Section 3.26.080. Additional standards for prompt, fair, and equitable settlements of motor vehicle claims.

	(a)  A person transacting a business of insurance who participates in the investigation, adjustment, negotiation, or settlement of a first-party or third-party motor vehicle claim shall  
		(1) apply one of the following settlement methods if coverage provides for the adjustment of a motor vehicle total loss on the basis of actual cash value or replacement with a vehicle of like kind and quality:  
			(A) offer a comparable and available replacement motor vehicle, with all applicable taxes, license fees, destination or delivery charges, and other fees incident to transfer of ownership of the motor vehicle paid, at no cost to the claimant other than the deductible amount, if any, as stated in the coverage; the offer of a replacement motor vehicle shall be made in writing if rejected by the claimant; or  
			(B) make a cash settlement based upon the actual cost to purchase a comparable motor vehicle, including all applicable taxes, license fees, destination or delivery charges, and other fees incident to transfer of ownership, less the deductible amount, if any, as stated in the coverage; the cost shall be determined by  
				(i) the cost of a comparable motor vehicle in the local market area to the claimant, if that motor vehicle is available in that area or was available during the last 90 days;  
				(ii) the average of two or more cost quotations obtained for a comparable motor vehicle from two or more licensed dealers located within the local market area, if a comparable motor vehicle is not available in that area; if quotes from two or more licensed dealers are not available from the local market area, the search area may be expanded to areas surrounding the local market area in 25-mile increments until two quotes are obtained;  
				(iii) a computerized database valuation service that produces statistically valid fair market values under (i) of this section;  
				(iv) the average retail value of a comparable motor vehicle, if that value is obtained from two industry sources published on a regular basis, at least once every two months, that contain the average retail, wholesale, and finance values for all makes and models for at least each of the last five model years, as well as a listing for all major options; cost may be determined under this sub-subparagraph only if (i) - (iii) of this subparagraph do not identify any comparable motor vehicles, and only with the consent of the claimant; or  
				(v) the cost of a comparable motor vehicle using a basis that is allowable under the coverage, if supported by documentation in the claim file and fully explained to the claimant; cost may be determined under this sub-subparagraph only if (i) - (iv) of this subparagraph do not identify any comparable motor vehicles;  
		(2) provide to a claimant a reasonable written explanation of the valuation of damages to the motor vehicle;  
		(3) include the first-party claimant's deductible, if any, in a subrogation demand unless the first-party claimant requests that it not be included or unless the deductible has been otherwise recovered by the first-party claimant; no deduction for expense may be made from any deductible recovered unless an outside attorney or other outside expert witnesses have been retained and any deduction is no more than a pro rata share of their cost less any attorney fees and costs recovered; any recovery of prejudgement or postjudgement interest shall be shared pro rata.  
	(b)  Any person transacting a business of insurance who participates in the investigation, adjustment, negotiation, or settlement of a third-party motor vehicle claim  
		(1) repealed 6/6/2015;  
		(2) may not recommend that a third-party claimant make a claim under the claimant's own coverage in order to delay or avoid paying a claim where liability and damages are reasonably clear.  
	(c)  A claimant may not be required to travel unreasonably either to inspect a replacement motor vehicle, obtain a repair estimate, or have the motor vehicle repaired at a specific facility.  
	(d)  Any estimate or appraisal of the cost of repair of a motor vehicle must be in a fair and appropriate amount that the claimant may reasonably be expected to be charged for repairs at one or more conveniently located repair facilities.  
	(e)  If the amount claimed as damage to the motor vehicle is reduced on the basis of betterment or depreciation, the person adjusting or settling the claim shall itemize each deduction and explain the basis for each reduction in writing to the claimant.  
	(f)  If a person adjusting or settling a claim elects to have repaired a claimant's motor vehicle and chooses a specific facility for the repairs, that person shall guarantee the repairs and cause the damaged motor vehicle to be restored to its condition before the loss, at no additional cost to the claimant, and cause the repairs to be completed within a reasonable time.  
