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Auto Insurance Madness


by Derek Drew, New York, NY & Washington, DC

copyright 1991,

This is my first posting of this gem, and somebody might want to stick it in the archives as a separate item (or I can send it as a formatted HTML file). It was written in 1991 and is kind of a companion piece to my article Refrigerator Madness (in the archives under the mis-labeled title "Refrigerator Manual"). At the end is the prize, the letter I sent asking the insurance company to ignore their own appraiser's estimate of the value of my camper and instead value it at $18,000 plus 8% New York Sales Tax, a letter to which they gladly agreed at a time that the blue book value of the car was around $11,000. The secret to why this letter worked is explained in the text below.
'90 Syncro Westfalia.....seen off-road at http

What follows is a story about my insurance investigations, the crash of my beautiful 1987 Westfalia, and what I found out about the wacky way insurance companies decide how much to pay out in the event of an accident. It also explains why my model insurance letter worked and how to use it to your best advantage.

When I bought my 1987 Syncro Westfalia camper in 1989 it was one year old, was in mint condition, and had less than 10,000 miles on it. The owner had added about a thousand dollars of aftermarket goodies to it (such as car alarms and a great stereo) and the car carried a $26,000 list price. The blue book value of the car was only about $16,000 but I couldn't understand how it could be so low. I certainly couldn't find a used Syncro Westfalia anywhere else for sale so we agreed on $20,000 as the purchase price and I was glad to pay it.

Over the course of the next year I put several thousand dollars into the vehicle by adding things like winches, awnings, screen rooms, a hot water shower, extra interior lighting, exotic rust proofing materials, two-way radios, etc. I became aware that the value of the vehicle was rapidly going down in the insurance company's eyes as I built up the mileage, but that its value to me was going the other direction. In essence, I was becoming uninsured before my very eyes. I think the final straw was when I spent about $400 to buy and install a set of in-body mounted Oettinger fog lamps made in Germany.


Accordingly, I made up a list of the improvements I had made to the vehicle, along with receipts, and sent this list to my insurance agent asking him if these $6,000+ of improvements would be covered in the event of a loss. The agent wrote back stating that the improvements would be covered provided I kept the receipts. I kept his letter but something about it suggested to me that he didn't know what he was saying. I called him by phone and asked him how the improvements would be valued and how he could be sure that the insurance company in question would pay me for them.

He didn't seem all that sure of his ground and so I pressed him to call the insurance company for an answer. If necessary, I stated, I would be willing to pay an extra amount to receive extra coverage. A week passed before the agent returned my call.

He said he had been busy researching my problem and the answer was not optimistic. No insurance company he could find would allow me to explicitly declare my added equipment and pay to ensure it was covered. The amount I would receive if the car were stolen, he said, would be determined based on the "book value" of that type and year of car at the time of the loss. The agent then confused me, however, by stating that I should keep the receipts for the improvements I had made to the vehicle so that I could show them to the insurance company should I experience a loss.

I then asked the insurance agent how these receipts could possibly be useful to me if the added equipment wasn't covered. The agent wouldn't give me a precise answer but mysteriously repeated that the receipts would be "useful" in the event of a loss.


The agent told me that "stated value" or "stated amount" coverage was the normal way to agree to the amount of coverage prior to a loss. But he said no US insurance company would issue such a policy to cover anything other than a collector car or an antique. The policies generally state that they will only cover vehicles more than ten years old, owned by families with a least one other car for every adult with a driver's license, and which are driven only a few hundred miles per year. I couldn't qualify on any of these criteria, let alone all three.

The agent then said that if I insisted on having an explicit agreement on the amount I would be paid in the event of a loss the only way would be through Lloyds of London. They would charge about 8% of the amount covered annually, insist that the policy would be in addition to my regular insurance (which I still had to purchase), and would insist on a $15,000 minimum coverage. All this would cost me about $1,000 annually over and above the amount that I was already paying for my regular coverage. Since I had receipts for what I had added to the car, he said, why bother?

His case was convincing, and I dropped the idea.

What I was only beginning to grasp was the weird truth about how the auto insurance business works that he was trying to tell me. My insurance company didn't want to agree to pay me for my loss ahead of time in any kind of explicit way, but if I did lose my car, they would take into account my receipts. In other words—the insurance company actually preferred to keep the amount I would be paid in the event of a loss fuzzy. I didn't understand why until a lot later.


The last day of November, 1990, I swerved in an attempt to avoid a deer that had stepped out right in front of the van on a lonely, unlit back road. The van turned on its side. The police and an ambulance showed up and I was taken to the hospital for x-rays on my ribs.

Meanwhile, my vehicle was left on the highway full of all kinds of goodies like ham radios, a radar detector, etc. I was worried sick about this stuff and got up at six a.m. to drive to the compound where the police had told me the vehicle was towed. Sure enough, an employee of the towing service was already leering over the vehicle at daybreak casing out the goodies.


He looked quite startled when I arrived and guilt was written all over his face. He bantered good naturedly until his nervousness subsided and then he walked away to other business. I felt it was obvious that had I not shown up promptly, my van would have received a good scavenging.

Horror number one was averted, I told myself. Now what could be horror number two. Storage fees by any chance?

Sure enough, I had already spent $10 on the first day's storage and my mission was to get the car out of there as soon as possible! I called my insurance agent to report the loss and then arranged to have the vehicle towed immediately to the most expensive, classy, and excellent body shop I could think of.


I knew from past experience that it is important to get your estimate at the most expensive body shop you can find. One should never, ever, be pressured by the insurance company into taking the vehicle to one of their own shops since they use these places to produce low estimates. Typically insurance companies pressure you to go to one of their own shops by telling you it will be quicker or somehow better.

Anyway, the insurance company is basically forced to pay the fee of whatever body shop you select for the estimate. Most state laws also explicitly state that you don't have to have your vehicle actually repaired at that facility, but are free to subsequently have the repair done at a lower priced facility if you so choose. The game is to get a high estimate, get the check from the insurance company, and only then decide how much you want to pay and where you want the repair to be done. Road Warrior fans can even amuse themselves by depositing the

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