You can the friend for the value of the car (the then-current or "blue book" value), to the extent that it was not paid by the insurer. (E.g. say the car was then worth $10k; if you received nothing from the insurer, you could sue for all $10k; if you received $8k, you could sue for $2k; if you received all but, say, a $500 deductible, you could sue for the $500; etc.). You can't sue for the balance on the loan--the law does not care about what you paid for the car, what you still owe on the car, etc.; that is not the measure of compensation. Rather, compensation is based on the value of the thing (the car) destroyed (totalled) at the time it was destroyed.
This is why, if you finance a car it is a good idea to buy "GAP" insurance to cover the amount you will still owe on the loan.
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