Progressive total-loss settlements in Indiana: how to negotiate a fair offer

Indiana regulates first-party automobile total losses through three layered authorities: the Unfair Claim Settlement Practices Act at Ind. Code § 27-4-1-4.5, the implementing claims-handling regulation at 760 IAC 1-67, and the common-law tort of first-party bad faith recognized by the Indiana Supreme Court in Erie Insurance Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993). Indiana does not impose a separate licensing requirement on a policyholder's appraiser invoked under the policy's appraisal clause. Ind. Code § 27-4-1-4.5 — Unfair Claim Settlement Practices. The statute lists 14 acts that constitute unfair claim settlement practices when committed in conscious disregard of the policy or with such frequency as to indicate a general business practice, including: misrepresenting pertinent facts or insurance policy provisions; failing to acknowledge and act reasonably promptly on claim communications; failing to adopt and implement reasonable standards for the prompt investigation of claims; refusing to pay claims without conducting a reasonable investigation; failing to affirm or deny coverage within a reasonable time after proof-of-loss statements have been completed; not attempting in good faith to effectuate prompt, fair, and equitable settlement of claims when liability has become reasonably clear; compelling insureds to institute litigation to recover amounts due by offering substantially less than the amounts ultimately recovered in actions brought by the insureds; and failing to promptly settle claims when liability has become reasonably clear under one portion of the insurance policy in order to influence settlements under other portions. 760 IAC 1-67 — Unfair Claim Settlement Practices Regulation. Indiana's claim-handling regulation establishes specific standards for handling first-party automobile claims. With respect to total-loss settlements: (a) The insurer must base the settlement on the actual cash value of the vehicle, calculated using one of the following methods: (1) the cost of two or more comparable vehicles available within the local market area; (2) two or more quotations from qualified dealers within the local market area; or (3) one of the various automobile valuation services that produce statistically valid fair market values for the local geographic area. (b) The insurer must include all applicable taxes, license fees, and other fees incident to the transfer of evidence of ownership of the comparable automobile. (c) Deductions from the value because of advance condition or required repairs must be measurable, discernible, itemized, and specified in dollar amounts, and must be appropriate in dollar amount. (d) If the insured cannot purchase a comparable automobile in the local market area for the offered amount, the insurer must reopen the claim and either locate a comparable vehicle for the offered amount, pay the difference, or invoke the policy's appraisal provision. Ind. Code § 9-22-3-3 — Salvage Title Threshold. A vehicle for which the cost of repair to its pre-accident condition exceeds 70% of its fair market value before the loss must be branded as a salvage vehicle. This 70% threshold sets the operational total-loss decision point in Indiana. Erie Insurance Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993). The Indiana Supreme Court recognized first-party bad faith as a separate tort, distinct from breach of contract. An insurer breaches its duty of good faith when it: (1) makes an unfounded refusal to pay policy proceeds; (2) causes an unfounded delay in making payment; (3) deceives the insured; or (4) exercises any unfair advantage to pressure an insured into a settlement of a claim. The bad-faith tort is the lever Indiana policyholders use to recover beyond the policy limits when an insurer's claim-handling conduct is unreasonable — Ind. Code § 27-4-1-4.5 itself does not provide a private right of action, but its statutory standards inform the bad-faith analysis under Hickman. Indiana also permits punitive damages in bad-faith cases on clear and convincing evidence under Ind. Code § 34-51-3-2. Indiana does not impose a separate licensing requirement on a policyholder's appraiser invoked under the policy's appraisal clause.