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In September, 2005, the Maryland
Attorney General sent a letter to more than 250 Maryland residents,
advising they were eligible for compensation from State Farm Insurance
Company. The right to compensation arises because State Farm failed to
properly report to the Motor Vehicle Administration when it settled
total loss claims on these vehicles after a collision. These vehicles
owned by Marylanders should have received a “salvage” title. The
Maryland A.G., along with 48 other state Attorneys General and the
Attorney General for the District of Columbia, negotiated a settlement
with State Farm.
The Maryland Consumer Rights Coalition
(“MCRC”) has issued this Consumer Alert for two reasons: (1) when
notifying consumers about the settlement, the Attorney General did not
alert owners to the potential safety risks posed by these vehicles, and
(ii) the compensation available in the settlement may not be sufficient
to cover the damages sustained by many owners. MCRC wants owners to
have a better, fuller understanding of the issues raised by State Farm’s
settlement with the state Attorneys General. |
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First, and most importantly, MCRC
cautions anyone who owns these vehicles about the serious safety risks
these vehicles may pose. THESE VEHICLES MAY BE UNSAFE TO DRIVE.
We strongly urge owners of these vehicles to have a safety inspection
performed immediately by a competent body shop.
MCRC also urges each owner to carefully evaluate whether the
financial settlement negotiated by the A.G.’s office is adequate, in
light of your unique circumstances. You are not required to accept the
funds which State Farm has agreed to pay; indeed, MCRC believes many
owners may be entitled to considerably more, depending on the facts
involved in their purchase. Please read below for further information.
In MCRC’s view, owners should consult with an attorney before
cashing the checks which will be mailed in January 2006 – if you cash
the check, you will lose important claims. You may still cash the
check, if you wish, after you have consulted with an attorney. |
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Under Maryland law, a vehicle is
declared a total loss or “salvage” vehicle only if the repairs needed to
fix collision damage cost more than the amount the vehicle was
worth before the collision. In other words, many of these vehicles were
severely damaged.
Experts say it’s extremely difficult
for shops to repair many total loss vehicles and still make a profit
unless they cut corners. Someone fixed the car to make it look ok. But
did that shop properly weld any damage to the vehicle’s frame or
substructure? Did they replace the air bags? Will the vehicle safely
protect children or other occupants in the event of another collision?
Only competent body shop personnel can do the kind of thorough
examination needed. That’s why MCRC urges owners of these vehicles to
immediately obtain a thorough safety inspection from a body shop, even
if their vehicles have passed routine state safety inspections.
To learn more about total loss vehicles and what systems should be
evaluated to assure the vehicle is safe to drive
see this story which appeared in Consumer Reports, published by
Consumers Union:
Too often,
repair shops cut corners by failing to replace air bags.
Click here for tips on how to spot faulty or phony air bag repairs.
Click here for other airbag information.
. This is a real concern.
Click here to see a company offering “non-functional, cosmetic airbag
covers” for sale.
See this to read about
a total loss car that was “repaired” but nevertheless sheared apart in a
routine accident.
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The Attorney
General’s letter explains compensation has been negotiated with State
Farm. Whether owners should cash State Farm’s check depends on a number
of different factors. MCRC recommends that all owners of these vehicles
consult with an attorney, but especially if they:
- sustained
personal injuries in an accident in one of these vehicles,
- had to pay
for mechanical or body shop repairs to one of these vehicles,
- took out a
loan to purchase the vehicle and incurred finance charges,
- invested in items like upgraded audio
equipment, anti-theft systems, window tinting, etc. to improve
their vehicle.
You may be
entitled to recover for all of these damages. In many cases, owners may
well be entitled to compensation significantly more than the sums
provided by State Farm through the settlement with the A.G.. If,
however, owners cash the check which will be mailed to them in January,
2006, they waive their claims for damages attributable to State Farm’s
failure to obtain a salvage title (they may not be waiving their claims
for other acts or omissions by State Farm, or damages incurred for other
reasons, including damages for personal injury – see an attorney for
more information). If an owner receives a check for one of these
vehicles from State Farm, through the Attorney General’s office or from
the company paid to administer the settlement, the owner should not cash
it before speaking with an attorney.
