The Office of General Counsel issued the following informal opinion on March 12, 2001, representing the position of the New York State Insurance Department.
RE: Automobile Physical Damage Total Loss Claims
Does New York State law require that automobile insurance companies pay for sales tax and title costs as components of physical damage total loss claims?
New York State law does require that automobile insurers pay for sales tax as a component of the "Actual cash value" amount determined for a physical damage total loss claim to repair or replace a damaged automobile.
New York State does not require that automobile insurance companies include title costs in determining the physical damage total loss settlement to the insured.
An Internet site contains an article entitled "Recouping expenses after your car is totaled." The article represents that New York State is one of twenty-nine (29) States that requires automobile insurance companies to pay for sales tax on the original automobile as a component of physical damage total loss claims. The article also represents that some, but not all of the twenty-nine (29) States referred to, pay for title costs in determining the replacement cost of the totaled automobile that is due the insured.
A New York State consumer stated that it bought a new car after a total loss to its automobile in December, 1999. The consumer also represented that its automobile insurance company's representative stated that New York State does not require sales tax and title costs to be included as components of physical damage total loss claims.
Pursuant to N.Y. Comp. Codes R. & Regs., tit. 11, § 216.7(c)(8) (1982) (Regulation 64) the payment for physical damage total loss may be either of (1) the original automobile's "Actual cash value", or (2) a specified dollar amount stated in the policy. Automobile insurance policy language usually dictates that the automobile insurance company will pay "Actual cash value" of the original automobile but fails to define that term. However, "Actual cash value", applied to a physical damage total loss claim, is addressed by N.Y. Comp. Codes R. & Regs., tit. 11, § 216.6(b)(2) (1982) (Regulation 64), which states:
(b) Actual cash value, unless otherwise specifically defined by law or policy, means the lesser of the amounts which the claimant can reasonably be expected to:
(1) repair the property to its condition immediately prior to the loss; or
(2) replace it with an item substantially identical to the item damaged. Such amount shall include all monies paid or payable as sales taxes on the item repaired or replaced. This shall not be construed to prevent an insurer from issuing a policy insuring against physical damage to property, where the amount of damages to be paid in the event of a total loss to the property is a specified dollar amount. (Emphasis added)
Thus, where the insured has paid sales tax on the purchase of the original automobile, the insurance company must include sales tax on a total loss settlement based on the value of the automobile at the time of the loss.
N.Y. Comp. Codes R. & Regs., tit. 11, § 216.6(b)(2) (1982) (Regulation 64) does not require that automobile insurance companies pay for title costs as a component of physical damage total loss claims. Accordingly, title costs are not components of an original automobile's "Actual cash value" in New York State.
For further information you may contact Senior Attorney Robert Freedman at the New York City Office.