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Fox Farley Willis & Burnette Attorneys At Law
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Am I Still Liable for a Car Loan if My Vehicle Is Totaled?


If your car is damaged due to someone else’s negligence, you can seek compensation through a personal injury lawsuit. In Tennessee, damages are measured based on whether or not the car is capable of repair. If the car can be returned to use, the plaintiff may seek damages equal to the cost of restoration and any losses suffered while awaiting repairs. If the car is a total loss, however, the plaintiff may seek damages equal to the difference between the vehicle’s “fair market value” just prior to the accident and its worth immediately afterwards.

Tennessee Court Rejects “Collusion” Charge Against Lender, Insurer

But what if you owe more on your car loan than the vehicle’s fair market value? The Tennessee Court of Appeals recently addressed this scenario. The court rejected an accident victim’s effort to challenge the lender’s calculation of fair market value, which left her on the hook for the outstanding loan balance.

The plaintiff here owned a 2008 Mitsubishi Galant. She financed the car’s purchase through a loan of approximately $16,000. About three years after buying the car, the plaintiff’s daughter got into an accident which totaled the vehicle. At the time of the accident, the plaintiff still owed a significant amount on her loan, and the lender retained titled to the car.

The accident was allegedly the fault of a second driver, who was the nominal defendant in this case. The defendant’s insurance company agreed to pay the lender $7,852.57 for the “fair market value” of the totaled car. The lender accepted this payment and applied it to the plaintiff’s outstanding loan balance. This still left the plaintiff owing about $4,700.

The plaintiff accused the lender and the defendant’s insurance company of, in effect, colluding against her. She claimed the fair market value of the car was more than $7,852.57 and asked the court to order the insurance company to pay damages equal to the “total loss of the car and the loss of use of the car.”

The court rejected the plaintiff’s claims and granted summary judgment to the defendant. The Court of Appeals agreed with the trial judge’s decision. In a January 30 opinion, the appeals court said the plaintiff failed to present any evidence that the car’s “fair market value” was actually higher than the amount paid by the insurer and accepted by the lender. The fact said value was less than the plaintiff’s loan balance was irrelevant. Additionally, the appeals court noted Tennessee law does recognize damages for “loss of use” of a vehicle that is damaged beyond repair.

Get Help Following a Car Accident

As the case above illustrates, your ability to recover damages following a car accident where you lack equity in the car itself is limited. But regardless of whether you own the car involved, if you suffer personal or bodily injury in an accident, you may still have a separate cause of action against the responsible parties. If you need advice from an experienced Tennessee personal injury lawyer, contact the offices of Fox, Farley, Willis & Burnette, Attorneys at Law, in Knoxville or Clinton today.


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