Rhode Island Bill Proposes Increasing Vehicle Total Loss Threshold to 85%

The Rhode Island legislature is considering new bills that propose increasing the vehicle total loss threshold to 85%. Currently, under state insurance regulations, insurers cannot declare a vehicle a total loss if repair costs are 80% or above of its fair market value, a threshold set in 2025 due to prior legislative amendments.

The proposed changes, encapsulated in SB 3115 and HB 7866, have successfully passed through both legislative chambers and now await the decision of Governor Dan McKee. Senator Hanna Gallo, who introduced the Senate bill, stressed the significance of permitting long-term vehicle owners to retain their cars. She stated, “This act would allow a consumer to choose whether their motor vehicle should be designated a total loss when the cost to rebuild their motor vehicle is less than 85% of the fair market value,” emphasizing the financial burden imposed by the current vehicle prices.

The Rhode Island Governor’s Insurance Council has expressed opposition to the bills, urging a gubernatorial veto. The council warns that these measures could lead to increased vehicle insurance costs for residents. Chairman Travis McDermott commented, "While inflation is soaring, these bills risk moving the state in the wrong direction by increasing vehicle repair costs, driving insurance claim expenses higher, and placing additional pressure on auto insurance premiums."

The council argues that enforcing a higher threshold would compel insurers to execute more expensive repairs instead of opting for total loss declarations, potentially inflating annual repair expenditures by nearly $1 million statewide. They also highlighted that Rhode Island already endures higher car insurance and repair costs compared to most other states.

Concerns were further voiced by Jennifer Morrison, the council's secretary, suggesting that repairing significantly damaged vehicles might lead to lengthy repair processes and increased costs, potentially compromising vehicle safety. The Senate bill has faced resistance from insurance lobbyists during recent committee hearings.

Chris Stark of the Rhode Island Insurance Federation noted that the industry had previously settled on an 80% threshold, considering it a compromise. Stark warned about the potential safety risks and cost implications that raising the threshold to 85% could entail. Jonathan Schreiber from the American Property Casualty Insurance Association highlighted that such a change would position Rhode Island as a regulatory outlier, with very few states adopting thresholds above 80%, noting that only Colorado and Texas currently exceed the proposed threshold.