What Happens When an Insurance Company Abandons Salvage on a Total Loss?

by Justin Petty, Petty Details

Okay, let’s dive right into the question this month…

A Dallas collision center asks: “What happens if an insurance company abandons salvage on a total loss? And who is actually responsible for the charges when that happens?”

That is a great question, and this issue is something we see all too frequently. So, let’s break it down and see who is responsible for what…I must start with a hard truth that most shops and vehicle owners don’t want to say out loud: On paper, the vehicle owner owes the shop for all the work and charges the shop incurs, while the insurance company owes the shop nothing. The owner signed the repair authorization, authorized the work and incurred storage, tear-down and administrative charges. From a pure contract standpoint between the shop and the customer, that bill belongs to the owner.

But wait, doesn’t the owner have an insurance policy that covers damage to their auto? If so, isn’t that policy supposed to cover reasonable and necessary expenses arising from a covered loss? Yes, it is! This entire abandonment issue exists in the gap between those two realities. The owner is responsible, but the insurance company is supposed to pay. If neither the owner or the carrier will pay for the associated repair costs, the vehicle sits at the shop, effectively abandoned.

This situation does not just appear out of nowhere – it is created by the way the claim is handled. What we typically see is that the insurer writes an initial estimate, normally based on visible damages only, which of course undervalues the actual cost of repair (first delay – waiting on initial estimate). The shop relies on that estimate and begins the process. Tear-down reveals additional damage. Supplements are submitted. The vehicle remains at the shop (second delay) while the insurer evaluates, re-evaluates and ponders making a final decision. Time passes, and naturally, costs begin to accumulate.

Only after all that does the insurer decide the vehicle is a total loss. By that point, the charges already exist. And more importantly, they exist because the insurer handled the claim as repairable until it became inconvenient to continue doing so. That timing matters, because those charges are not incidental – they are the direct result of the insurer’s decisions during the adjustment process.

Just a quick note about something that should be obvious…When the carrier formally deems the vehicle a total loss, they will ask the owner to release the vehicle to them, and when that happens, the owner should immediately confirm with the shop that the vehicle is released to the carrier. I’ve seen owners being advised (improperly) not to release their vehicle, but unless there is a special circumstance, that simply creates a delay, and that delay would be seen as the owner’s responsibility. Unless you are retaining your vehicle’s salvage or have some other unusual circumstance, release the vehicle when asked by the carrier, period.

When shops say a carrier is “abandoning salvage,” what they are usually describing is not a formal legal concept – it is a practical breakdown in responsibility. The insurer delays picking up the vehicle, avoids clearly accepting ownership or attempts to shift responsibility back onto the owner or the shop. In some cases, communication just stops altogether. But the vehicle itself is not really the issue. The issue is that accepting the salvage means accepting the financial consequences tied to it (shop charges must be paid to obtain the salvage).

If the insurer takes the vehicle, they are acknowledging the full timeline of the claim, including the decisions that led to the charges. If they delay or avoid that step, they create leverage. Storage continues to accrue. The situation becomes uncomfortable. And eventually, pressure builds – usually on the shop and the policyholder, not the carrier.

In some cases, that’s just poor internal communication. Estimating, total loss and salvage vendors are not on the same page. Files get closed prematurely. Assignments are delayed. But in other situations, it’s hard to ignore the financial incentive. The longer the carrier avoids committing to the outcome, the more pressure shifts onto someone else to absorb the cost.

We have already seen a version of this play out in a courtroom.

In Joseph Wayne Collins v. State Farm Mutual Automobile Insurance Company, Cause No. 2021-220, 4th Judicial District Court of Rusk County, Texas, State Farm didn’t abandon the salvage. They took a different approach. They picked up the vehicle, paid the shop to obtain possession and then reduced the total loss settlement paid to Mr. Collins by amounts they determined were not reasonable or necessary.

So, instead of avoiding the charges entirely, they paid them – and then attempted to recover those amounts by reducing what they owed under the policy.

That approach was challenged, and it did not hold up. A jury found that State Farm failed to comply with the insurance policy and engaged in unfair or deceptive acts or practices. The damages awarded included amounts that had been wrongfully deducted from the policy proceeds, along with additional expenses incurred by the policyholder as a result of how the claim was handled.