Ask an
attorney whether it may be possible to require that State Farm
repurchase the vehicle, pay off any loan on the vehicle, reimburse for
sales tax, reimburse for all repairs needed to fix problems that arose
in the undisclosed total loss collision, pay for any improvements made
to the vehicle, etc.
When the
Indiana Attorney General sued State Farm in 1998 for failing to properly
obtain salvage titles in that state, consumers got far better relief
than owners are being offered in the settlement with the Maryland A.G.
and his colleagues. State Farm agreed to pay Indiana residents an
amount equal to their purchase price and related expenses, including
sales tax, finance charges and any amounts owners paid to improve the
condition and value of their vehicles. Residents of Maryland who want
this kind of relief are advised to see an attorney.
Click here to read
the Indiana settlement in PDF format. Generally, if
owners of these vehicles cash State Farm’s check, they may still be
required to pay off their car loans, unless they bring suit and recover
from the dealer who sold them the vehicle. See, for example, http://www.consumeraffairs.com/news04/2005/state_farm_totaled.html
Lawyers often recommend including all possible defendants, such as State
Farm, the selling dealer and bank or finance company, in the same case.
Many lawyers
believe State Farm owes most owners of these vehicles more than the sums
the Attorney General was able to negotiate. One reason is that when the
owners of these vehicles go to sell or trade-in their vehicles, the law
requires they disclose their vehicle title should have been marked as
“salvage.” Indeed, the MVA may require that owners turn in their titles
and may return to you a title which is properly “branded” so that anyone
who buys your vehicle will know the vehicle was severely damaged. This
reduces the value of their vehicle dramatically, in many cases below the
amounts offered by State Farm. If owners want to find out for
themselves, they should take the car to Carmax or another dealer and ask
what the dealer would pay for the car. Then, they should ask what the
car would be worth if it had a salvage title. There will be a
substantial difference.
Many lawyers
believe State Farm also may be held liable to pay punitive damages.
State Farm admits it failed to properly process at least 32,000 titles
across the United States that should have been marked as “salvage” or
otherwise branded or disclosed as required by the law of the various
states and the District of Columbia. And State Farm did so after
entering into the agreement with the Indiana Attorney General in 1998,
by which it promised to abide by Indiana’s state titling laws for
salvage vehicles and likely was made aware of extremely serious flaws in
its practices and procedures for compliance with all state titling
laws. By violating its 1998 agreement with the Indiana A.G. and by
engaging in wholesale violations of the titling laws of the other 49
states and the District of Columbia, State Farm probably earned far more
than the $40,000,000 it has offered consumers in the settlement with the
Maryland Attorney General and his colleagues.
Finally, the
Maryland Attorney General’s September, 2005 letter failed to disclose
that owners of these vehicles may be required to submit these vehicles
to inspection by the State police or county police, and Maryland state
safety inspection. The police inspections may be required by law to
determine whether stolen parts were used in their repair. If the police
find stolen parts in these vehicles, the police may confiscate the
vehicles, leaving owners with a major headache. MCRC believes it would
be disadvantageous to settle with State Farm by cashing its check, only
to learn at a later time that the vehicle has to be confiscated due to
stolen parts.
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MCRC filed a request for documents
relating to the State Farm settlement, pursuant to the Maryland Public
Information Act. We also have asked the Maryland Attorney General to
immediately send a second letter to the owners of these vehicles,
pointing out the safety risks these vehicles may pose and urging owners
to have a safety inspection performed. MCRC asked the A.G. to provide
us with a list of the names and addresses of these owners so we could
send such a letter, however, the A.G. declined this request. MCRC may
appeal the denial of this information because important public safety
issues are involved. The A.G.’s office has advised us, informally, that
it is considering our request to send its own letter to Marylanders,
urging them to have their vehicles inspected for safety.
MCRC also has
written to the Motor Vehicle Administration, inquiring whether the MVA
will require owners to have their vehicles inspected by county or state
police and whether any other action will be taken to protect the public
safety. A response has not yet been received.
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