Insurance payouts generally go to leasing companies, not drivers, when leased cars are totaled in California. Lessees may still owe money depending on the lease terms and if GAP coverage is in place.
Total losses of leased cars are more complex than claims involving owned vehicles because the leasing companies hold the titles, not the drivers. This creates a three-party situation involving insurers, lessors and lessees.
This article covers in detail what happens when you total a leased vehicle in California.
Call us today for a FREE consultation at (800) 718-4658 or contact us if you or a loved one totaled a leased vehicle in an accident caused by another driver. An experienced car accident lawyer at our firm can pursue a personal injury claim on your behalf seeking compensation for medical bills, lost wages, pain, suffering and more, and we will charge you no legal fee unless and until we win your case.
Key Takeaways
- Insurers generally pay the actual cash value (ACV) of totaled cars to leasing companies, not drivers.
- Lessees may owe the difference out of pocket when insurance payouts are less than the remaining lease balance.
- GAP coverage may cover some or all of the difference between the insurance payout and the remaining lease balance.
- Lessees may have separate personal injury claims for medical costs, lost wages and other losses when other drivers caused accidents.
Table of Contents
- Who Pays When a Leased Car Is Totaled in California?
- When Does a Car Get Declared a Total Loss?
- What Is GAP Insurance and Do You Need It?
- What Might the Lessee Still Owe After the Claim?
- Steps to Take After Totaling a Leased Car
- Can You Sue the At-Fault Driver After a Leased Car Total Loss?
- What Damages Are Available in a Leased Car Accident Claim?
- When to Contact a Car Accident Attorney
- FAQs
Who Pays When a Leased Car Is Totaled in California?
Insurers generally pay totaled vehicles’ ACVs directly to leasing companies who hold titles to vehicles under California DMV registration rules for leased vehicles.
Other drivers who cause accidents with leased vehicles see their liability insurance responsible for property damage payouts. Lessees’ own collision or uninsured motorist coverage may step in when other drivers are uninsured or underinsured.
Lessees generally do not receive insurance checks directly. Lessors typically apply proceeds to outstanding lease balances.
Injured lessees whose crashes are caused by other drivers should consult with a California car accident lawyer to see if they qualify to recover financial compensation for medical bills, lost wages and more.
When Does a Car Get Declared a Total Loss?
Vehicles are totaled when they are damaged beyond repair or their repair costs exceed their values.
Vehicles are generally considered totaled in California when the cost of repairs plus the vehicle’s salvage value equals or exceeds the vehicle’s actual cash value before the accident.
Insurers must notify lessees and explain the basis for the ACV figure in writing once a total loss determination is made.
California gives policyholders a 35 day window to challenge a valuation after receiving a settlement offer. Insurers must reopen files under 10 CCR section 2695.8 when drivers cannot locate comparable vehicles at the offered gross amount.
What Is GAP Insurance and Do You Need It?
GAP, or Guaranteed Asset Protection insurance, covers the difference between the ACV paid by the insurer and the remaining balance owed on the lease.
This difference exists since vehicles can lose a significant portion of their value just months after purchase.
The CFPB explains that standard auto insurance only pays up to the value of the vehicle. This means the remaining lease balance is the lessee’s responsibility.
Modern leases typically include GAP insurance automatically. Some lessors, however, require lessees to purchase GAP insurance separately, or even leave lessees entirely exposed.
California Civil Code section 2985.8 requires that any lease making a lessee liable for the gap amount to include a prominent first page notice that states: “THIS LEASE PROVIDES THAT YOU ARE LIABLE FOR THE GAP AMOUNT.”
What Might the Lessee Still Owe After the Claim?
Certain charges often remain, even when leases include GAP insurance or lessees purchase it separately:
- You are responsible for paying any insurance deductible prior to the claim being settled
- Past due payments
- Fees listed as exclusions in the GAP certificate
California law generally treats insurance payouts and deductibles as part of vehicles’ values when determining what lessees still owe under leases when leased vehicles are totaled and the required insurance is in place.
Lessees may owe thousands of dollars even after their vehicles are gone when leases do not include GAP insurance and the insurer’s payout falls short.
A California personal injury attorney may be able to pursue these out-of-pocket costs, including uncovered lease obligations, by pursuing a personal injury claim when a crash is caused by another driver. Recoverability depends on case-specific facts.
Down payments and customization costs are typically not recoverable after you total a leased vehicle.
