Industry veterans weigh pros, cons of proposed laws
In the wake of Hurricanes Katrina and Rita damaging millions of vehicles, several in the collision repair industry have been concerned with those vehicles being resold without complete disclosure of the damage they had incurred during the storms.
Because of this, a group of legislators has been fighting to make sure all pertinent vehicle data is available to consumers. Sen. Trent Lott (R-Miss.) and Rep. Cliff Stearns (R-Fla.) are leading this charge, and currently are trying to get legislation passed to ensure all information is accurately reported.
Lott's bill (S-3707), the Consumer Access to Total Loss Vehicle Data Act, would provide information to consumers about vehicles declared a total loss by insurance companies. Stearns' legislation (H.R.-6093) calls for the National Highway Traffic Safety Administration (NHTSA) to require the disclosure of all information pertaining to the fair market value and safety of damaged vehicles. The vehicle data could be shared through online automobile services such as CARFAX.
Both pieces of legislation are currently being discussed in the 110th U.S. Congress, which first convened Jan. 4.
Right now, each state has its own laws that dictate how a car is categorized as a total loss and how it must be documented. No uniform system exists at the federal level to track damaged cars. Totaled, flooded or stolen vehicles would be permanently red-flagged by insurers under the proposed legislations. Insurance companies would also be required to reveal the reason for the total loss, the date of the total loss, the odometer reading on that date and whether or not the airbag deployed.
Why total loss legislation?
Lott began his crusade after several Mississippi-based auto dealers approached him with concerns about flooded vehicles ending up in the marketplace and being sold to unsuspecting consumers.
"A number of these cars are unsafe and shouldn't be on the roads," Lott said at a press conference announcing the bills. "And folks are overpaying for vehicles they believe are mechanically sound. To the untrained eye, they appear to be in good shape."
Lott and Stearns are joined by Rep. Bobby Rush (D-Ill.) and Rep. Gene Green (D-Texas) in the fight for federal legislation that would require insurance companies to reveal totaled, flooded or stolen vehicles before a car is sold at salvage auction. The legislation would affect about five million vehicles that were totaled last year due to severe damage, flooding or theft.
When unsavory vendors clean up and resell these flooded cars to unsuspecting buyers after insurers pay off and clean the titles, it's called title washing — and it's a crime many want to see stopped for good.
"We need to have a set of standards that will enable a person in Florida to tell if a car was flooded in Texas and vice-versa," says Green. "I believe it's time we made this important information available to consumers and authorities so consumers can be safe on the road."
Adds Stearns: "This is a matter of safety and fraudulent activity and needs to be stopped."
Besides the consumer concerns, there are safety and health concerns as well. Blood damage and corrosion can cause a number of problems, including malfunctioning airbags, and can lead to the presence of blood-borne pathogens or mold in the car.
"These flood vehicles end up in our repair facilities," says Bob Redding, Washington, D.C., representative for the Automotive Service Association (ASA). "Vehicle owners bring these flood cars to our shops with very little information. Without the knowledge that these vehicles have been submerged, repairers may miss a critical piece of information — such as the airbag system — in their evaluation of the vehicle repair. The ability to identify these vehicles could save consumers repair expense, prevent injury or even loss of life, as well as prevent long-term economic costs to consumers, repairers and insurers."
The National Automobile Dealers Association (NADA) supports the bills, stating that they're necessary in ensuring fair market value and safety.
"The more consumers hear about the danger caused by rebuilt wrecks, the more they want Congress to do something about it," says David Regan, vice president of legislative affairs for NADA. "With more than five million vehicles totaled by insurance companies just last year — more than half a million of them coming from the Gulf Hurricanes of 2005 — something has to be done to permanently notify consumers about these severely damaged vehicles."
Getting information out to the public and the repairers is a key aspect of this legislation.
"The legislation will provide more public information about the vehicle, which is important in the repair process as well as to the protection of the repair technician," says Redding. "This legislation is good for all parties; consumers, repairers, technicians, etc."
NADA spokesman Bailey Wood adds that a total is the most significant event in a vehicle's lifetime, and that all information about that total must be disclosed. He also feels that the legislation won't affect the number of totals, leaving repairers with less work.
"Insurers total vehicles for various reasons," Wood explains. "The definition of what a total is doesn't matter. We just need to know if a vehicle has been totaled."
On the other hand...