It is also important to recognize that Robert McDorman (Auto Claim Specialists) served as the expert in that case. His role was critical in establishing that the charges at issue were not arbitrary – they were reasonable, necessary and directly tied to the insurer’s handling of the claim. That case is significant because it confirms what many shops and policyholders already suspect: this is not a gray area when you actually break it down and apply the facts.

Everything comes back to one core question: were the charges reasonable and necessary as a result of the covered loss?

If the answer is yes, then those charges are part of the loss. They do not become separate simply because they arose during the adjustment process instead of appearing on the initial estimate. The insurer cannot separate the physical damage from the process used to evaluate that damage. If their handling of the claim caused additional costs to be incurred, those costs do not just disappear. They have to go somewhere.

And too often, the attempt is to push them onto the policyholder.

This is where understanding the type of claim becomes critical.

In a first-party claim, meaning a claim under the policyholder’s own insurance, there is a contractual relationship. That contract provides tools to resolve disputes, and one of the most important – yet most misunderstood – is the Appraisal Clause.

As of January 2026 (thanks again, Robert!), all Texas auto policies contain an appraisal provision that allows either party to demand an appraisal when there is a disagreement over the amount of loss. That phrase is broader than many people realize. It does not just apply to the value of the vehicle itself – it can also apply to how that value is calculated, including deductions, offsets and charges that the insurer refuses to recognize.

If an insurer reduces a total loss settlement by claiming certain charges are not owed, that is a dispute over the amount of loss. Appraisal provides a structured way to resolve that dispute. Each side selects an appraiser, and if those appraisers cannot agree, an umpire is brought in to make the final determination.

What makes appraisal powerful is that it removes unilateral control from the insurer. The decision is no longer based solely on internal guidelines or cost containment practices – it becomes a question of what is reasonable and necessary under the circumstances, evaluated by independent parties.

That does not guarantee a perfect outcome, but it creates a level playing field that does not otherwise exist.

In addition to appraisal, the policyholder can also pursue remedies through the Texas Department of Insurance (TDI) when the issue involves claim handling practices. Delays, failure to conduct a reasonable investigation or failure to attempt a fair settlement when liability is reasonably clear can all trigger regulatory scrutiny. While a TDI complaint does not resolve the financial dispute directly, it can create pressure and accountability that might not otherwise be present.

And when those issues rise to a higher level, the policyholder may pursue claims for breach of contract or unfair claims practices, as was done in Collins. That is a more significant step, but it is sometimes necessary when the handling of the claim crosses the line.

In a third-party claim, the situation changes entirely.

There is no contract between the claimant and the insurer. There is no Appraisal Clause. There is no direct policy-based obligation. The insurer’s duty runs to their insured, not to the third-party claimant.

That means if the carrier refuses to pay charges related to the loss, the dispute becomes one of liability rather than contract. The remedies are limited to filing suit against the at-fault party, pursuing recovery in small claims court or escalating the matter through litigation.

That is a more difficult position, and it often requires more time and expense to resolve. It also means that the leverage the policyholder has in a first-party claim simply does not exist in the same way.

At the center of all of this is the policyholder. They are the one who signed the repair authorization. They are the one the shop will look to for payment. And they are the one who expected their insurance policy to cover the costs associated with the loss.

What they are really fighting is not a disagreement over a vehicle. It is a dispute over costs created by the insurer’s handling of the claim.

Storage, tear-down, administrative time and delays are all part of that equation. Whether the insurer abandons the salvage or picks it up and then deducts the charges after the fact, the underlying objective can often be the same: limit exposure to those costs.

The bottom line is that “salvage abandonment” is not really about the vehicle. It is about avoiding responsibility for the financial consequences of how the claim was handled.

On paper, the owner owes the shop.

Under the policy, the insurer should be paying what is reasonable and necessary as a result of the covered loss.

When those two do not align, the burden gets pushed onto the policyholder – unless they understand how to push it back.

And as the Collins case – supported by the expert analysis of Robert McDormann – demonstrates, when that issue is properly challenged, the outcome does not always favor the insurance company.

Want more? Check out the May 2026 issue of Texas Automotive!