	(g)  If the claimant's motor vehicle is determined to be economically unrepairable and, therefore, a total loss, the person adjusting or settling the claim may not reduce the salvage value of the vehicle by charges for cleaning.  
	(h)  An insurer may reduce the value of the motor vehicle on the basis of betterment. Any deductions must be measurable, be itemized, have specific dollar amounts, and be documented in the claim file. Betterment deductions may be made only if the deductions  
		(1) reflect a measurable decrease in market value attributable to the poorer condition of the vehicle or damage to the vehicle that existed before the current claim;  
		(2) apply to parts normally subject to repair and replacement during the useful life of the vehicle;  
		(3) reflect missing parts and the deductions are not more than the replacement cost of the parts.  
	(i)  A source for determining fair market values under (a)( l )(B)(iii) of this section must meet the following criteria:  
		(1) the source must give primary consideration to the values of comparable motor vehicles in the local market area that are currently available or were available during the last 90 days;  
		(2) the source must produce values applicable in this state for at least 85 percent of all makes and models for the last 15 model years taking into account the values of all major options for these vehicles;  
		(3) if at least two comparable motor vehicles are not found in the local market area during the last 90 days, the search may be expanded up to the last 180 days in 30-day increments until two or more comparable motor vehicles are located;  
		(4) if at least two comparable motor vehicles are not found in the local market area after expanding the search period as provided under (3) of this subsection, the search area may be expanded to areas surrounding the local market area in 25-mile increments for comparable motor vehicles that are currently available or were available during the last 90 days; if at least two comparable motor vehicles are not found in the expanded search area, the search area or time period in 30-day increments may be expanded further with the agreement of the claimant.  
	(j)  If the claimant notifies the insurer not later than 60 days after receipt of the claim payment that the claimant cannot purchase a comparable vehicle for the amount determined under (a)(l)(B) of this section, the insurer shall, if the appraisal section of the policy has not been exercised, reopen the insurer's claim file and determine a new settlement amount using one of the following procedures:  
		(1) the insurer may locate a comparable motor vehicle available through a licensed dealer for the value determined by the insurer at the time of settlement, along with all applicable taxes, license fees, destination or delivery charges, and other fees incident to transfer of ownership of the motor vehicle, at no cost to the claimant other than the deductible amount, if any, as stated in the coverage;  
		(2) if the claimant has located a comparable motor vehicle of like kind and quality, the insurer may  
			(A) pay the difference between the value determined by the insurer at the time of settlement and the cost of the comparable motor vehicle; or  
			(B) negotiate and effect the purchase of the comparable motor vehicle for the claimant;  
		(3) for a first-party claimant, the insurer may conclude the loss settlement using the appraisal provisions of the policy.  
	(k)  An insurer is not required to take action under (j) of this section if  
		(1) the insurer provided documentation to the claimant at the time of settlement of the location of a specific comparable motor vehicle available for purchase for the agreed settlement amount and the claimant did not purchase this vehicle not later than 10 working days after the date final payment is sent to the claimant, lienholder, or both; or  
		(2) the appraisal section of the policy has been exercised.  
	(l)  If comparable motor vehicles cannot be found under the procedures described in this section, the insurer may consider vehicles by other manufacturers that otherwise fall within the definition of "comparable motor vehicle" under 3 AAC 26.300 in the valuation processes described in this section.  
	(m)  This section does not prohibit an insurer from issuing a stated policy insuring against physical damage, where the amount of damages to be paid in the event of a total loss is a specified dollar amount.  

Authorities

21.06.090;21.36.125;01.05.031;21.36.350;44.62.125

Notes

Authority

AS 21.06.090 AS 21.36.125 Editor's note: In 2010 the revisor of statutes, acting under AS 01.05.031, redesignated former AS 21.36.350 as AS 21.36.125(c). As of Register 196 (January 2011), the regulations attorney made a conforming technical revision under AS 44.62.125(b)(6), to the authority citation that follows 3 AAC 26.080, deleting the citation to former AS 21.36.350 to reflect that the authority citation already includes a citation to AS 21.36.125, the section where material formerly in AS 21.36.350 was relocated.

History

Eff. 5/6/89, Register 110; am 6/6/2015, Register 214

References

3.26.080