While auto repair industry associations have come out in favor of the bill, there are some issues to be resolved. Lott's bill does not define what, exactly, a total loss is, and the insurance industry has indicated that building the database proposed in the legislation would be burdensome in terms of cost.
"The current bill would require us to set up an entirely new data collection and dissemination mechanism at our own expense," says Tom Litjen, vice president of federal government relations at the Property Casualty Insurers Association of America (PCI). "We're looking for ways to do that with less expense to the industry, and we're trying to work within the existing mechanisms to make that information available."
The PCI, along with the American Insurance Association and the Automotive Recyclers Association (ARA), is currently working on alternative legislation that they say would be less onerous to the industry. The ARA has also asked for clarification on the total loss issue, and suggested that the bill be altered so that damaged vehicles that should only be used for parts or scrap have their VINs and corresponding paperwork removed from the system to keep them off the road.
Litjen also notes that the information in the proposed database would not be complete. A vehicle with liability-only insurance could be totaled and rebuilt without that information ever being reflected on the title.
"We don't control all salvaged vehicles," Litjen says. "There is, in fact, a great percentage of salvaged vehicles that we don't have information on. We don't want consumers to have a false sense of confidence in this database."
Thoughts from the frontline
Many in the industry support the bills, feeling that they will benefit both shops and insurers, all while strengthening the ties between the two. Many others feel that the legislation is no good and/or needs tweaking.
In interviews between ABRN and those in the industry, a general feeling is that the legislation would affect the salvage value that the insurers use to determine total loss with, or that it may move the repair cost versus total to a greater cutoff point, due to the economics of the system. This could lead to repairs to vehicles that would have been previously totaled, or it may lead to repairs of vehicles that really should not be returned to the road.
Some feel that the legislation will lead to older vehicles being repaired, possibly causing a drop in new car sales. Others feel insurers will be likely to push salvage parts that will cost less due to the lower salvage value the insurers will receive from parts yards.
Another feeling is that if rebuilders were not bidding on totaled cars there would be more salvage available at lower price. Salvage yards could then afford to sell more parts at lower cost. Many repairers feel they could often fix some cars and stay under total loss if they could find LKQ parts that are cost effective and available. Most would like to repair every car with new OEM parts, but that is no longer an option with many older cars. Sometimes salvage parts are the only option for not totaling cars but still being able to do safe, quality repairs.
"I think it would be positive for insurers," says Donald Reckner, owner of Elmo's Autobody in Ballston Lake, N.Y. and Elmo's Autobody of Scotia in Scotia, N.Y. "It would help the problem of re-insuring a vehicle that may not be safe because of poor repairs.
"We have seen on more than one occasion where a rebuilder purchases a totaled vehicle at auction and fixes it as cheap as possible, usually with rails or inner panels that are still kinked or bent. These cars sometimes incur more damage because the crush zones are not restored properly. The vehicle was totaled for a reason. SRS systems are many times not repaired properly as well. Many times a customer doesn't even know how severely a car may have been damaged."
Angus Murray, owner of Miami Springs Taxi and Surplus Property Sales in Florida, has purchased a large number of Katrina-branded vehicles, and reports that some required major repair while others required nothing other than detailing.
"The total loss determination to me appears to be a subjective process with some insurers," says Murray. "While some legislators appear to be calling for the outright destruction of flood-branded units, I oppose it. If title washing can be prevented, these vehicles are a valuable source of parts and whole vehicles for large market segments, particularly for me since I operate taxicabs."
Bobby W. Johnson, of B & J Collision Repairs Inc. in Jefferson, Texas, feels Stearn's bill is not good, as the industry doesn't need any bill that says a car that has been wrecked is worth less, or is unsafe, because it depends on how it was repaired and how well. He also feels that CARFAX is not a good place for information to be collected because it's not always dependable when it comes to a customer who pays for repairs without involving insurance.
"All Stearn's bill will do is cause more totals, less value on used cars and more customers who don't want repairs made if it means the vehicle will be worth less or tagged as damaged goods," says Johnson.
Many, like Johnson, make their livings fixing wrecked vehicles and don't want any of those prospective repairs off the market for any reason. They feel that totals are totals and should be sold for parts or dismantled, but that some totals are for economic reasons only and the cars are easy to repair safely, especially older cars.
"Bottom line, I don't think there is any good from any proposed new legislation that involves the collision industry," says Johnson. "We have too much now and it does not work well now. I would not support anything that would mean one less vehicle to repair — we need all we can get today."
