USAA Changes Policy After ABC News Investigation Into Sandy-Damaged Vehicles Sold on Used Car Lots
By GERRY WAGSCHAL, DANIEL MORRIS, ERIN BRADY, MICHAEL CAPPETTA
In the wake of an ABC News investigation into superstorm Sandy-damaged
cars being sold on used car lots, a major American insurance company
acknowledged that its salvage vehicle branding process after Sandy was
"unsatisfactory," and it is making changes to help keep those damaged
cars off the road.
USAA, which focuses on providing financial services and insurance to
U.S. military members and their families, is now facing questions, which
were raised by an ABC's "The Lookout" report in July, over its failure
to brand at least one of its flood-damaged vehicles -- a 2006 Ford F-350
-- as a salvage vehicle before selling it at auction.
In a follow-up interview with "The Lookout's" Bill Weir, Kevin Bergner,
the president of USAA's Property and Casualty Insurance Group and a
former Army general, said the team's report was "shining the light on
something that is troubling all of us."
"We went back and looked at our process, and we said 'unsatisfactory,'"
Bergner said. "We are changing it, and we will maintain that highest
standard. That even a parts-only sale will involve a [salvage] branded
title."
When superstorm Sandy pummeled the Northeast last October, the damage
was widespread. Nearly 300 people lost their lives, and thousands more
lost their homes. Then there were the cars. According to the
National Insurance Crime Bureau, an estimated 250,000 cars were submerged for days in corrosive saltwater.
Thousands of these flood-damaged vehicles were temporarily stored at the
Calverton Executive Airpark in Long Island. In the months following
Sandy's destruction, these cars began to disappear. Where did these
flood cars go?
In a seven-month investigation, ABC's "The Lookout" found these cars turning up on used car lots across the country.Christopher Basso, public relations manager at
CarFax, explains the potential hazards of flood-damaged vehicles, adding that "flood cars literally rot from the inside out."
Because of how easily the damage can be concealed, Basso warns
prospective buyers to bring the vehicle to a mechanic for an inspection.
"While this car looks great on the outside and to the untrained eye,
things are falling apart inside this car. It may not happen immediately,
but days, weeks or months down the road, parts that are on this car are
going to fail."
CarFax estimates that more than 100,000 Sandy-damaged vehicles are now back on the road across the United States.
When ABC's "The Lookout" team went undercover at used car dealership
D&D Auto Sales in Old Bridge, N.J., it discovered a Ford F-350 truck
totaled by superstorm Sandy selling for $19,999. The truck's Vehicle
Identification Number, or VIN, and auction records indicated it had been
damaged by a flood.
A D&D's salesman sold the car to an ABC's "The Lookout" producer for
its asking price and referred to a flood alert on the vehicle history
report CarFax as only "a glitch."
But Alan Picker, owner and certified mechanic at All-Time AutoBody in
Point Pleasant, N.J., knows the CarFax alert was no glitch. "The
Lookout" team brought the truck to him to examine the dangers a
cleaned-up flood vehicle can often conceal. Picker discovered the car
had serious damage, including a corroded transmission, as well as
potentially hazardous airbags that could randomly deploy while driving.
D&D Auto Sales responded to "The Lookout" team's findings and
stated, "D&D auto sales sincerely regrets the unfortunate
misrepresentation of the product by the salesperson. We do not condone
such business practices and have terminated the salesman as a result of
his independent action. This is in no way reflective of typical business
practices at D&D."
The Ford F-350's previous owner, Mike Kennedy of Point Pleasant, N.J.,
is a retired Navy man and his insurance company is USAA, which had
declared the truck as a total loss after it flooded during Sandy.
According to New Jersey authorities, once the insurer declares a vehicle
a total loss, pays off its insured and takes possession of the vehicle,
the insurer becomes the owner of the vehicle. New Jersey authorities
say it is then the insurer's responsibility to brand the vehicle's title
as flood-damaged, forever marking it as a salvage vehicle, before it
goes to auction. But when USAA became the owner of Kennedy's Ford F-350,
it failed to do that.
The company claimed Kennedy's title was lost, and instead of asking for a
new one, it says it told the auction house to sell the Ford F-350 for
parts only. But somehow, the truck ended up on D&D Auto Sales' lot
in one piece. As in many states, in this circumstance, failure to obtain
a salvage title is illegal in New Jersey.
The New Jersey Motor Vehicle Commission has now suspended D&D Auto
Sales' license to sell cars, pending an investigation. The New Jersey
Attorney General's office launched its own criminal investigation into
the dealership, which includes the cars USAA sold at auction that the
dealer bought.
After ABC's "The Lookout" report aired, Bergner said in a follow-up
interview at USAA headquarters in San Antonio that USAA went back
through 3,872 vehicle titles -- the total number of USAA member cars he
said were declared losses as a result of superstorm Sandy. Of those,
Bergner said the company found 174 cases where USAA had sold flood cars
without branded titles at auction in New Jersey, just as it did with
Kennedy's Ford F-350.
That means it is possible that all of those 174 cars are on the road
today -- USAA doesn't know. But it says it now plans to get salvage
titles for all those vehicles.
