California Total Loss Threshold & Appraisal Guide

A "comparable automobile" is one of like kind and quality, made by the same manufacturer, of the same or newer model year, of the same model type, of a similar body type, with options and mileage similar to the insured vehicle. Newer-model-year vehicles may not be used as comparables unless there are not sufficient same-model-year comparables. Any differences must be fairly adjusted, and any adjustments from the cost of a comparable automobile must be discernible, measurable, itemized, and specified as well as appropriate in dollar amount and so documented in the claim file. Deductions taken from the cost of a comparable automobile that cannot be supported shall not be used. The actual cost of a comparable automobile shall not include any deduction for the condition of the loss vehicle unless the documented condition of the loss vehicle is below average for that particular year, make and model of vehicle. A comparable automobile must have been available for retail purchase by the general public in the local market area within ninety (90) calendar days of the final settlement offer. Each comparable shall be identified by VIN, stock or order number, or license plate, plus the seller's telephone number or street address.

The insurer shall take reasonable steps to verify that the determination of the cost of a comparable vehicle is accurate and representative of the market value of a comparable automobile in the local market area. The Department shall have access to all records, data, computer programs, or any other information used by the insurer or any other source to determine market value, on request. The cost of a comparable automobile shall be fully itemized and explained in writing for the claimant at the time the settlement offer is made.

Knowingly committing or performing with such frequency as to indicate a general business practice any of the following unfair claims settlement practices: (1) Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue. (2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies. (3) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies. (5) Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. (6) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds. (13) Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement.

In case the insured and this company shall fail to agree as to the actual cash value or the amount of loss, then, on the written demand of either, each shall select a competent and disinterested appraiser and notify the other of the appraiser selected within twenty days of such demand. The appraisers shall first select a competent and disinterested umpire; and failing for fifteen days to agree upon such umpire, then, on request of the insured or this company, such umpire shall be selected by a judge of a court of record in the county and state in which the property covered is located. The appraisers shall then appraise the loss, stating separately actual cash value and loss to each item; and, failing to agree, shall submit their differences, only, to the umpire. An award in writing, so itemized, of any two when filed with this company shall determine the amount of actual cash value and loss. Each appraiser shall be paid by the party selecting him and the expenses of appraisal and umpire shall be paid by the parties equally.

Established that an insurer's breach of the implied covenant of good faith and fair dealing in the handling of a first-party claim sounds in tort, not contract, meaning consequential damages, emotional-distress damages, and (in egregious cases) punitive damages are available to the insured beyond the policy benefits owed.

Held that a "genuine dispute" over claim value is a complete defense to a tort bad-faith claim only when the insurer's investigation and analysis were objectively reasonable; the doctrine does not protect an insurer whose valuation rests on undocumented assumptions, one-sided investigation, or failure to consider information favorable to the insured.

Recognized that every insurance contract in California contains an implied covenant of good faith and fair dealing, and that an insurer's breach of that covenant in handling a first-party claim gives rise to tort liability independent of the contract, opening the door to the entire California first-party bad-faith doctrine that followed.