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Wednesday, 30 November 2005 17:00

LA legislature passes bill to crush hurricane-flooded vehicles

In a move that some insurers believe could prove detrimental to Louisiana consumers and insurers, the Louisiana legislature narrowly passed a bill that would require all vehicles determined to be "total" losses as a result of recent flooding to be crushed. 

"This bill is not the solution to deal with the flooded vehicles issue in Louisiana," said Greg LaCost, assistant vice president, regional manager and counsel for the Property Casualty Insurers Association of America (PCI). "While PCI believes that contaminated vehicles should be destroyed for the health and welfare of the public, HB 11 goes well beyond that. It is destructive to Louisiana commerce and consumers by not limiting itself to vehicles that are dangerous to the public. While vehicles contaminated by salt water or biohazard materials should be disassembled and taken off the roads, HB 11 would result in the destruction of thousands of vehicles that could be salvaged.

The bill will preclude consumers from fixing or keeping their totaled vehicles if they have suffered damage to their electrical system, power train or computer, especially with older model vehicles. If a consumer has a car worth $2,000 with a $500 deductible, and the car suffers computer damage in the amount of $1,500, under the current law, the insured could pay the deductible and the carrier could fix the car for the consumer. Under the new proposal, the consumer would be paid $500 and be without a car.

Current Louisiana laws regarding flooded vehicles are stronger than the rest of the country as they require a specific disclosure of a vehicle being involved in a flood prior to any sale. No other state has required crushing flooded vehicles, but other states have salvaged and flooded vehicle title laws. Louisiana was consistent with the country's views on flooded vehicles by the passage of a salvage and branding law which requires "flooded salvage" to be placed permanently on the flooded vehicle's title.

"While car dealers and manufacturers will benefit, Louisiana consumers, insurers, and rebuilders will suffer from the passage of this bill," added LaCost. "If this bill passes, Louisiana should expect higher insurance premiums, increased pricing for used vehicles, possible increased cost in new cars due to increased demand, and inability of poorer consumers to buy vehicles because of costs. Current law protects consumers without stalling out needed Louisiana commerce."

National effort

On the national front, the National Automobile Dealers Association (NADA) also proposed a series of steps to protect consumers from purchasing flood and salvage vehicles in testimony before the Consumer Affairs, Product Safety and Insurance Subcommittee of the Senate Commerce Committee.

Virginia Automobile Dealers Associa-tion President Don Hall, testifying on behalf of NADA, said transparency, timeliness and technology are essential to provide consumers more complete and current vehicle title history.

"The complicated 51-jurisdiction state motor vehicle titling systems invites fraud" said Hall, noting that unscrupulous rebuilders or refurbishers can obtain a "clean" or "washed" title in a state with weak title disclosure rules. "Any buyer should have pre-purchase access to information about significant vehicle damage that may affect safety, drivability, durability and market value," he added.

"All states should 'carry forward' prior brands when issuing new titles and states should brand registrations, as well as titles," Hall said.

He noted that state Department of Motor Vehicle (DMVs) offices document transactions after the fact, and that vehicle history services need more timely vehicle title information to minimize consumer risks.

The NADA testimony stated that existing technology in the private sector should be used so that all states move to electronic titling of motor vehicles. The association also called for states to work more aggressively with the information companies to reduce the timeframe that electronic data reaches consumers.

Hall's congressional remarks echo those made by NADA Chairman Jack Kain in October, when he called on insurance companies, auto manufacturers and state DMVs to improve the uniform access and reliability of vehicle title information, in a speech to the Automotive Press Association in Detroit.

Since then, the National Insurance Crime Bureau has taken an important step toward that goal by introducing an electronic database for identifying flood-damaged vehicles. "We applaud the insurance companies for providing information about flood cars, but why not provide the same data for severely wrecked vehicles?" asked Kain.

 

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