California Man Sues BMW For Taking Equity Over His Totaled M5 Competition

[TXSTYLE]

Interesting....

https://www.carscoops.com/2022/06/ca...5-competition/

Alexander Russell signed a 36-month lease for a 2019 BMW M5 Competition in October 2019. At the time, the car was worth $115,816. Auto News reports that Russell was involved in a crash on February 14, 2022 that left the super sedan a total loss.

A lawsuit filed in the U.S. Central District of California asserts that the lease’s residual value was $81,589.57 but that the vehicle insurer, Safeco, had set the car’s market value at $106,178. Russell claims he should have been left with $24,589.40 in equity after the balance of the financing was repaid.

[rcracin]

Kind of makes sense. It's his insurance and I believe he has the option to buy the car out of the lease, right?

Similar to people who leased cars pre pandemic and their buy out was less than market value. Easy money to be made.

[DocL]

Originally Posted by rcracin

Kind of makes sense. It's his insurance and I believe he has the option to buy the car out of the lease, right?

Similar to people who leased cars pre pandemic and their buy out was less than market value. Easy money to be made.

Then he should have bought it off the lease early if he wanted the equity. The car wasn’t his, he was only renting

if You rented a house that burned down would the insurance company give you more?

[kring]

It is interesting because it is HIS insurance policy. Not BMWs. So technically he was cut the check, and then BMW balance was paid.. I might agree that it’s his policy, his entitlement.

It’s the same way that I can take a life insurance policy out on anyone, and if they die, I get paid. I am not sure BMW has any legitimate case here on why they kept the proceeds from his insurance policy.

[rcracin]

Originally Posted by DocL

Then he should have bought it off the lease early if he wanted the equity. The car wasn’t his, he was only renting

if You rented a house that burned down would the insurance company give you more?

Your analogy would be comparable if you're renting the house with a stated value to purchase at any point during the lease or when the lease ends and also if you as the lessee carries the insurance policy.

[LuvMyE92]

It's all moot. He does not own the car.

[freakystyly]

He's doing it wrong, should have gotten a STD in the back seat instead.

[ryan stewart]

Originally Posted by rcracin

Your analogy would be comparable if you're renting the house with a stated value to purchase at any point during the lease or when the lease ends and also if you as the lessee carries the insurance policy.

Technically but like said until you purchased it you still don't own it, you're still just renting it.

He would have had to buy out to have ownership stake.

[DETRoadster]

I'm sure there's language buried deep in the lease documents that no one reads, stating that YOU must provide insurance on the car to protect BMW's interest.

My wife is in a commercial lease for the building her business is in. She's required to carry a $5M insurance policy on the building to cover any damages she might cause. The lease is very clear that any damages are to be covered by her policy to protect the landlord's property and investment. She has zero claim to any equity in the building. I suspect the same is true for the BMW lease holder.

[zx10guy]

Originally Posted by DETRoadster

I'm sure there's language buried deep in the lease documents that no one reads, stating that YOU must provide insurance on the car to protect BMW's interest.

My wife is in a commercial lease for the building her business is in. She's required to carry a $5M insurance policy on the building to cover any damages she might cause. The lease is very clear that any damages are to be covered by her policy to protect the landlord's property and investment. She has zero claim to any equity in the building. I suspect the same is true for the BMW lease holder.

Also the same with homeowners where if you don't have enough equity stake in the house in relation to the mortgage, you have to take out PMI (private mortgage insurance). Where PMI pays out to the bank any deficiencies if you default on the loan.

[kring]

Originally Posted by LuvMyE92

It's all moot. He does not own the car.

I don't own you, but I can have an insurance policy on you and there's nothing you can do about it and I get paid if something were to happen to you. He OWNS the policy, and therefor the payout... FULL STOP, no discussion... now he still has obligation and likely a LEAN on the car so that would need to be fulfilled for the outstand balance. his insurance is to make HIM whole. this isn't gap insurance, it's the opposite. the gap is more than closed by the insurance proceeds and therefore, it can only be his.

