The Office of General Counsel issued the following informal opinion on February 28, 2000.
Title Branding Regulation
In the event of a total loss, can an insurance company state that it will only pay fifty (50%) percent of the value of a vehicle merely because the title to the vehicle is branded as "Rebuilt Salvage"?
An automobile insurer may not pay a reduced amount in settlement of a vehicle damage claim simply on the basis of the fact that the title to the vehicle is branded as "Rebuilt Salvage".
A purchaser of a used vehicle was told by his insurance agent that in the event that his vehicle was totaled, he would only receive fifty (50%) percent of the value of the vehicle because the vehicles title was branded "Rebuilt Salvage".
No provision of the insurance law or regulations allows an insurer to categorically determine that a vehicle with a branded title is per se of substantially lower value than a comparable vehicle with an unbranded title. Instead, any insurance settlement for property damage must be determined on the basis of a vehicles fair market value irrespective of the status of the vehicles title. See generally, Insurance Regulation 64, New York Comp. Codes R. and Regs. tit. 11, § 216 (7) (1999).
Notwithstanding the above, it appears that the agents statement possibly originated out of a misunderstanding of the provisions of the insurance regulations which were promulgated to help implement the title branding requirements of the Department of Motor Vehicles ("DMV"). The DMV requirements were enacted as a consumer protection measure to ensure that purchasers of used vehicles would be informed of whether a vehicle offered for sale was a rebuilt salvage vehicle. Under the DMV rules, if a vehicle eight model years old or newer is damaged to the extent that the total estimated or actual cost to rebuild the vehicle exceeds seventy-five (75%) percent of the vehicles undamaged value, the title to the vehicle must be branded as "Rebuilt Salvage". See N.Y. Comp. Codes R. & Regs. tit. 15, § 20.20(c) (1999).
Section 216.7 (16) of Insurance Regulation 64 helps to ensure compliance with these DMV regulations by requiring that insurers withhold at least fifty (50%) percent of any claim payment pending the submission of the vehicles title to the insurer. See N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(16) (1999). However, this part of the regulation has no effect on the settlement of a vehicle damage claim.
For further information you may contact Senior Attorney Michael Campanelli at the Departments New York office.