CAA Total Loss and Diminished Value 2 — Questions and Answers
Question 1: Under a total loss formula (TLF) state, a vehicle is declared a total loss when which condition is met?
- Salvage value exceeds the cost of repair
- Cost of repair alone exceeds 50% of the purchase price
- The vehicle is more than 10 years old
- Cost of repair plus salvage value equals or exceeds the actual cash value (Correct answer)
Correct answer: Cost of repair plus salvage value equals or exceeds the actual cash value
TLF states compare repair cost plus salvage value against the pre-loss ACV.
Question 2: A vehicle has an ACV of $20,000, a repair estimate of $13,500, and a salvage bid of $7,000. Under a total loss formula, what is the result?
- Total loss only if the owner requests it
- Repairable, because salvage is under 50% of ACV
- Total loss, because $20,500 exceeds the $20,000 ACV (Correct answer)
- Repairable, because repairs are under 70% of ACV
Correct answer: Total loss, because $20,500 exceeds the $20,000 ACV
$13,500 + $7,000 = $20,500, which exceeds the $20,000 ACV.
Question 3: Which state uses a 100% total loss threshold, meaning repairs must equal or exceed ACV before a vehicle is totaled?
- Iowa
- Florida
- Oklahoma
- Texas (Correct answer)
Correct answer: Texas
Texas uses a 100% threshold, while Florida is 80%, Iowa 70%, and Oklahoma 60%.
Question 4: When an owner keeps a totaled vehicle (owner-retained salvage), how is the settlement typically calculated?
- ACV plus salvage value
- Repair cost minus the deductible
- ACV minus the salvage value and any deductible (Correct answer)
- ACV with no deductions
Correct answer: ACV minus the salvage value and any deductible
The insurer deducts the salvage value it would have recovered, along with the deductible.
Question 5: In a comparable-vehicle valuation report, why are adjustments made to comparables?
- To add the insurer's administrative fees
- To include the cost of the owner's rental car
- To reflect the vehicle's original MSRP
- To account for differences in mileage, options, and condition versus the loss vehicle (Correct answer)
Correct answer: To account for differences in mileage, options, and condition versus the loss vehicle
Adjustments align each comparable with the loss vehicle's specific attributes.
Question 6: Which type of diminished value refers to the loss in market value simply because the vehicle now has an accident history, even after perfect repairs?
- Repair-related diminished value
- Betterment value
- Immediate diminished value
- Inherent diminished value (Correct answer)
Correct answer: Inherent diminished value
Inherent DV results from the stigma of an accident history regardless of repair quality.
Question 7: Which document would most strongly support a buyer-perception argument in a diminished value claim?
- The owner's maintenance receipts
- The original window sticker
- A vehicle history report showing the reported accident (Correct answer)
- The insurer's rental reimbursement log
Correct answer: A vehicle history report showing the reported accident
A history report showing the accident is what prospective buyers see and react to.
CAA Total Loss and Diminished Value 2
Under a total loss formula (TLF) state, a vehicle is declared a total loss when which condition is met?