Steps to Take After Totaling a Leased Car
Call 911
Police reports establish crashes’ facts. They can serve as important evidence for insurance claims and subsequent legal actions.
Exchange Information and Document the Scene
Get the other driver’s insurance and contact information. Take pictures of:
- Vehicle damage
- Road conditions
- Skid marks
- Traffic signs
- Visible injuries
Seek Medical Attention
Seek medical attention as soon as possible, even if injuries aren’t immediately apparent.
Some injuries don’t show symptoms immediately after crashes. Delays in treatment may give an insurer grounds to question or reduce the value of your injury claim.
Notify the Leasing Company
Report the accident to the leasing company as soon as you can.
The lessor might have specific requirements about:
- Vehicle storage
- Inspections
- Salvage handling
- Approved repair facilities
File Insurance Claims
Report the crash to your insurer as soon as possible.
File a claim through the at-fault driver’s liability insurance carrier if another driver caused the crash.
If you were seriously injured in the accident, it is recommended that you have a personal injury lawyer file a claim through the at-fault driver’s insurance company for you.
Avoid Giving a Recorded Statement
Do not provide a recorded statement to the at-fault driver’s insurer before you speak with a California car accident attorney. An insurance company may be able to reduce the value of or deny your claim if you say the wrong thing to them.
Review Your Lease Agreement
Determine if your lease includes GAP coverage or a deficiency waiver. Identify any fees, obligations or early-termination provisions which may apply after a total loss.
Preserve All Records
Keep copies of:
- The police report
- Repair estimates
- Medical records
- Insurance correspondence
- Lease documents
- All written communications with the leasing company
Can You Sue the At-Fault Driver After a Leased Car Total Loss?
Yes. Lessees can pursue personal injury claims separate from property damage resolution with leasing companies when other drivers cause crashes. The two claims will be independent claims.
A California car accident attorney can handle negotiations with the at-fault driver’s insurance company, collect evidence to establish fault, and calculate your losses.
What Damages Are Available in a Leased Car Accident Claim?
The value of your claim will depend on injury severity, documentation and the specific circumstances of your accident.
A California car accident attorney can identify your recoverable losses, including costs you may not realize you can be compensated for.
Our law firm can help you seek financial compensation for:
Medical Bills
All past and future medical expenses related to your accident, including the costs of things such as surgeries, hospital stays, ER visits, doctor visits, medications, medical treatments, medical testing, rehabilitation, physical therapy and more.
Lost Wages
Wages you’re not able to earn because of being hurt too badly to work or having to take time off of work to attend medical appointments.
Loss of Earning Capacity
Loss or reduction of earning capacity caused by a disability that was caused by your accident.
Out of Pocket Expenses
Out of pocket lease costs not covered by GAP insurance coverage or a car insurance company, such as monthly payments.
Property Damage
Property damage that is not otherwise reimbursed.
Pain and Suffering
Physical pain, mental suffering, emotional distress and loss of enjoyment of daily activities.
Wrongful Death
Compensation for:
- Funeral and burial costs
- A loved one’s medical bills incurred prior to their passing
- The loss of a loved one’s income, household services, love, companionship and spousal benefits
When to Contact a Car Accident Attorney
Call us today for a FREE consultation at (800) 718-4658 or contact us if you or a loved one was injured or killed in an accident caused by another driver.
We can seek financial compensation for you and we will charge you no legal fee unless and until we win your case.
Call us today.
FAQs
What If the Insurance Payout Does Not Cover the Full Lease Balance?
The lessee is responsible for the difference when there is no GAP coverage and the payout falls short.
A California car accident attorney can seek compensation for that uncovered balance when the crash is caused by another driver.
Can a Lessee End the Lease Early After a Total Loss?
In total loss situations, leases are typically terminated as part of the settlement process instead of being terminated voluntarily. Lease termination happens when an insurance company pays the actual cash value (ACV) of the vehicle to the leasing company.
California Civil Code section 2987 governs how the “realized value” is calculated in this scenario. It requires the lessor to credit any security deposit against the remaining liability of the lessee.
Early termination fees are typically charged regarding early voluntary termination outside of the total loss framework. This is determined by the contract’s terms.
How Long Do I Have to File a Leased Car Accident Claim?
California CCP section 335.1 sets a two-year statute of limitations for personal injury claims which arise from vehicle accidents.
This deadline begins at the date of the crash. It does not pause while the lease or insurance claim is being resolved.
