Custom Parts & Equipment Coverage and Agreed-Value Policies: Are You Sure You’re Fully Insured?

I run a personal injury law firm in Orange County, Florida. I’ve ridden motorcycles since 1984, so I’ve dedicated a large part of my practice to representing bikers. I was also a Progressive Insurance Special Lines adjuster and handled motorcycle claims for Progressive in Central Florida for several years before going to their Casualty Unit. Those experiences have been invaluable to me as a personal injury lawyer. That also means I get a lot of calls about insurance policies and coverage issues when things go south between bikers and their insurers.

I had a life-long friend contact me about his insurance company declaring his wife’s bike a total loss. She had a base model Harley FLSTC Heritage Softail® Classic, but he and his wife had extensively modified the bike and added several thousands of dollars of custom parts to it.

The problem he faced is that his wife had a crash that was her fault, so he had to go through their collision coverage for her bike’s total loss. When he purchased his policy, though, he didn’t buy additional Custom Parts & Equipment (“CPE”) coverage. He didn’t buy additional CPE coverage when they added even more CPE to the bike.

There was nothing I could do to help him because he was under-insured for his level of risk. His insurance company paid him for a base model Heritage Softtail plus $1K extra for his CPE. That’s it. He was what insurance companies call “self-insured” for the rest of his bike’s value. A lot of that CPE was damaged in the crash, too, so he couldn’t just add it to another Softail.

How much CPE does your bike have? An aftermarket exhaust? Custom wheels? An expensive paint job? Extensive amounts of chrome?

I’m willing to bet that most of you are “self-insured” for your extensive mods too.

One of those ways an insurance company determines your insurance premium is the value of your bike, and the insurance company does that by decoding your bike’s Vehicle Identification Number (“VIN”). It also relies upon you to tell them about your bike.

If your bike’s VIN decodes as a base model Harley, and you didn’t tell them about your additional CPE, then that’s what the insurance company will pay you for if it’s a total loss if you don’t have that additional CPE coverage. The insurance company will not pay you for more risk than it has underwritten.

If you put $20K of aftermarket parts on a $10K bike, then your insurance company will only pay you $10K for it. A standard motorcycle policy won’t pay you for your bike’s full value if you have lots of CPE or mods and no additional CPE coverage. Most insurance companies will allow you an additional thousand dollars or so in CPE—some do not—but that’s it.

Think about it: How much money would you lose if your bike were a total loss through being wrecked or stolen right now?

Read your insurance policy if you don’t believe me and look for the section that discusses “Actual Cash Value.” That will confirm what I said. The insurance company only owes you for what it agreed to insure when you bought your policy.

There are two ways to avoid this problem with your insurance company:

  1. Your first option is to buy additional coverage for the amount of CPE you’ve put on your bike. You’ll need receipts to prove the CPE’s value, and like almost anything else, CPE loses value over time, so you usually won’t get a dollar for dollar reimbursement. Additionally, CPE is usually worth less than factory equipment. That’s particularly true when it comes to wheels and custom paint. Insurance companies will almost always subtract the OEM value from any CPE equipment you put on your bike. Also, you need to be careful to buy additional CPE coverage whenever you buy more parts for your bike. It’s easy to buy parts and install them, and then not have enough CPE coverage in a total loss because you forgot to call your agent and increase your CPE coverage.
  1. Your second option is to buy an Agreed Value (or “Stated Value”) policy. This is a better option if you have a lot of CPE, if your bike is highly modified, or it’s an antique. Some insurance companies will not write these policies so you must shop around for an insurance company that will. Once you and your insurance company agree upon your bike’s value then that is what the insurance company will pay you if it’s a total loss one year or 10 years from now. That only changes if you and the insurance company agree upon a new value. It’s important to keep your policy current to reflect your bike’s market value. Agreed Value policies can be expensive, but if your bike has a lot of mods or is an antique, it may be worth it.

