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September 2006

 

Flooded and wrecked vehicle disclosure sought

The National Automobile Dealers Association (NADA) wants to make America’s roadways safer by protecting consumers from purchasing flood and salvage vehicles. Their efforts took a big step forward when Senator Trent Lott (Republican, Missouri) introduced legislation (S. 3707) that would require insurance companies to make total-loss information commercially available to the public.

Approximately five million vehicles were “totaled” by insurance companies last year due to extensive damage, flooding or theft. But thousands of these “totaled” vehicles are rebuilt and then sold, with clear titles, to unsuspecting customers. This problem grew dramatically worse with the estimated 500,000 vehicles damaged by Hurricane Katrina. There is evidence that many of these flood-damaged vehicles are now returning to the marketplace.

The NADA-supported approach focuses on the Vehicle Identification Numbers of totaled vehicles. The NADA approach would require auto insurance companies to make commercially available the date of the total loss; the primary reason for total loss (i.e. damaged, flooded, stolen); and the odometer reading on the date of total loss.

Despite repeated attempts to curb salvage title fraud, this problem persists because state motor vehicle titling laws are confusing and incomplete. No public database exists to “red flag” all of the problem vehicles. In 2005, State Farm admitted to having resold 30,000 totaled vehicles over several years without salvage titles. In a 2001 Iowa case, Progressive Insurance acknowledged a similar practice on a much smaller scale.

For more information, visit NADA’s website at www.nada.org.


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