Total Loss Insurance Claims: Do I Need to Sign a Power of Attorney?

After an accident, you may hear those terrible words from your insurance company: Total loss. In most cases, if the inspector declares your car a total loss, the insurance company will cut you a check for the car’s value, and that is the end of the process.

At this stressful moment, the insurer may ask you to sign two documents, a Bill of Sale and a Power of Attorney. What is a power of attorney, and why does your insurance company need one just to complete your insurance claim? Do you need to sign it? What happens if you don’t?

The short answer is yes, you do need to sign the power of attorney to process your claim. If you’re cautious, there’s no reason to worry about any other legal problems.

Why the Insurer Needs A Power of Attorney

A Power of Attorney (POA) gives another person (your agent) the ability to act on your behalf. You can create a POA for almost any situation. The most common use is a durable power of attorney used in living wills. In an insurance situation, the company needs a power of attorney to complete your car insurance claim.

After an accident, the insurance policy pays out the fair market value of the vehicle. That is the end of your ownership of the vehicle, but not the insurance company’s. To dispose of the car, they must have legal ownership of the vehicle and permission from the original owner to transfer title.

The power of attorney form allows the insurer to transfer the title to a new owner, offer the wreck in an auction, or sell it to a salvage yard. Along with the bill of sale, the POA allows the insurer to remove the totaled vehicle from your home or the auto shop and dispose of it without needing to obtain your written permission every time it changes hands.

What a Power of Attorney Lets the Insurance Company Do

A limited power of attorney gives the insurance company the ability to act for you to transfer ownership of your car. Normally, when you sell your car, you sign a document or a section of the title that surrenders your rights to the car, allowing the new owner to submit a request for a new title in their name.

When your car is totaled, what happens next depends on whether you still owe the bank or lienholder or if you own the car free and clear. A POA lets the insurer handle the details of disposing of your car, paying for any remaining loan balance, and other state paperwork, without having to involve you in the process. The POA lets the insurance company:

• Sign the title transfer documents
• Execute the bill of sale from you to the insurance company
• Sign the odometer disclosure form
• Obtain a duplicate title if necessary
• File all necessary DMV paperwork
• Transfer title to a salvage yard or auction company

The insurance settlement and any money from the sale or salvage of the vehicle pay off your remaining loan. If that sum does not cover the remaining loan amount, you’ll have to continue paying until you pay the loan in full. Your attorney can explain how this works and how to negotiate an accord and satisfaction after a collision.

What a POA Does NOT Let the Insurance Company Do

Unlike a general power of attorney, which gives your agent broad power to act on your behalf, car insurance POAs give the insurer a narrow scope of authority. A POA should only give the company the ability to transfer the title and dispose of your car. It should not:

• Let the insurance company access your finances or bank accounts
• Involve any other damaged property
• Let the company make decisions about any other property
• Continue indefinitely or give the company authority in other matters besides the title transfer
• Have any blank spaces the company will “fill in later,” or have vague terms like “act in my best interest.” The POA should spell out exactly what the insurance company can and cannot do
• Waive any rights besides the ones listed in the Power of Attorney document

Make sure either you or your attorney confirms that the POA you’re signing doesn’t contain any of these provisions.

Limiting your POA

It’s a good idea to have an attorney review the POA before you sign, even if you don’t have a lawyer handling your insurance claim. If you’re doing this yourself, look over the document carefully, and watch out for the following:

• Your vehicle’s VIN number should appear on the document in all relevant places
• There should be specific start and stop dates
• The document should specifically state that it only allows the agent to handle title transfer or DMV matters and grant no other powers
• It should be very short, as an insurance POA that’s longer than one or two pages is a red flag that something is amiss

For example, the California DMV POA form is half a page long. It contains blanks for the vehicle’s VIN, make, model, and license plate number (and the engine number for a motorcycle). The only language on the form states that:

“I [name of signer] appoint [name of agent] as my attorney in fact, to complete all necessary documents, as needed, to transfer ownership as required by law.”