Unfortunately, if you don’t have additional CPE coverage or an Agreed Value policy, then no lawyer can help you get the value of your bike from your own insurance company. Your insurance policy probably has an arbitration clause in it that says if you and your insurance company can’t agree on your bike’s value then you must submit to binding arbitration. Arbitration is expensive, and I think it’s almost useless in such cases.

It’s not always possible to go through the other person’s property damage coverage. That person may not have any insurance coverage or have very little insurance coverage, so a lawsuit is probably throwing good money after bad. That’s because our courts award judgments, not money, and it’s up to you to collect on those judgments. Most people have nothing, so you can’t get anything from them. We lawyers call such people “judgment-proof” or “uncollectible.” That’s why we don’t handle cases in which there isn’t any coverage. You can’t get something from nothing, so you must protect yourself. No one else will.

Insurance is great if you buy what you need for your level of risk. Keep in mind that 25% of Florida drivers have absolutely no insurance coverage, and many only have $10K of property damage coverage, so you can lose a lot of money very quickly in a crash if you don’t protect yourself.

I hope you’ve found this article informative.

Void Ab Initio: An Unfair Legal Fiction

You would think that a contract is a contract is a contract. We expect parties to uphold their ends of a contract whenever they enter into them.

Unfortunately, that is not the case with some insurance companies.

I will not mention specific insurance companies, but some insurance companies try to weasel out of claims by using a process called “void ab initio.”

Void ab initio is a legal fiction that allows one party to a contract to pretend that the contract never existed. Some insurance companies use this legal fiction in order to avoid an insurance contract rather than paying the value of claims when they occur.

What happens in a void ab initio action is the insurance company returns all your policy premiums and then pretends that your insurance policy never existed because it  supposedly never would have written your policy if it had known about certain facts.

Those insurance companies will happily take your insurance premium monies for years until you  or somebody else makes a claim. After you or someone else makes a claim, the insurance company holds what is called an Examination Under Oath (“EUO”) EUO in order to  discover something that would allow them to void your policy contract. The insurer is often looking for a way to deny your claim if it holds an EUO.

Sometimes they will do it based upon just a recorded statement.

So what do the insurance companies look for?

Well, it can be as simple as somebody who lives in your home that you did not disclose to your insurance agent when you got the policy. I have seen insurance companies  deny coverage because the insured party did not disclose that they had children of 15 years or older living with them, live with their parents, had roommates, or anything else that would raise the premium by such an insignificant amount is $10 (or maybe less) per policy period.

I have also seen this occur once somebody has changed their address without notifying the insurance company.

One insurance underwriter admitted during her deposition that her insurance company was engaging in what is called “post-claims  underwriting.” All that means is the insurance company  is trying to reach back in time in order to say they would not have underwritten your policy had they known about some fact.

So you didn’t tell your insurance company that you drive for Uber or Lyft when you took out the policy? Get ready for a denial. Nothing is covered. Your policy is voided. It’s as if it never existed.

In my opinion is that it’s an underhanded way  of denying claims instead of paying them. It is usually the lower-tier insurance companies that act this way. They will literally try to void your policy for any reason they can rather than paying thousands of dollars to pay your claims.

However, many times it is the insurance agent who fills out  the  insurance company’s initial policy application. This is particularly  true when it comes to immigrants, poor people, and others who do not have the best reading skills. Sometimes the insurance agent, claims adjuster, or underwriter do themselves not understand questions the these applications ask. If the insurance company representatives do not understand their own applications, then how are common  citizens expected to do so?

Here is how to avoid the most common void ab initio traps:

  • List everybody  who lives in your household. It does not matter that they have their own insurance.  It does not matter if they will never drive your car.List them anyway. You can exclude those people from your policy, but they can never drive your car, even in an emergency. You can also list some people as what are called “permissive drivers” if they drive your car on a frequent basis.
  • Tell your insurance company if somebody moves in with you too. You can add or exclude them from your policy. You can’t ever let an excluded person drive you car, though, because that will result in a denial or reduction of coverage.
  • Make sure that your  insurance company knows exactly where you live. I am frequently surprised when my clients do not update their  insurance companies about their addresses. An insurance company will Void ab Initio your policy in a heartbeat when you move to a higher risk area, and there is no way for you to tell if you live in a higher risk area. This is called “garaging.”
  • You must tell your insurance company if you drive or start driving for Uber or Lyft (even part-time), deliver  food  or people for money, or otherwise use your car for any business other than driving to and from work.
  • Please tell your insurance company about all crashes that you have been in. One favorite tactic is for your insurance company to run a report on you after somebody makes a claim in order to say they would not have issued a policy to you had they known about your loss history.

