Years of lobbying to eliminate a longstanding and critical component of Florida consumer protection may soon pay off for big insurance companies and salvage auto auction corporations.
Today, Florida law requires a total-loss vehicle that has damage of more than 80 percent of its retail value to receive a Certificate of Destruction, deeming it to be destined for dismantling or destruction. Although many of these vehicles cannot be returned to a safe condition, Senate Bill 754/House Bill 7063 would make it much easier to put such vehicles back on the road.
Consumers in all states should expect their title and branding laws to protect their safety and welfare, and their pocketbooks, by requiring these wrecks to be taken off the road. After years of efforts to change this law, the businesses that stand to gain have fashioned a “compromise” that creates two classes of vehicles for purposes of Certificate of Destruction status.
Under this proposed law, severely damaged vehicles seven years old or newer with a retail cost of at least $7,500 will be considered nonrepairable only if the owner or insurance company determines that the estimated costs of repair are 90 percent or more of the cost of the vehicle. To be branded nonrepairable, vehicles more than seven years old must be damaged to the extent that the only value is for parts or scrap, making them essentially immune from nonrepairable branding at the determination of the owner or insurer. With the average age of the vehicle on the road today at almost 11½ years, this subjective definition could exempt most of the vehicles registered in Florida.
Last year, the salvage vehicle auction companies that sell damaged vehicles on behalf of the insurers — and keep a percentage of the sale price — testified in the Florida Senate that a repairable vehicle typically sells for $1,500 to $2,000 more than one with a nonrepairable title. This extra profit for insurers and salvage auctions provides the motivation for insurers pushing to exempt many salvage cars from nonrepairable branding.
There is a well-documented history of such abuses. After Hurricane Katrina, State Farm Insurance admitted to avoiding branding and then reselling as many as 30,000 vehicles damaged in the storm. As a result, new owners were unaware of their vehicles’ histories.
A consumer who purchases a severely damaged salvage vehicle that cannot be made safely operational will have the daunting task of finding a remedy via the courts. As a longtime consumer advocate and a former Florida deputy attorney general who helped draft and get Florida’s Lemon Law passed, I know that for most consumers — especially minority and low-income consumers who would become the victims of the proposed change — this is an insurmountable obstacle. There is no Lemon Law remedy under these circumstances.
Proponents of bills like these claim that they are looking out for consumers who may want to keep or repair their older, lower-value damaged vehicles. In fact, this legislation has no impact on branding when a car is repaired and kept by the consumer. The real issue seems to be an effort by insurers to avoid branding the most catastrophically damaged vehicles as nonrepairable after they pay off a claim and take possession of a total-loss vehicle.
Recently, ABC News followed the sale of a single Hurricane Sandy flood loss vehicle, and traced it to titling and branding issues that originated with both an insurer and its contracted salvage auction company. In its seven-month investigation, ABC found Sandy-damaged cars turning up on used car lots across the country. Furthermore, the insurance company that handled the vehicle identified in the ABC News story finally admitted to handling 174 other New Jersey vehicles in the same manner, but refused to comment on whether any of the remaining 3,698 cars the company insured and declared as total losses as a result of Sandy were also sold with unbranded titles.
The current requirement for a Certificate of Destruction is a very important section of the statute, created through extensive meetings and discussion among consumers, law enforcement, the auto recycling industry, the insurance industry, auctions and other stakeholders. The law has provided substantial protection for consumers. Legislators should keep these protections in place.
Walter Dartland is executive director of the Consumer Federation of the Southeast.