Ohio total-loss appraisal: how the appraisal clause works

Ohio regulates first-party automobile total losses through two layered authorities: the unfair-claim-practices statutes at Ohio Revised Code §§ 3901.20 and 3901.21, and the implementing claims-handling rule at Ohio Administrative Code 3901-1-54. O.R.C. § 3901.20 prohibits any person from engaging in any trade practice defined as an unfair or deceptive act or practice in the business of insurance under §§ 3901.19 to 3901.23. O.R.C. § 3901.21 enumerates dozens of specific unfair and deceptive acts, including, in subsection (P), the use of "pattern settlement" — defined as a method by which liability is routinely imputed to a claimant without an investigation of the particular occurrence and by using a predetermined formula. The section preserves the insurer's right to apply formulas or guidelines to the facts and circumstances disclosed by the insurer's actual investigation of the particular occurrence. Ohio Adm. Code 3901-1-54(H) sets standards for prompt, fair, and equitable settlement of automobile insurance claims: (H)(6) When an insurer elects to offer a replacement automobile in settlement of a total-loss claim on the basis of actual cash value or replacement of like kind and quality, it must offer a replacement comparable in kind and quality, with all applicable taxes and fees paid. (H)(7) When an insurer elects to offer a cash settlement, the offer shall be based upon the actual cost to purchase a comparable automobile less any applicable deductible amount and any betterment deduction permitted by paragraph (H)(2). The settlement value may be derived from: (a) The average cost of two or more comparable automobiles in the local market area if comparable automobiles are or were available to consumers within the last ninety days; (b) The average cost of two or more comparable automobiles in areas proximate to the local market area, including the closest in-state or out-of-state major metropolitan areas, that are or were available within the last ninety days, if comparable automobiles are not available under (a); (c) The average of two or more quotations obtained by the insurer from two or more licensed dealers located within the local market area if comparable automobiles are not available under (a) and (b); or (d) The cost as determined from a generally recognized used motor vehicle industry source such as: (i) an electronic database, if the pertinent portions of the valuation documents it generates are provided to the claimant upon request; or (ii) a guidebook generally available to the public, if the insurer identifies the guidebook to the claimant upon request, with appropriate adjustments for condition, mileage and major options made and documented in the claim file. (e) Any method or source chosen under (d) shall be used consistently over a period of time by the insurer. (f) Sales tax reimbursement: if within 30 days of receipt of a cash settlement the claimant purchases a replacement automobile, the insurer shall reimburse the claimant for applicable sales taxes, unless the insurer elects to pay applicable sales taxes directly at the time of settlement. The same paragraph requires an insurer that settles a total loss on a cash settlement basis to maintain in the claim file the documentation used to determine the loss and provide it to the first-party claimant on request, and to notify the first-party claimant of any rights to renegotiate the settlement if a comparable vehicle is not available for purchase within thirty-five days of receipt of the settlement. (g) An insurer that settles a total loss claim must give the claimant written notice of the right to sales-tax reimbursement with the settlement check, unless it pays the sales taxes directly. The Ohio Department of Insurance enforces these requirements administratively. As Ohio Adm. Code 3901-1-54 explicitly states, "Nothing in this rule shall be construed to create or imply a private cause of action for violation of this rule" — meaning the leverage runs through ODI consumer-services complaints and the contractual appraisal clause rather than a private right of action under the rule itself.