An agent’s client has a 2010 Volkswagen Jetta Diesel, which is subject to the recall/repurchase agreement related to the second large consumer settlement in the automaker’s diesel emissions scandal. VW offered to pay the client based on the vehicle’s "clean book value," with no mileage consideration for the value of the car in 2015. The offer is good until 2018. 

Q: If the vehicle is destroyed, what will the insurer's valuation be? 

Response 1: The car will be valued at its actual cash value at the time of loss. Ask the carrier's claims department about the factors they use to develop ACV.

Response 2: ACV settlement for cars is generally based on market value, which is what a willing buyer would pay a willing seller for the property. However, there's probably not a lot of case law clarifying whether one buyer that's motivated for a singular reason would qualify as a normal willing buyer.

The insurer’s valuation will be based on what the general public pays for these cars today, which will likely be less than the offer. You can always argue an insurer's valuation, but normally the argument is based on showing higher comps—something that could be difficult in this case. I have little doubt that the insured would be better off taking VW's offer—and sooner rather than later.

Response 3: Your question is not relevant to VW’s repurchase agreement. Insurance valuation is typically ACV less the policy deductible, based on a multitude of factors too numerous to list here.

Response 4: Insurers typically use Kelley Blue Book and other reference points, including buy-sell listings that reflect the values in a particular geographical area. If the value of the car decreased because of the recall, the insurer payment is likely to follow suit. And if your client has a loan or lease on the vehicle, they could be financially upside down.

Response 5: The insurance value is not dependent upon the manufacturer's offer.

Response 6: The ACV at the time of loss.

Response 7: The insurer has a different contract than the owner may have with VW on the recall/repurchase agreement. If the auto is destroyed, it has virtually no value. VW is not likely to repurchase a destroyed auto, and the insurer is not bound by the value that VW might have paid if the auto had not been destroyed.

Response 8: The ACV paid by the policy will take the mileage into consideration as well as the condition of the vehicle. That could make a huge difference.

This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.