I operate a rental car company, and I am currently dealing with a dispute involving a renter insured through USAA.
The renter rented my McLaren 570S Spider for 1 day and was involved in an incident where the vehicle was backed into an object, resulting in significant engine damage. The initial body shop inspection determined the vehicle to be a total loss.
Approximately three months later, USAA issued a total loss settlement offer of roughly $143,000 (including tax). I rejected this offer because the comparable vehicles used in their valuation were materially inaccurate and undervalued, should be around $165,000~. At my request, the renter attempted to invoke the appraisal clause contained in their USAA policy. USAA denied this request, stating that the appraisal clause could not be invoked for a rental vehicle—despite no such exclusion appearing anywhere in the policy language.
We retained legal counsel, who engaged directly with USAA. Despite months of correspondence and dispute, USAA refused to revise their position or settlement amount. After approximately six months of disagreement, USAA took possession of the McLaren in August 2024 and transported it to Copart, where it remained until January 2025.
During this period, USAA conducted their own inspection through a facility of their choosing and subsequently reversed their original position, stating that the vehicle was not a total loss and that damages amounted to only $45,000. USAA issued payment for $45,000 and returned the vehicle.
Upon return, it was discovered that the vehicle had been stored outdoors with the convertible top down for approximately six months in Washington State weather. As a result, the vehicle suffered extensive additional damage, including destroyed interior leather, fried electronic systems, and missing components such as the carbon fiber diffuser and carbon fiber engine cover. These damages did not exist prior to USAA taking custody of the vehicle.
USAA later offered an additional $5,000 to address the electrical damage, which was wholly inadequate given the scope of loss and deterioration caused while the vehicle was under their control.
All settlement offers were rejected. Based on USAA’s refusal to honor the appraisal clause, shifting loss determinations, prolonged possession of the vehicle, and negligent handling resulting in substantial additional damage, we have initiated litigation alleging bad faith claims handling. Our legal counsel has advised that the bad faith claim—particularly regarding the appraisal clause denial—is exceptionally strong.
I may have forgotten some details, but this really just sums it up. I'm just curious what do you guys think, slam dunk case for bad faith, I know I should just follow what my lawyer says however I'm just seeing if anyone else has the same experience?
Right now we're suing for an additional $120,000 of the total loss and bad faith x 3.
Edit: Another renter crashed my Audi R8 back in July & they have USAA to. They offered me $114k (bad comps again with a 0.67/mile reduction. I'm going thru the asme issue with the again, so I may have another bad faith claim on my hands.
Edit2: Never had this issue with any other insurance agency, only USAA thus far to date.
Edit3: I forgot to menton, the Mclaren 570S Renter previously totaled our GTR 2 years prior. If they have insurance we rent to them. I think this may be the reason his insurance is trying to lowball us because they did not drop him originally.
USAA Claim – Rental Car – Thoughts
byu/CryptoInstinct inInsurance
Posted by CryptoInstinct
2 Comments
Do you not have your own insurance that would handle the loss and then subrogate?
As to the appraisal clause, if you want to share the exact language from the USAA policy, then you would likely have a better chance of someone chiming in with thoughts. If the language relies on defined terms, then sharing those definitions would help.
I have access to a Progressive policy. In the appraisal clause, it relies on the definition of “you” which is the named insured and spouse. There is no mention of owner of a rental vehicle. If USAA’s language mirrors that of Progressive’s, USAA likely has a strong contractual argument to deny the appraisal clause to you.
I would suggest focusing on making sure that you have locked down the cost to repair the accident damages along with those caused by USAA’s decision to allow the vehicle to be exposed to the elements. If the documented damages are high enough to warrant a total loss, then push it in that direction. While you do not have the appraisal clause, now that you are in litigation, discovery can be used to document the vehicle’s value.
After litigation with USAA, if you are still not made whole, I am assuming that the rental contract allows you to recover admin fees, loss of use, diminishment of value from the renter. While collection of that money will likely be a challenge, it is at least another avenue to pursue.
You also might want to consider following the model used by many of the large rental carriers. They do not immediately leverage the Collision/Comprehensive coverage of the renter. Instead, they pay for the repair/total of the vehicle and then look to the renter’s coverage to recover damages through subrogation. It is a lot harder for a carrier, like USAA, to scrutinize the ACV v Repair decision if it was not involved in the process. As long as you provide objective documentation to support your subroutine demand, my experience is that it will not be denied. Just food for thought.