That dealership needs to learn the difference between minimum legal liability and doing right by the customer. The fact that it took GM and a different dealer from 1,000 miles away getting involved is pretty disgusting.
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Different state laws are different, but OGG basically has it right. It appears liability was established and the issue was the level of damages (read, amount of money) paid out on the claim. Similar to Allstate (and other insurers) for years messing with people that were hurt due to a clear liability situation, such as rear end accident. (basically, you can't run into who is is established in the lane in front of you. Liability is clear if you do), but nonetheless disputed liability repeatedly in the court system (losing at mandatory arbitration, then getting a new trial de novo aka new trial under the rules) thus pushing the cost up for the poor injured people and trying to force a settlement for less, when liability was never an issue in the first place. Granted, some plaintiffs would run up costs but the vast majority follow a pretty standard course of treatment. And anyway, if the insurer wants to challenge the level of care, but liability is clear, why continue to contest liability? Judges started to award attorneys fees and sanctions as a result. I don't do a lot of PI any more, that but that was how it was back when I lived in the city.
Likewise, here the issue in the property damage claim is what is the replacement value of the used car. The insurers tend to be very actuarial about this number, using their own value books or whatever databases concerning used car values. Those of us that own quirky classic cars such as old Alfas or old BMWs, etc., know that it is very difficult to get good replacement value for your car if it is totaled. This is a more specialty car and so it is always hard to get full value.
So yeah, OGG has it right. The dealer maybe was legally only on the hook for a like used vehicle, but probably should have stepped up and avoided this PR headache. The higher ups at GM saw the problem and stepped it up to stop the bleeding. Always seemed to be that way. The bottom level adjuster would hold the line and see if the claimant would push it. It always seems like it takes pushing the issue past the bottom rung adjuster to a person with better decision making power to get a case properly resolved, that being, if it is a higher level case. In this case, it seems it would be.