Void ab initio is a tool that insurance companies often use in order to deny claims that they should have paid. Do not give the insurance company any ammunition to claim that it would not have written  your policy if it had known about some circumstance that you do not think is important.

It’s all important.

The insurance company denying your claim is bad enough, but it gets even worse, because the State of Florida can suspend your license because you got into a crash and did not have insurance—even though you did. How unfair is that? Yet it happens frequently in Florida.

Avoid a void ab initio problem by following my advice.

Kindest regards,

Christopher R Dillingham II, Esquire

Florida Comparative Negligence in a Nutshell

I’ve seen a lot of social posts lately about rear-end and other kinds of collisions. Many of them are, well, wrong. Most people think whoever gets a ticket is at-fault, and some think a person who rear-ends another car is always is at-fault. Yet that’s not how the law works in Florida.

Here’s the law in Florida regarding liability in crashes: Florida is a “pure comparative negligence state.” There are states that use other standards of law, so this post only applies to Florida. I’m not licensed to practice law in other states.

Drivers in Florida can collect whatever percentage of damages for which they are not at fault. Crashes are rarely 100% one party’s fault or the other. Drivers can usually avoid crashes by driving slower, braking sooner, reacting quicker, following further away, or keeping a better look-out.That sometimes leaves a lot of room to argue comparative negligence with a claims adjuster or to a jury. That’s true even in rear-end collisions. There is only a rebuttable presumption of negligence in even rear-end collisions, yet people usually believe the rear-driver is always at-fault, but that’s not true. Not using one’s turn signal, making a sudden, unexpected stop, not having working brake lights are all negligent acts. That means you might not be 100% at-fault even if you rear-end another car. I’ve had cases in which drivers stopped for no reason whatsoever on I-4 in a 65 MPH speed zone. I had another case in which a driver left his car in the middle of Orange Blossom Trail in Orlando with no lights on.
A question I always ask adjusters when they trying to blame my client for a crash is, “What’s 1% of someone’s life worth?” What I mean by that is that an insurance company has low bodily injury liability limits, then even if my client is the majority at-fault, my client’s injuries might warrant a policy limits tender despite my client’s comparative negligence.

Big injuries beat low policy limits almost every day of the week. Herniations? Broken bones? Amputations or death? It’s usually no contest.

So how does comparative negligence work? The easiest explanation is to pretend Driver A and Driver B both have $1 of damages. Driver A is 75% at fault and Driver B is 25% at fault. Here’s how that breaks down:

1. Driver A, who is 75% at-fault, can collect $.25 of his $1 in damages.
2. Driver B, who is only 25% at-fault, can collect $.75 of her $1 in damages.
That applies to bodily injury and/or property damage.
Traffic tickets and police reports don’t matter when it comes to determining liability. Cops do not determine liability in a Florida. They only seek probable cause that shows someone violated a state statute. That’s it. Judges don’t always agree with cops either. That has nothing to do with comparative fault. Tickets and police reports are hearsay and are not admissible evidence in court. Furthermore, a police officer can only testify to what he perceived with his own senses. I can recall only a few cases in which an officer witnessed a crash, and often, cops make horrible witnesses. The reasons why are best left for another post.
Claims adjusters determine liability in cases in which lawsuits haven’t been filed. Juries determine liability in lawsuits.
So how does a claims adjuster or jury determine liability? They look at pictures of the roadway, traffic light sequences, traffics signs, points of impact, crush damages, and other physical evidence as well as listen to witness testimony.There might even be eyewitnesses that saw things helpful to my client’s case.
That’s a very simple overview of liability in a Florida.