Economic and non-genuine total loss: what is it?

total loss of a vehicle

The vehicle damage is usually the largest cost factor in the settlement of an accident. The vehicle owner whose property was damaged has Right to have your vehicle repaired and the other party involved in the accident and their liability insurance pay for the damage. A special situation arises when the car has suffered a total loss. The situation is even more difficult if the owner still wants to repair his vehicle and a economic write-off complicates the settlement.

The text provides information about:

  • Contrast: integrity interests of the injured party/economic load limit of the polluter.
  • What is a total loss?
  • How are new vehicles settled in the event of a total loss?
  • Invoicing and repairs in the event of a total economic loss.
  • Repair despite exceeding the 130% limit.
  • Can the injured party repair it himself?
  • Settlement: total loss and comprehensive insurance (false total loss)

Conflict of integrity interests of the injured party/economic load limit of the tortfeasor

Drivers on the road must be willing to take the risk of their vehicle being involved in an accident and being damaged. Realize this operational risk in an accident, the injured party has that Right to have their vehicle restored (interest in integrity). Irrespective of this, however, economic aspects must not be completely disregarded.

This contrast between the interest in integrity and economic aspects will be described in more detail below.

What actually is a total loss?

If the vehicle has suffered such severe damage that the repair is economically or technically problematic, one can speak of a total loss. The repair damage itself is then a total loss.

Of the technical total loss (Warped chassis after a rear-end collision) automatically leads to an economic total loss. The difference is that a technical total loss cannot be repaired, while it remains technically possible in the case of a total economic loss.

A economic total loss is generally present when the repair costs exceed the difference between the replacement value and the residual value. The vehicle only has “scrap value”. The replacement value is the amount that the injured party has to pay to buy a vehicle of the same value.

Example: economic total loss:

  • Repair cost = €5,000
  • Replacement value = €3,000
  • Residual value = €500

→ Total loss because the difference between replacement value and residual value (€2,500) is lower than the repair costs.

A technical write-off always results in an economic write-off if the repair costs are too high no longer in relation to the value of the vehicle. In this case, in the case of a total loss, the insurance company does not have to pay the injured party for the repair, but only for the repair Difference between replacement value and residual value. With the proceeds, the injured party can buy an equivalent vehicle as a replacement.

However, there is an exception. The injured party can also have their vehicle repaired if it is a total loss. However, the costs for the repair may not exceed 130% of the replacement value (130% case law).

Total loss: Settlement for new vehicles


 
If a new vehicle is a total loss, the new price can be requested when the damage is settled

Becomes a brand new vehicle damaged, the damaged vehicle owner can settle liability claims on a new vehicle basis. Then he can demand the new price for a car (not for commercial vehicles) and make the damaged vehicle available to the liability insurer or sell it in another way. If the new vehicle is a total loss, billing is limited to vehicles up to four weeks after registration and a mileage of up to approx. 1000 kilometers (BGH NJW 1982, 433). For mileages over 1000 kilometers, a deduction of 1 to 1.5% of the new price per 1000 km is made (BGH NJW 1983, 2694). In this case, the compensation is equivalent to a real total loss, which is why this case is considered false total loss is seen.

A further prerequisite for the replacement value compensation is that the new vehicle is so badly damaged that the injured party cannot be expected to continue using the repaired vehicle (Federal Court of Justice VersR 1982, 163). As a rule of thumb, they should Repair costs account for at least 30 percent of the vehicle value (OLG Munich DAR 1982, 70). Furthermore, the injured party can only demand replacement value compensation if he sells his damaged vehicle and purchases a new vehicle.

Economic total loss: billing and repair

Since 2003, the Federal Court of Justice has further developed and differentiated the settlement of claims in a good 50 decisions four groups of claims processing. In order to avoid financial disadvantages, legal advice is recommended.

As a rule, the injured party can demand reimbursement of the necessary repair costs, regardless of whether and when and how he actually has the repair work carried out. It is none of the tortfeasor’s business whether the injured party repairs, sells, trades in the vehicle that has not been repaired or continues to use it (fictitious claims settlementBGH NJW 2005, 1108).

Of the economic total loss captures the situation that it would be more expensive to own the vehicle repair as a new to get. The Federal Court of Justice ruled in favor of the injured party that, with regard to his integrity interest in the repair of his vehicle, a tolerance limit of 30% based on the replacement value without reducing the residual value must be recognized (Federal Court of Justice DAR 1992, 22). As a result, this means that the injured party has his vehicle may repair up to 130% of the replacement value (guide value)..

An economic write-off considered the residual value of the damaged vehicle when determining the repair costs Not. An economic total loss is then calculated as follows:

  • Replacement value: €20,000
  • Residual value: €5,000
  • Maximum repair cost: 130% of €20,000 = €26,000

Repair despite exceeding the 130% limit

Only when the expected repair costs are more than 30% above the replacement value (130% limit exceeded), regular repairs are economically unreasonable. If the injured party then repairs his vehicle, he cannot easily split the costs into an economically reasonable part to be paid by the other party (up to 130 percent of the replacement value) and an economically unreasonable part to be borne by himself (more than 130%). In this case the injured party can only demand the replacement costs for a replacement vehicle. The injured party’s interest in integrity must then take a back seat to economic considerations.

If the expert opinion is more than 130%, but the invoice is between 100 and 130%, the BGH, in order to avoid trickery, will ensure that the injured party proves that the professional repair in accordance with the specifications of the report was economically reasonable (BGH VI ZR 79/10).

The injured party can carry out repairs themselves


 
The repair of the car with a total loss can be carried out by the injured party himself

The total loss settlement also applies if the damaged vehicle owner repairs the vehicle himself (BGH NJW 2008, 2183). The injured party express their interest in integrity by having the vehicle repairedbecause he obviously does not want to part with his trusted and reliable vehicle and wants to have the necessary repair work carried out “whatever the cost”.

hold the Repair costs for repairs up to 130%the injured party can settle the total loss of the car, without having to document the repair costs in detail. It does not depend on the actual repair costs incurred, but only on the amount of money required for production. If the amount of money required for the repair was determined in an expert report, it is up to the injured party to decide whether and when and to what extent he uses this “necessary amount of money”. Value added tax will only be replaced if it has actually arisen.

As a limitation, however, case law requires that the integrity interest in the vehicle can only be confirmed if if the injured party actually and professionally carries out the repair work. If the vehicle only undergoes a temporary emergency operation and is made roadworthy or repaired unprofessionally, the injured party can do not demand increased repair cost compensation of up to 130%. Rather, he must prove that he has repaired the vehicle professionally.

Total loss and fully comprehensive insurance (false total loss)

If the owner wants to make use of his fully comprehensive insurance in the event of a total loss, he will receive it refunded the original price within the first six months after the first registration. This also applies if the repair costs are at least 80% of the new price. Otherwise, he will be replaced with the replacement value after deducting the residual value. Unlike in liability cases, the holder has no entitlement to have your vehicle repaired for up to 130% of the replacement value.

Since a lot of electronics and technology are installed in cars these days, the cost of repairs is often so disproportionately high that the cost is tantamount to a total loss. If the owner is then compensated with the new price, one speaks of a false total loss.