Does an Insurer Automatically Have the Right to Take Salvaged Property?

If you’ve insured valuable personal property such as your car, boat, or a prized collectible, your insurance policy puts a limit on the value of the insured item. For vehicles, the policy may specify that a car is insured for the actual cash value at the time just before it was damaged. Certain property, such as artwork or jewelry, might be insured for a particular cash amount.

Sometimes the property insured is worth much more than the insured value, either in terms of cash value or value to you personally. Even if it becomes damaged, you might still want to keep it.

So, if your insured property is damaged and much of the value is depleted, and your insurance company pays you the full value specified in your policy, what then happens to the damaged property? Can you keep it? Does the insurance company automatically have the right to take possession of it? The answer depends on a variety of circumstances, and in many situations, arguments could be made on either side.

First Things First: The Terms of the Policy are Controlling

When a question involves insurance, the first place to look for answers is the policy itself. Insurance companies have considerable latitude in the terms they can include in insurance policies, including those they establish regarding ownership of property after a claim is filed. Policyholders are generally expected to have agreed to the policy terms, so the words in the policy carry great weight.

If an insurance policy says the insurance company acquires ownership of the property after a claim has been paid in full, that language is controlling. But often, the policy language is silent or vague about ownership rights, which can make it confusing.

Auto Insurance Terms

In auto insurance policies, insurance companies frequently spell out at least some of the rights involved, and Florida law specifies some requirements. When a car or other vehicle driven on the road suffers damage that equals a certain amount of the vehicle’s value, insurance companies will consider that vehicle a “total loss” even if the vehicle is still operable. Sometimes the loss threshold is 70%, and other times it is 80%, but it is important to remember that it is a purely monetary percentage and has nothing to do with whether the vehicle remains usable. A vehicle can be “totaled” in a financial sense while still being quite useful or even desirable.

Florida statutes specify that a motor vehicle or motor home that is considered a “total loss” is salvage. The statutes further explain that a vehicle is a “total loss” if the insurance company has paid to replace the damaged vehicle with one of a similar type or quality, or pays for theft of the vehicle, or when the cost to repair the vehicle would be 80% or more of the cost to replace it.

Auto insurance policies are usually fairly clear about vehicles that are salvaged. Generally, the policy will specify that the insured person must agree to transfer title to the insurance company or pay the salvage value of the vehicle if they want to retain ownership while still collecting payments for the loss. For example, if the car is considered to be worth $10,000 before a wreck and the wreck caused $8,000 in damage, the vehicle’s salvage value would be $2,000. The owner would generally have $2,000 deducted from the payout to retain ownership.

Whoever retains the vehicle, whether it is the owner or the insurance company, must apply for a salvage title through the Florida Department of Highway Safety and Motor Vehicles. A salvage title indicates that a vehicle has sustained extensive damage. If a car is going to be sold for parts, the owner would apply for a certificate of destruction instead.

Marine Insurance Laws are Limited in Application

Under traditional common law applicable to marine vessels, if an insurance company pays the owner of a vessel for a constructive total loss—which occurs when the cost of repairs exceeds the insured value of the vessel—then the insurance company becomes the owner of the vessel and its cargo. The insurance company also gains the benefits of ownership, such as income from the cargo or the vessel’s value, and must bear the liabilities that go along with ownership.

However, that automatic understanding applicable in common law applies only to vessels, and then possibly only in limited situations. When insurance companies have tried to apply this convention to other types of property, courts have refused to extend it. For instance, when an insurance company paid the full policy limit for a painting damaged in transit and later sought possession of the painting, a New York court held that the insurance company had no right to possession despite having paid the full policy limit for the damage. The court declined to extend the principles of maritime law to property outside that realm.

When the Policy is Silent, the Right Arguments are Crucial

The right to retain property that has been written off as a loss can be difficult to discern unless an insurance policy is very clear on the issue. Insurance policies written for vehicles may have defined expectations, and common law may govern claims involving maritime vessels, but with respect to other property, opportunities may remain for insurers to claim ownership and policyholders to decline to turn over possession. Insurance companies should clearly specify their rights, and when they fail to do so, a knowledgeable attorney may take the opportunity to support a policyholder’s position in retaining ownership of salvaged property.

Ver Ploeg & Marino Provides Strategic Representation to Resolve Insurance Disputes

Insurance companies try to conserve their funds and recover payouts in any way they think they can get away with. Sometimes, they act within the bounds of their contractual and legal obligations, and sometimes they overstep the boundaries.

When that happens, the team at Ver Ploeg & Marino works effectively to obtain justice for policyholders. If you have concerns about an insurance issue, we invite you to schedule a confidential consultation by calling us at 305-577-3996 or contacting us online now.

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