Expert: Charlie Barone - 10/14/2009

Question
I am an insurance agent. My client, an auto dealer , had a new car stolen from his lot. The thief drove it around the country and put 13,000 miles on it. He was caught and the car returned with minimal damage but the insurance company won't pay the dealer for his loss on his cost on the brand new car with no miles versus what he now can sell the car for with 13,000 miles on it. They point to the "dimished Value" exclusion but I don't think this exlusion was intented for this purpose. What do you think?

Answer
Exclusions from first party benefits have become very common in a number of states in the US. It is hard to get around them in cases of diminished value losses. However, if the policy is one with its basis on the actual cash value and premiums are determined on that basis, it would appear that a policyholder is owed for the loss. The dealer is not insuring the car for his use, but rather for its value as an item destined to be sold.

Since I am not a lawyer and cannot give legal advice, I would have your client get in touch with an attorney with a specialty in policyholder rights and issues.