By contrast, the Nevada DMV form states the same thing, albeit in more “legalese” and confusing language. It says that the signer makes the insurance company the:

“true and lawful Attorney in Fact to sign in the name, place and stead of the undersigned, any and all documents, including but not limited to Certificate of Title and/or Vehicle Registration Certificate, issued by the Department of Motor Vehicles of the State of Nevada (NV DMV), or issued by another state to the extent authorized by that state’s law and within the scope of the NV DMV’s authority to require and/or accept such signed documents, covering the motor vehicle described above, in whatever manner necessary to transfer any Registration Certificate and/or secure, transfer, and/or release any Certificate of Title. Granting and giving unto said Attorney in Fact, full authority and power to do and perform any and all acts authorized hereby, as fully to all intents and purposes as the grantor might, or could do if personally present, with full power of substitution.”

The key sentence is in bold. Otherwise, Nevada’s document is nearly identical to California’s.

California and Nevada both require wet-ink signatures for a valid power of attorney. Some states may require notarization or other verification. Check your state laws for the requirements. The California document expires once the insurer transfers ownership to the new owner. You can specify an end date if you know you will be able to complete the transfer process by that date.

Signing the POA

Before you sign any document from an insurance company, you may want to get legal advice. The POA and Bill of Sale are a part of the insurance claim settlement. However, you may need to sign a POA to begin or finalize the settlement process. If you’re unsure about where the POA should fall in the settlement procedure, consider talking to an attorney.

If you’re not satisfied with the settlement amount or are unclear on where the money is going, do not sign the POA until someone explains it to you. The settlement should look something like this:

• The Actual Cash Value (ACV) of the vehicle (this is what you’d get if you could sell the car as-is without owing anyone)
• Minus the insurance deductible, since you won’t get that back
• Minus either the salvage value (unless you keep the car) or the amount due on the loan (if you still owe on the car)

The ACV minus the deductible and the loan amount is what you’ll get from the insurance company.

You can keep the car and sell it for salvage yourself, but that value comes out of your settlement. If you choose that option, the insurance company will deduct that amount from a settlement check. The bank gets paid first, so you don’t have to pay for a wrecked car. If the math doesn’t add up, do not sign the POA.

What Happens After You Sign the POA?

After you sign, the insurance company will transfer all documents and prepare the financial transfers. Remove your personal belongings from the vehicle as soon as possible, as the salvage company or auction agents will arrive to remove the wreck sooner rather than later. Once you sign, the car is no longer yours.

The DMV should send notice of title transfer. You may want to check on this in about ten days, since you are liable for the car until the title transfer, and the DMV may not notify you of the change. When you get the notice, keep a copy for your records.

If You Don’t Want To Sign (Or Cannot)

You are not legally required to sign the POA, but you have few other options at this point. As a practical matter, signing is necessary to complete the total loss settlement process.

It can be complicated signing over the POA if you are not the sole person on the title. If the settlement will not pay off the outstanding loan, you may want to keep the wreck and make your own arrangements for payment.

In some states, not signing means that you cannot receive the settlement payment, so consult an attorney before taking this step. If you can refuse to sign, consider the following to help determine if it’s worth the complications:

• You’ll have to handle the title transfer and sale to a salvage yard or auction house yourself
• Your state law may not permit the private sale under these circumstances
• You will be liable for transporting the wreck from wherever it is now to wherever you sell it

If the language of the POA is what is making you uncomfortable, you can try asking for changes to the POA itself. Most insurance companies use the state vehicle power of attorney form that is applicable to their location. These forms already limit the insurer’s ability to transfer title and usually require a separate form to obtain odometer readings.

If you want to negotiate changes to a POA, such as additional conditions or a definite expiration date, contact an attorney. They can negotiate terms with the insurance company and avoid delays or a flat no from the insurer.

Get Legal Advice From a Personal Injury Attorney

It is normal to have reservations about signing any legal document. You should always get legal advice when dealing with insurance companies after a car accident and during the settlement process. To get your legal questions answered during the claims process, contact a personal injury lawyer or motor vehicle attorney in your area to discuss the matter. POA requirements, forms, and settlement processes vary significantly by state, so it’s important to talk to someone licensed in your state.