Section 0780-01-05-.09 - STANDARDS FOR PROMPT, FAIR AND EQUITABLE SETTLEMENTS APPLICABLE TO AUTOMOBILE INSURANCE(1) When the insurance policy provides for the adjustment and settlement of first party automobile total losses on the basis of actual cash value or replacement with another of like kind and quality, one of the following methods shall apply at the discretion of the insurer:(a) The insurer may elect to offer a replacement automobile that is at least comparable in that it will be by the same manufacturer, same or newer year, similar body style, similar options and mileage as the insured vehicle and in as good or better overall condition and available for inspection at a licensed dealer within a reasonable distance of the insured's residence. The insurer shall pay all applicable taxes, license fees and other fees incident to transfer of evidence of ownership of the automobile, paid at no cost other than any deductible provided in the policy. The offer and any rejection thereof must be documented in the claim file.(b) The insurer may elect a cash settlement based upon the actual cost, less any deductible provided in the policy, to purchase a comparable automobile including all applicable taxes, license fees and other fees incident to transfer of evidence of ownership of a comparable automobile. Such cost may be derived from: 1. The cost of two or more comparable automobiles in the local market area when comparable automobiles are available or were available within the last ninety (90) days to consumers in the local market area; or2. The cost of two (2) or more comparable automobiles in areas proximate to the local market area, including the closest major metropolitan areas within or without the state, that are available or were available within the last ninety (90) days to consumers when comparable automobiles are not available in the local market area pursuant to part 0780-01-05-.09(1)(b) 1. above; or3. One (1) of two (2) or more quotations obtained by the insurer from two (2) or more licensed dealers located within the local market area when the cost of comparable automobiles are not available pursuant to parts 0780-01-05-.09(1)(b) 1. and (1)(b)2. above; or4. Any source for determining statistically valid fair market values that meet all of the following criteria: (i) The source shall give primary consideration to the values of vehicles in the local market area and may consider data on vehicles outside the area;(ii) The source's database shall produce values for at least eighty-five percent (85%) of all makes and models for the last fifteen (15) model years, taking into account the values of all major options for such vehicles; and(iii) The source shall produce fair market values based on current data available from the area surrounding the location where the insured vehicle was principally garaged or a necessary expansion of parameters (such as time and area) to assure statistical validity.(c) When a first party claimant's automobile total loss is settled on a basis which deviates from the methods described in subparagraphs 0780-01-05-.09(1)(a) and (1)(b), the deviation must be supported by documentation giving particulars of the automobile condition. Any deductions from the cost, including deduction for salvage, must be as specific as reasonably possible, and specific and appropriate as to dollar amount, and shall be documented in the claim file as required by rule 0780-01-05-.05. The basis for the settlement shall be fully explained to the first party claimant.(2) Insurers shall not require a first party claimant to travel an unreasonable distance either to inspect a replacement automobile, to obtain a repair estimate or to have the automobile repaired at a specific repair shop.(3) Insurers shall, upon the first party claimant's request, include the first party claimant's deductible, if any, in subrogation demands. Subrogation recoveries shall be shared on a proportionate basis with the first party claimant, unless the deductible amount has been otherwise recovered. No deduction for expenses can be made from the deductible recovery unless an outside attorney is retained to collect such recovery. The deduction may then be for only a pro rata share of the allocated loss adjustment expense.(4) Vehicle Repairs. If partial losses are settled on the basis of a written estimate prepared by or for the insurer, the insurer shall supply the insured a copy of the estimate upon which the settlement is based. The estimate prepared by or for the insurer shall be reasonable, in accordance with applicable policy provisions, and of an amount which will allow for repairs to be made in a workmanlike manner. If the insured subsequently claims, based upon a written estimate which he or she obtains, that necessary repairs will exceed the written estimate prepared by or for the insurer, and differences remain unresolved during the course of the repair or negotiation process, the insurer shall:(a) Pay the difference between the written estimate and a higher estimate obtained by the insured; or(b) Promptly provide the insured with the name of at least one (1) repair shop in areas proximate to the local market area, including the closest major metropolitan areas within or without the state, that will make the repairs for the amount of the written estimate, not considering the cost of supplemental or additional repairs which may be uncovered as part of the repair process. The insurer shall assure that such repairs provided by such repairers designated by the insurer are performed in a workmanlike manner. The insurer shall maintain documentation of all such communications. If such communication is made by means other than writing, an appropriate notation of the communication shall be made in the claim file of the insurer and dated.(5) When the amount claimed is reduced because of betterment or depreciation, all information for such reduction shall be contained in the claim file. The deductions shall be itemized and specified as to dollar amount and shall be appropriate for the amount of deductions.(6) When the insurer elects to repair and designates a specific repair shop for automobile repairs, the insurer shall cause the damaged automobile to be restored to its condition prior to the loss at no additional cost to the claimant other than as stated in the policy and within a reasonable period of time.(7) Towing. Unless the insurer has provided an insured with the name of a specific towing company or provides a roadside assistance program, prior to the insured's use of another towing company, the insurer shall pay any and all reasonable towing charges irrespective of the towing company used by the insured, subject to any applicable policy provisions.(8) Storage. The insurer shall provide reasonable notice to an insured prior to termination of payment for reasonable automobile storage charges and documentation of the denial as required by rule 0780-01-05-.05. Such insurer shall provide reasonable time for the insured to remove the vehicle from storage prior to the termination of payment, subject to any applicable policy provisions.(9) Betterment deductions are allowable only if the deductions:(a) Reflect a measurable decrease in market value attributable to the poorer condition of, or prior damage to, the vehicle;(b) Any deductions set forth in subparagraph 0780-01-05-.09(9)(a) above must be measurable, itemized, specified as to dollar amount, and documented in the claim file; and(c) No insurer shall require the insured or first party claimant to supply parts for replacement.Tenn. Comp. R. & Regs. 0780-01-05-.09
Original rules filed July 11, 2017; effective 10/9/2017.Authority: T.C.A. §§ 56-2-301, 56-8-101 through 56-8-120, 56-8-105, 56-8-108, and 56-8-110.