Originally Posted by ryan stewart

Technically but like said until you purchased it you still don't own it, you're still just renting it.

He would have had to buy out to have ownership stake.

That would make it a cut & dry case; but the lease may be still valid as entitled to the proceeds of the insurance.

Originally Posted by DETRoadster

I'm sure there's language buried deep in the lease documents that no one reads, stating that YOU must provide insurance on the car to protect BMW's interest.

It's not a question of If he needs to hold insurances, it absolutely is in the contract that insurance is required, and in most states it's a legal requirement and a requirement to register the vehicle.

The question is with the insurance HE signed up for and pays... why would he NOT be entitled to the money... I believe 100% he is entitled to the full amount as it's his policy... ownership is irrelevant. Now BMW would have a LEAN on the car and leans are required to be paid first... his LEAN is for the remaining balance... which is ALL that BMW is entitled to, the amount of the LEAN. after that, any remaining balance would absolutely be his. BMW's interest stops at the the cars value, anything beyond that is his interests.

Especially if the cost of cars and replacement have gone up - that would offset his loss or negative position in trying to replace like-for-like.... the whole point of the insurance policy is to be whole in the end... BMW stole his money.

fairly certain his case is rock-solid and he'll win it outright... might even get compensation.

What we don't know - is there more weird California laws or something shady in the lease fine print that says BMW is entitled to more and you waive your right... which I think could then also be challenged to the legality of that type of fine print.

[Run Silent]

So in a normal world - if he leased the car and had insurance on it and it was totaled - and the balance on his lease contract (residual plus remaining payments) was $80,000 and the insurance company valued the car at $60,000 - he would owe the remaining $20,000 to BMW financial, right?

Why wouldn't the other way be the same?

If his remaining payments and residual was $80,000 and the insurance company valued the car at $100,000 - wouldn't he be owed $20,000?

Pretty shit if the door doesn't swing both directions.

Just another reason I don't borrow money, lol.

[rcracin]

Originally Posted by Run Silent

So in a normal world - if he leased the car and had insurance on it and it was totaled - and the balance on his lease contract (residual plus remaining payments) was $80,000 and the insurance company valued the car at $60,000 - he would owe the remaining $20,000 to BMW financial, right?

Why wouldn't the other way be the same?

If his remaining payments and residual was $80,000 and the insurance company valued the car at $100,000 - wouldn't he be owed $20,000?

Pretty shit if the door doesn't swing both directions.

Just another reason I don't borrow money, lol.

This is the correct expectation to me and expectation is all we can discuss here absent a thorough reading of the contract.

[TXSTYLE]

Originally Posted by kring

It is interesting because it is HIS insurance policy. Not BMWs. So technically he was cut the check, and then BMW balance was paid.. I might agree that it’s his policy, his entitlement.

It’s the same way that I can take a life insurance policy out on anyone, and if they die, I get paid. I am not sure BMW has any legitimate case here on why they kept the proceeds from his insurance policy.

This is exactly how I see it and thought while reading the article.
Not to mention there are quite a lot of owners joining in on the class action suit. So it's definitely NOT isolated.

[TXSTYLE]

Originally Posted by kring

I don't own you, but I can have an insurance policy on you and there's nothing you can do about it and I get paid if something were to happen to you. He OWNS the policy, and therefor the payout... FULL STOP, no discussion... now he still has obligation and likely a LEAN on the car so that would need to be fulfilled for the outstand balance. his insurance is to make HIM whole. this isn't gap insurance, it's the opposite. the gap is more than closed by the insurance proceeds and therefore, it can only be his.



That would make it a cut & dry case; but the lease may be still valid as entitled to the proceeds of the insurance.

It's not a question of If he needs to hold insurances, it absolutely is in the contract that insurance is required, and in most states it's a legal requirement and a requirement to register the vehicle.

