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Custom Parts & Equipment Coverage and Agreed-Value Policies:
Are You Sure Youíre Fully Insured?
By Christopher R. Dillingham, II, Esquire
1676 East Semoran Blvd. Apopka, FL 32703
Office: 1-833-FL-TRIAL (358-7425) / Cell: 407-463-3506
I run a personal injury law firm in Orange County, Florida. Iíve ridden motorcycles since 1984, so Iíve dedicated a large part of my practice to representing bikers. I was also a Progressive Insurance Special Lines adjuster and handled motorcycle claims for Progressive in Central Florida for several years before going to their Casualty Unit. Those experiences have been invaluable to me as a personal injury lawyer. That also means I get a lot of calls about insurance policies and coverage issues when things go south between bikers and their insurers.
I had a life-long friend contact me about his insurance company declaring his wifeís bike a total loss. She had a base model Harley FLSTC Heritage Softailģ Classic, but he and his wife had extensively modified the bike and added several thousands of dollars of custom parts to it.
The problem he faced is that his wife had a crash that was her fault, so he had to go through their collision coverage for her bikeís total loss. When he purchased his policy, though, he didnít buy additional Custom Parts & Equipment (ďCPEĒ) coverage. He didnít buy additional CPE coverage when they added even more CPE to the bike.
There was nothing I could do to help him because he was underinsured for his level of risk. His insurance company paid him for a base model Heritage Softtail plus $1K extra for his CPE. Thatís it. He was what insurance companies call ďself-insuredĒ for the rest of his bikeís value. A lot of that CPE was damaged in the crash, too, so he couldnít just add it to another Softail.
How much CPE does your bike have? Aftermarket exhaust? Custom wheels? An expensive paint job? Extensive amounts of chrome? Iím willing to bet that most of you are ďself-insuredĒ for your extensive mods too.
One of those ways an insurance company determines your insurance premium is the value of your bike, and the insurance company does that by decoding your bikeís Vehicle Identification Number (ďVINĒ). It also relies upon you to tell them about your bike. If your bikeís VIN decodes as a base model Harley, and you didnít tell them about your additional CPR, then thatís what the insurance company will pay you for if itís a total loss if you donít have additional CPE coverage. The insurance company will not pay you for more risk than it has underwritten. If you put $20K of aftermarket parts on a $10K bike, then your insurance company will only pay you $10K for it. A standard motorcycle policy wonít pay you for your bikeís full value if you have lots of CPE or mods and no additional CPE coverage. Most insurance companies will allow you an additional thousand dollars or so in CPEósome do notóbut thatís it.
Think about it: How much money would you lose if your bike were a total loss through being wrecked or stolen right now?
Read your insurance policy if you donít believe me and look for the section that discusses ďActual Cash Value.Ē That will confirm what I said. The insurance company only owes you for what it agreed to insure when you bought your policy.
There are two ways to avoid this problem with your insurance company:
1.Your first option is to buy additional coverage for the amount of CPE youíve put on your bike. Youíll need receipts to prove the CPEís value, and like almost anything else, CPE loses value over time, so you usually wonít get a dollar for dollar reimbursement. Additionally, CPE is usually worth less than factory equipment. Thatís particularly true when it comes to wheels and custom paint. Insurance companies will almost always subtract the OEM value from any CPE equipment you put on your bike. Also, you need to be careful to buy additional CPE coverage whenever you buy more parts for your bike. Itís easy to buy parts and install them, and then not have enough CPE coverage in a total loss because you forgot to call your agent and increase your CPE coverage.
2.Your second option is to buy an Agreed Value (or ďStated ValueĒ) policy. This is a better option if you have a lot of CPE, if your bike is highly modified, or itís an antique. Some insurance companies will not write these policies so you must shop around for an insurance company that will. Once you and your insurance company agree upon your bikeís value then that is what the insurance company will pay you if itís a total loss one year or 10 years from now. That only changes if you and the insurance company agree upon a new value. Itís important to keep your policy current to reflect your bikeís market value. Agreed Value policies can be expensive, but if your bike has a lot of mods or is an antique, it may be worth it.
Unfortunately, if you donít have additional CPE coverage or an Agreed Value policy, then no lawyer can help you get the value of your bike from your own insurance company. Your insurance policy probably has an arbitration clause in it that says if you and your insurance company canít agree on your bikeís value then you must submit to binding arbitration. Arbitration is expensive, and I think itís almost useless in such cases.
Itís not always possible to go through the other personís property damage coverage. That person may not have any insurance coverage or have very little insurance coverage, and a lawsuit is probably throwing good money after bad. Thatís because our courts award judgments, not money, and itís up to you to collect on those judgments. Most people have nothing, so you canít get anything from them. We lawyers call such people ďjudgment-proofĒ or ďuncollectible.Ē Thatís why we donít handle cases in which there isnít any coverage. You canít get something from nothing, so you must protect yourself. No one else will.
Insurance is great if you buy what you need for your level of risk. Keep in mind that 25% of Florida drivers have absolutely no insurance coverage, and many only have $10K of property damage coverage, so you can lose a lot of money very quickly in a crash if you donít protect yourself.
I hope youíve found this article informative. Chris