Are We Recovering Everything We’re Entitled To?

As a Risk or Fleet Manager, can you positively affect the bottom line? In a word, yes. The opportunity is hiding in your auto physical damage claims — specifically in the elements most of us never request. When another party damages one of our vehicles, we focus on getting the repair or total loss paid and move on. But that’s leaving real money on the table.

Some of us are self-insured and pursue the at-fault carrier with in-house staff or a Third-Party Administrator (TPA). Others carry fleet insurance through a captive, risk pool, or carrier with a deductible. Regardless of how recoveries are handled, one issue shows up almost every time: Loss of Use and Diminution of Value are rarely requested on claims submitted by firms running a pool fleet.

Why These Elements Get Left Behind

The reasons vary. If your fleet is insured, the policy usually has no provision covering these elements. Many assume they can’t recover Loss of Use because they keep spare vehicles — and some have been told exactly that by insurance carriers. Diminution of Value is something the insurance industry works hard to make difficult to prove. On top of that, we’re never short on claims, recovering the damage or total loss already eats significant time and resources, and few of us have spare staff to prolong a settlement.

Here’s the truth: every injured party is entitled to compensation for Loss of Use (or Loss of Revenue) and Diminution of Value in a not-at-fault accident. Having a spare pool doesn’t change that. Most of a fleet can’t be rented through a local agency — or there isn’t one near where the loss occurred — so we effectively incur Loss of Use costs 365 days a year. And a vehicle’s value drops every time it’s damaged, whether or not you ever sell it. If you run revenue-producing specialized units, Loss of Revenue may be the more appropriate measure than Loss of Use. Recover these elements and you contribute directly to your company’s bottom line. Ask any Fleet Manager: if they only needed a pool for routine PM maintenance, their fleet could be marginally smaller.

Don’t Forget Total Loss Supplements

Another element we routinely see omitted is what we call Total Loss Supplements — parts and labor over and above the vehicle’s Actual Cash Value (ACV) to account for removing and reinstalling specialty equipment on a replacement unit. Think radios, lights, cameras, GPS, telematics, bicycle racks, wheelchair ramps, and the like, plus the cost of restriping or lettering the replacement. When you add up the time your staff spends on these tasks and their hourly cost, it’s a substantial amount of uncompensated work the at-fault carrier should be paying for.

There’s a smart wrinkle here too. Look at which specialty pieces are actually adaptable to the replacement unit. Take an operating control unit for emergency lights, or an attenuator. If it’s seven years old, worked at the time of loss, but isn’t compatible with the newer replacement, leave it behind, add it to the total loss supplement, and let the carrier depreciate it. Why pull something that’s only headed for a dumpster? Treat it like your kid’s first car with the high-end stereo and chrome rims (I know, I’m dating myself). If that car gets totaled, the adjuster takes your receipts, maybe depreciates the items, and adds them to the payout. You’re doing essentially the same thing.

Mind the Statute of Limitations — and Go Back

Before we talk ROI, consider your Statute of Limitations. If you pursue these elements, don’t just add them to new claims — revisit past claims as well. If you didn’t exhaust limits or sign a release on the original recovery, you can re-open the claim and submit a supplemental request for compensation.

Government Risk and Fleet professionals should pay especially close attention. Some states exempt municipalities and governmental sub-divisions from the Statute of Limitations entirely, meaning you can re-open claims as far back as your records retention allows. Texas, for example, has a two-year statute — but municipalities are exempt and enjoy a 10-year records retention policy. That can translate to substantial taxpayer proceeds available for recovery. So ask yourself: what is your Statute of Limitations, and how many claims could you potentially re-open?

Is the ROI Really There?

Yes. By accurately calculating your downtime and securing a solid Diminished Value evaluation, the return is real. We worked with a medium-sized county outside Atlanta where the statute is four years. They ran a mix of white/light fleet alongside heavy equipment and trucks. By reopening past claims, we recovered a little over $2.3 million in additional revenue they never thought was possible.

Can your TPA or risk pool simply add these on request? If your TPA works for you, they can pursue recovery, but they’re generally not very effective at it. If your claims go to a captive, risk pool, or carrier, they’re similarly constrained — limited to recovering what they paid out plus your deductible.

Options for Putting This to Work

You can hire a damage recovery firm that specializes in this work, overlaying and enhancing your current process without replacing it. Make sure they are 100% performance-based — no monthly fee, no per-file fee. The most cost-effective model, with the best ROI, is a firm whose revenue comes entirely from what you are currently not recovering. Since there’s no cost to recover your damages, there’s no downside to outsourcing the function. Contrast that with a TPA charging a percentage of everything they recover: on a $25,000 loss at 15%, that’s $3,750 coming out of your net proceeds. Switching to a performance-based model produces immediate savings.

I hope this gives you a fresh perspective on auto physical damage claims — and on how, as a Risk professional, you can positively affect the bottom line come budget season.

Michael Towers

Alternative Claims Management

MTowers@AltClaim.com  •  407-301-1115

Michael Towers has been in the damage recovery space for over four decades, owning a car rental agency and later a successful damage recovery firm before selling to Zurich. He currently serves as a lead contracted support specialist (SME) for the Alternative Claims Management sales team. He spent nearly 10 years as V.P. of Legal and Legislative Affairs for the car rental industry, meeting with 18 insurance commissioners and attorneys general on damage recovery and testifying before the National Association of Attorneys General (NAAG) Task Force on Physical Damage Recovery. He also led a successful class action against specific credit card processing agencies over non-conforming charges.