The question is with the insurance HE signed up for and pays... why would he NOT be entitled to the money... I believe 100% he is entitled to the full amount as it's his policy... ownership is irrelevant. Now BMW would have a LEAN on the car and leans are required to be paid first... his LEAN is for the remaining balance... which is ALL that BMW is entitled to, the amount of the LEAN. after that, any remaining balance would absolutely be his. BMW's interest stops at the the cars value, anything beyond that is his interests.

Especially if the cost of cars and replacement have gone up - that would offset his loss or negative position in trying to replace like-for-like.... the whole point of the insurance policy is to be whole in the end... BMW stole his money.

fairly certain his case is rock-solid and he'll win it outright... might even get compensation.

What we don't know - is there more weird California laws or something shady in the lease fine print that says BMW is entitled to more and you waive your right... which I think could then also be challenged to the legality of that type of fine print.

Ding, ding, ding. I see there is some confusion on how insurance actually works and benefits the insured.

[DETRoadster]

Originally Posted by rcracin

This is the correct expectation to me and expectation is all we can discuss here absent a thorough reading of the contract.

Clearly we need someone with a BMW under lease contract to read their contract and fill us in on what it says about insurance requirements!

[UncleWede]

Originally Posted by DETRoadster

Clearly we need someone with a BMW under lease contract to read their contract and fill us in on what it says about insurance requirements!

Yeah, RIIIGHT!

[ryan stewart]

Originally Posted by kring

I don't own you, but I can have an insurance policy on you and there's nothing you can do about it and I get paid if something were to happen to you.

Lol, you know nothing about insurance. Why don't you try taking out a policy on me without my consent, you know my name. People think cop shows are real.

This guy doesnt own the asset, his insurance, unless he opted for some sort of optional extension of coverage similar to classics, is likely just to cover his liability of replacement of BMWs asset, just like liability for renters, even if its some sort of similar scheme where youd have the option to buy out at the end of the lease.

[G35POPPEDMYCHERRY]

....AMERIKA

[TR930]

The insurance was to cover BMW's potential rental income loss in an accident, not the renter. Simple as that. BMW owns that car.

Even though that guy paid for the insurance, it was simply to insure he pays his remaining debt to BMW. The insurance was not there to replace any unrealized value for the leasee or BMW. Now, that being said if BMW was cut a check for that "market" value, even then I think it comes back to who actually owns the car? Once you answer that, then the entity is who incurred the loss should be the one made whole. The fact that the leasee can't find another m5 to lease at the same price as before is irrelevant. IMO

Buyer should have bought out his remaining lease payments to own the car. Then, his insurance might have cut him a check for the current market value replacement cost ( if that language was in his contract).

[LuvMyE92]

Originally Posted by TXSTYLE

Ding, ding, ding. I see there is some confusion on how insurance actually works and benefits the insured.

Yes, well said (written). Unfortunately, not only do people not read their finance contracts, they also don't read their insurance contracts. For instance, the clause where it says "loss payee" AKA insurable interest AKA the person that gets the money.

Also, it seems that everyone thinks that they are entitled to lottery winnings, even if they didn't buy a ticket. At least in this country.

Regardless of all of that, it was a poor decision by BMW Financial (not BMW) that is probably going to hurt them more in goodwill than the slight financial benefit. At the very least, they should have applied the $25K to the purchase of a new BMW.

As usual, the only people that will win here are the lawyers.

[TXSTYLE]

Originally Posted by LuvMyE92

Yes, well said (written). Unfortunately, not only do people not read their finance contracts, they also don't read their insurance contracts. For instance, the clause where it says "loss payee" AKA insurable interest AKA the person that gets the money.

Also, it seems that everyone thinks that they are entitled to lottery winnings, even if they didn't buy a ticket. At least in this country.

Regardless of all of that, it was a poor decision by BMW Financial (not BMW) that is probably going to hurt them more in goodwill than the slight financial benefit. At the very least, they should have applied the $25K to the purchase of a new BMW.

As usual, the only people that will win here are the lawyers.

I agree with you entirely.