Progressive total-loss offers in Indiana: how the appraisal clause works

Indiana regulates first-party automobile total losses through the Unfair Claim Settlement Practices Act at Ind. Code § 27-4-1-4.5 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). Ind. Code § 27-4-1-4.5 prescribes no comparable-vehicle, dealer-quotation, or valuation-service settlement method and no itemized-deduction standard. Valuation disputes are resolved through the appraisal clause of the policy, backed by the statutory good-faith-settlement standard and the Hickman bad-faith tort. Ind. Code § 27-4-1-4.5 — Unfair Claim Settlement Practices. The statute lists 16 acts that constitute unfair claim settlement practices (Ind. Code § 27-4-1-4(a)(16) makes committing or performing them with such frequency as to indicate a general practice an unfair act), 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. Subsection (6) — the duty to attempt in good faith to effectuate a prompt, fair, and equitable settlement once liability is reasonably clear — is the provision most directly engaged by a low total-loss offer. The statute is enforced administratively by the Indiana Department of Insurance and does not itself create a private right of action. Ind. Code § 9-22-3-3 — Salvage Title. For a vehicle manufactured within the last seven model years, the statute requires a certificate of salvage title when (1) an insurance company has determined that it is economically impractical to repair the vehicle and has made an agreed settlement with the insured or claimant; (2) the owner is a business that insures its own vehicles, or acquired the vehicle after it was wrecked or damaged, and the cost of repair exceeds 70% of the vehicle's fair market value immediately before the damage; or (3) the vehicle is flood damaged. Ind. Code § 9-22-3-4.1 then requires the insurer to apply for the salvage title within 45 days after it receives the certificate of title. 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 (Ind. Code § 27-4-1-18). Indiana also permits punitive damages in bad-faith cases on clear and convincing evidence under Ind. Code § 34-51-3-2. The practical mechanism for resolving a disputed actual-cash-value figure is the appraisal clause found in most personal-auto policies: either party may demand appraisal, each side names a competent appraiser, and the two appraisers (or an umpire) set the amount of loss.