Allstate total-loss offers in Vermont: how the appraisal clause works

Vermont regulates first-party automobile total losses through layered authorities: the insurance appraiser license in 8 V.S.A. chapter 131 (§§ 4791 and 4793, administered by the Vermont Department of Financial Regulation, with a written examination and statutory exemptions), the unfair claim settlement practices provision at 8 V.S.A. § 4724(9) (no standalone private right of action), the Department's fair-claims-practices regulation, Vermont Regulation I-79-2 (revised effective July 1, 2018), and the first-party bad-faith claim recognized in Bushey v. Allstate Insurance Co., 164 Vt. 399 (1995). We don't act as the appraiser in Vermont. 8 V.S.A. §§ 4791 and 4793 — Insurance Appraiser License. Section 4793(a) provides that no person shall act as or hold himself or herself out to be an insurance appraiser unless duly licensed. Section 4791(5) defines an "appraiser" as "any person who, for compensation, appraises the loss or damage under policies of automobile insurance on the behalf of the insurers under such policies." No license is required of an official or employee of a domestic fire or casualty insurance company, or of a duly licensed resident insurance producer of a domestic or duly admitted foreign insurer, who is authorized by the insurer to appraise losses under its policies, or of an automobile repair shop or repair facility that makes an appraisal at the request of the insured or insurer. Applicants take a written examination "as to the applicant's competence to act as a licensee" (§ 4800(3)(D)(i)), and a person violating the subchapter may, after hearing, be subject to an administrative penalty of $500 to $2,500 (§ 4804(d)). 8 V.S.A. § 4724(9) — Unfair claim settlement practices. The statute prohibits committing or performing, with such frequency as to indicate a business practice, practices that include: misrepresenting pertinent facts or insurance policy provisions relating to coverage at issue; failing to acknowledge and act reasonably promptly upon communications with respect to claims; failing to adopt and implement reasonable standards for the prompt investigation of claims; refusing to pay claims without conducting a reasonable investigation based upon all available information; failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed; and not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. § 4724 itself does not create a private right of action; enforcement runs through the Department of Financial Regulation. Vermont Regulation I-79-2 — Fair Claims Practices (revised effective July 1, 2018; it replaces the version dated September 1, 1979). Section 8(B) sets Vermont's motor-vehicle total-loss settlement standards. Under Section 8(B)(2), the cost on which a cash settlement is based must be no less than the AVERAGE of (a) the retail value given the vehicle by the NADA Used Car Guide (or Older Used Car Guide) and (b) the retail value of a comparable vehicle furnished by a third-party vendor whose methodology gives primary consideration to the values of comparable vehicles available in the local market. Section 8(B)(1) and (2) require all applicable taxes, registration fees, and other fees incident to transfer of evidence of ownership to be included in either the replacement-vehicle method or the cash-settlement method. Section 8(B)(2)(d) bars deductions for costs such as reconditioning and tune-up unless they are justified and detailed as a result of actual inspection by a licensed adjuster or appraiser. Section 7(B) requires each claim payment to include an appropriate explanation of the basis of the payment (for example, a full explanation of all deductions for depreciation, deductibles, or coinsurance). The regulation contains no closed list of comparables, dealer quotes, or statistically valid sources, and no express right-of-recourse provision. Bushey v. Allstate Insurance Co., 164 Vt. 399 (1995) — First-party bad faith. Bushey extended the "bad faith" cause of action to first-party claims by insureds. To establish bad faith, the plaintiff must show that "(1) the insurance company had no reasonable basis to deny benefits of the policy, and (2) the company knew or recklessly disregarded the fact that no reasonable basis existed for denying the claim." Where a claim is "fairly debatable," the insurer is not guilty of bad faith even if it is ultimately determined to have been mistaken. Murphy v. Patriot Insurance Co., 2014 VT 96, applied that test and affirmed a judgment for the insurer, upholding the dismissal of the insured's negligence and bad-faith claims; the court declined to impose "an independent, extra-contractual negligence duty," describing the relationship between insurer and insured as "fundamentally contractual." 23 V.S.A. chapter 21 — Salvage title. Under 23 V.S.A. § 2001(13), a "salvaged motor vehicle" is a motor vehicle that has been "purchased or otherwise acquired as salvage; scrapped, dismantled, or destroyed; or declared a total loss by an insurance company," and § 2001(14) defines a "totaled motor vehicle" as one "declared by an insurance company to be a total loss." Salvage certificates of title are governed by §§ 2091–2095. Vermont's definitions turn on an insurer's total-loss declaration rather than a fixed percentage. We don't act as the appraiser in Vermont.