored it, you had a new engine, etc., that you could in fact negotiate with the insurance company and the insurance company could pay far more than the book value. Is that correct?

Rep. Balducci responded, "...Yes that's correct. They could pay much more."

SENATE CONSIDERATION

The bill was placed on the consent calendar without debate in the Senate.

JH:eh