Expert: webfoot - 5/31/2007

Question
My 1999 Olds Intrigue caught fire about a week ago.  The fire went out pretty quickly; I assume because when I turned the key off, it shut off the fuel flow, and the wind was blowing pretty strong that night.  By the time I ran home (about two blocks away) called 911 and went back to the car, the fire was out.  

I called the fire department, had the car towed, and called my insurance carrier, USAA.  They sent a wrecker to take the car to an insurance salvage pool, even though I told them it was a very small fire; you can't even look at the car and tell there was a fire.  There is some smoke residue under the engine compartment.  

The tow company told me they will likely total the car because it is 'old' and the salvage pool got hold of it.  According to him, the salvage pool will make an offer to USAA that will be part of the decision whether to total the car.  I was surprised by this; I thought they would determine the cost to fix the car, and compare that with the ACV of the car to see if it crossed some 'magic' threshold (maybe 80-85%) to determine if it is repairable.  However, the tow company owner said he is seeing insurance companies total cars with relatively little damage.  

Could you explain how an insurance company decides whether to total a car after a relatively minor fire?

Thanks.  

Answer
I just love these tow truck driver experts when I get little snippets of their wisdom about one a month.

The repair or replace decision has nothing to do with where the vehicle is sitting.  People are not walking around the salvage pool facility making random offers on cars.  No one looks at the cars until auction day which is weeks after a settlement is made. The threshold for total loss varies from state to state, company to company but is generally far less than 80%.  

Insurance companies base the repair or total decision on the cost of repairing the visible damage,  plus the cost of potential supplemental hidden damage plus the cost of rental during the repair time.  That is compared to the value of the vehicle less the salvage value.  The salvage value is not based on offers, but on statistics for similar vehicles and damage.  Whichever ends up being less is what they owe.

With a fire, the potential supplement on a very minor burn can include the entire electrical system which is about $4,000.  This has to be considered as a real possibility as it only takes a few seconds for an electrical system to short from one end of the car to the other regardless of the cause of the fire. This damage however is rarely visible.  There is also the issue of smoke damage/smell, etc.  With a car that old, it will likely be a total loss.  Fire losses on any car are rarely repaired.

The initial fire was most likely caused from a fluid leak onto the exhaust manifold.  The most common thing that I see with GM cars is power steering hose failure.
It's likely time to go car shopping.
Good luck!