July 1, 2019

The insured hit and totaled another vehicle. The 3rd party PD plaintiff had a 0% loan for the following 4 years. The manufacturer no longer is offering 0 interest, and the plaintiff is demanding the amount of interest she will now have to pay over the next 4 years. No change in credit standing of the plaintiff. Is the interest owed under the personal auto policy as legitimate damages?

Washington Subscriber

The purpose of auto insurance is to pay for the vehicle that was damaged in the accident and restore the injured party to her position before the loss. In this case, the payment is meant to pay for the totaled car. The status of her loan arrangement is immaterial; the policy pays for the actual cash value of the vehicle, not any loan arrangement. The insurer is not concerned with whether the recipient uses the insurance proceeds to buy a more expensive car, or a less expensive car. and pocket the remainder of the settlement. She could be overfinanced and owe more than the vehicle is worth; she would not be compensated for that loan amount, just the value of the vehicle.