Auto-Owners total-loss offers in Alabama: how the appraisal clause works

Alabama regulates first-party automobile total losses through three layered authorities: the claim-refusal statute at Ala. Code § 27-12-24, the implementing claims regulation at Ala. Admin. Code ch. 482-1-125, and the common-law tort of first-party bad faith recognized by the Alabama Supreme Court in Chavers v. National Security Fire & Casualty Co., 405 So. 2d 1 (Ala. 1981). Ala. Code § 27-12-24 — Refusal of Insurer to Pay or Settle Claims. No insurer shall, without just cause, refuse to pay or settle claims arising under coverages provided by its policies in Alabama with such frequency as to indicate a general business practice in the state, a practice the statute says is evidenced by a substantial increase in the number of complaints against the insurer received by the Insurance Department, a substantial increase in the number of lawsuits against the insurer or its insureds by claimants, and other relevant evidence. Ala. Admin. Code ch. 482-1-125 — Standards for Property/Casualty Insurance Claims. Rule 482-1-125-.08(1) establishes three settlement options for first-party automobile total-loss claims: (a) Replacement automobile. The insurer may offer a specific comparable automobile available to the insured, with all applicable sales tax, license fees, title fees, and other transfer fees paid, at no cost other than any deductible provided in the policy. (b) Cash settlement based on the actual cost to purchase a comparable. The insurer may pay a cash settlement based on the actual cost to purchase a comparable automobile, including all applicable taxes, license fees, and transfer-of-ownership fees. (c) Deviation settlement. When a total loss is settled on a basis that deviates from the methods in (a) or (b), the deviation must be supported by documentation of the vehicle's condition. Any deductions from value — including any deduction for salvage — must be measurable, discernible, itemized and specified as to dollar amount. The basis for the deviation settlement must be fully explained to the first-party claimant. (5) and (8)(b) Betterment and depreciation deductions. When the amount claimed is reduced because of betterment or depreciation, all information supporting the reduction must be in the claim file and the deductions itemized and specified as to dollar amount (paragraph (5)); a betterment deduction must also be measurable and documented in the claim file (paragraph (8)(b)). Alabama's regulation does not contain the NAIC-model "two-or-more comparables / two-or-more dealer quotations / statistically valid source" closed list that several other states have adopted, and does not contain a 30-day "right of recourse" provision. Documentation-and-itemization duties run through the deviation-settlement subsection (c) and the betterment subsection (8)(b). Ala. Admin. Code r. 482-1-125-.02 also provides that evidence of a violation of the chapter "shall not be utilized for any other purpose or admissible as evidence for any purpose in any civil or criminal court proceeding," limiting the regulation's direct use as evidence in a Chavers bad-faith trial — though the rule remains operative for the Alabama Department of Insurance's administrative enforcement. Chavers v. National Security Fire & Casualty Co., 405 So. 2d 1 (Ala. 1981). The Alabama Supreme Court recognized first-party bad faith as a tort separate from breach of contract. Alabama also permits punitive damages on clear and convincing evidence under Ala. Code § 6-11-20. Ala. Code § 32-8-87 — Salvage Title Threshold. A vehicle for which the cost of repairs equals or exceeds 75% of its fair retail value before the loss must be branded as a salvage vehicle.