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.