How to Avoid a Big Hassle if Your Financed Car Gets Wrecked

A frustrated-looking woman stands next to her wrecked car and talks on her smartphone.

(Image credit: Getty Images)

Today’s story will be of special interest to anyone who owns a vehicle that is financed — has a lien — and it is in an auto accident or otherwise sustains damage. If insurance is involved, who should the check be made payable to? What happens if the check is not made payable to the correct party?

What is a lien?

A lien on a car means a third party — usually a lender, known as a lienholder, such as a credit union or bank — has a legal interest in the vehicle. If there is a default on the loan, the lienholder could repossess the car. So, in effect, it is being rented from the lienholder, who owns it until the loan is paid and a lien release is issued.

Those questions were not even remotely on Brian Renninger’s mind in November 2023, when the retired correctional officer and his wife, Jeanne, were on U.S. Highway 70 in New Mexico between Ruidoso and Alamogordo when a large piece of Styrofoam flew off of a commercial truck in their lane.

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“There was no way to avoid driving over it. It hit everything underneath my Dodge Ram and fifth-wheel RV trailer, causing significant damage. The truck just drove off, the driver likely unaware of what had happened.”

Temporary repairs made for the drive home

Brian had adequate repairs done that enabled him to drive home, where he filed a claim with his auto insurance, USAA. The claims adjuster suggested using one of their shops, but “I took the fifth-wheel to Mike, a mechanic I had used for several years and considered a friend.”

Despite the fact that Brian’s insurance declaration sheet showed the RV to be financed by a credit union, the claims adjuster issued a check — $7,972.59 — payable to Mike and Brian, omitting the name of the credit union.

“I met Mike at his bank, where I signed the check, so he could buy parts. I asked if he needed the entire check for parts, and he replied, ‘This is walking-around money.’ Right then, I suspected something, but I said nothing, as I trusted him.”

One excuse after another

“Mike promised the vehicle would be repaired by January 2024. Then it was February, March, and finally in April, I get a text: ‘Had pneumonia. It will be done this Thursday.’ As expected, it wasn’t. My USAA adjuster said because I did not use their shop, they could not help. “I contacted every government agency I thought might help, but no one would (at first). Finally, the Bureau of Automotive Repair (BAR) — with whom I had filed a complaint — got serious when I called them. Mike had been unlicensed since 2015, and the BAR rep said they planned to shut him down. I went to Mike’s shop and took possession of my RV, which had sustained much more damage while in his possession.”

What should the claims adjuster have done?

Bob West, a retired Farmers Insurance claims adjuster, has such a positive attitude that “we’re going to get this resolved” could be stamped on his forehead. When I ran Brian’s situation by him, he immediately said, “The adjuster didn’t put the credit union’s name on the check? What? That set all of this in motion because they would not release funds until, most likely, the RV was repaired. A claims adjuster must protect the lienholder by listing them as a loss payee, or the insurance company might have to pay twice.”

If the claims adjuster suggests you use their preferred repair shop, ask for three names and check them out online, reading — first — the negative reviews. You are free to choose your own shop, but if things go south, the insurance company will likely decline to help, as they do not have to provide help.

Hats off to USAA: A happy ending

I contacted the media department at USAA, explained what had happened and asked them to look into this and help their insured. The next day, Brian sent me this email:

“On June 27, I received a phone call from a USAA fraud investigator and was told my case had garnered immense interest. He was having a meeting in about two hours with a USAA director to talk specifically about it. In all his years with them, this had never happened. Later the same day, I received a call from my new adjuster stating, ‘We will do everything that is needed to make this right for you.’ THANK YOU, USAA!

“Mr. Beaver, the moral to my story is to completely vet any repair facility before entrusting your vehicle to them. Are they licensed? Read the negative reviews and complaints before those that are positive. Always obtain a written estimate. Go with your gut feeling. Even if you have known the shop owner for years, things happen, people change. If things do not feel right, (go somewhere else).”

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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After attending Loyola University School of Law, H. Dennis Beaver joined California's Kern County District Attorney's Office, where he established a Consumer Fraud section. He is in the general practice of law and writes a syndicated newspaper column, You and the Law. Through his column, he offers readers in need of down-to-earth advice his help free of charge. "I know it sounds corny, but I just love to be able to use my education and experience to help, simply to help. When a reader contacts me, it is a gift."