"That's what we're working with the New Jersey Motor Vehicle Commission
to do, is go track down every one of those vehicles, 174, and we'll not
stop until we are able to say all of them are off the road, [and] are in
the right place, which is where that Ford F-350 sits today, in the
salvage yard," Berger said.
Before our interview with USAA, ABC News identified four flood vehicles
sold by USAA at auction in New Jersey without branded titles. Three, a
Honda CRV, a Chrysler Town and Country and a Lexus RX330, were
subsequently sold with clean titles and are today being driven by
unsuspecting new owners.
USAA would not tell ABC News exactly how it disposed of the remaining
3,698 cars the company insured and declared total losses as a result of
superstorm Sandy. The company refused to comment on whether any or all
were also sold with unbranded titles.
USAA spokesman Roger Wildermuth said "more than 90 percent of them were
in New Jersey and New York," when Sandy hit. He added, "New York has a
separate process that does not require a salvage title, and we are
confident that we have complied fully with those regulations."
Following our interview with USAA, the auction house involved said in a
statement to ABC News that its company "fully supports USAA's practice
of branding titles on vehicles they intend to sell for parts only, and
we will continue to comply with the accepted practice of the NJ MVC."
"There are a number of states that have titling statutes with tremendous
loopholes that exempt numbers of significantly damaged vehicles from
being branded at all," Nusbaum said. "If Hurricane Sandy had taken place
in one of those states, many if not most of those vehicles would never
have gotten branded. This is an unacceptable risk for the public."
To protect yourself, experts encourage drivers to do their homework
before spending their money and thoroughly check a car's history, as
well as get the car inspected by a certified mechanic. ###
Comments from our Foolish Readers
Report this Comment On August 24, 2013, at 10:22 AM, susanbrand1970 wrote:
Report this Comment On August 24, 2013, at 10:27 AM, sabebrush6 wrote:
Report this Comment On August 24, 2013, at 10:30 AM, ponchoman49 wrote:
Report this Comment On August 24, 2013, at 10:53 AM, fpl1954 wrote:
Report this Comment On August 24, 2013, at 11:05 AM, mrsb78 wrote:
Report this Comment On August 24, 2013, at 11:07 AM, raptorred wrote:
Report this Comment On August 24, 2013, at 11:11 AM, Jayz929RR wrote:
Report this Comment On August 24, 2013, at 11:11 AM, debug013 wrote:
Report this Comment On August 24, 2013, at 11:12 AM, overunder27 wrote:
Report this Comment On August 24, 2013, at 11:13 AM, 2manystangs wrote:
Report this Comment On August 24, 2013, at 11:15 AM, cage102609 wrote:
Report this Comment On August 24, 2013, at 11:16 AM, jackie78 wrote:
Report this Comment On August 24, 2013, at 11:18 AM, Gordon2525 wrote:
Report this Comment On August 24, 2013, at 11:19 AM, excelscior wrote:
Report this Comment On August 24, 2013, at 11:23 AM, bcweir wrote:
Report this Comment On August 24, 2013, at 11:25 AM, afig367 wrote:
Report this Comment On August 24, 2013, at 11:25 AM, dksmoothe77 wrote:
Report this Comment On August 24, 2013, at 11:26 AM, ocheewah wrote:
Report this Comment On August 24, 2013, at 11:29 AM, EvanBuck wrote:
Report this Comment On August 24, 2013, at 11:36 AM, AeroDesign wrote:
Report this Comment On August 24, 2013, at 11:38 AM, jeff7232 wrote:
Report this Comment On August 24, 2013, at 11:41 AM, KazooKitty wrote:
Report this Comment On August 24, 2013, at 11:42 AM, moparcarfanh8sgm wrote:
Report this Comment On August 24, 2013, at 11:43 AM, StockgeniusII wrote:
Report this Comment On August 24, 2013, at 11:43 AM, tmeyer37 wrote:
Report this Comment On August 24, 2013, at 11:45 AM, joverclock wrote:
Report this Comment On August 24, 2013, at 11:46 AM, Cuencanolenny wrote:
Report this Comment On August 24, 2013, at 11:47 AM, Firechicken427 wrote:
Report this Comment On August 24, 2013, at 11:47 AM, Tuite300 wrote:
Report this Comment On August 24, 2013, at 11:50 AM, Browntreecat wrote:
Report this Comment On August 24, 2013, at 11:51 AM, RainyDayV8 wrote:
Report this Comment On August 24, 2013, at 11:51 AM, BubbaTee wrote:
Report this Comment On August 24, 2013, at 11:52 AM, mobadthangood wrote:
Report this Comment On August 24, 2013, at 11:55 AM, betdon2 wrote:
Report this Comment On August 24, 2013, at 11:56 AM, dede123 wrote:
Report this Comment On August 24, 2013, at 11:59 AM, biggdawg49 wrote:
Report this Comment On August 24, 2013, at 11:59 AM, RailraodMike wrote:
Report this Comment On August 24, 2013, at 12:04 PM, Jshphrd wrote:
Report this Comment On August 24, 2013, at 12:04 PM, PlasticRobotoid wrote:
Report this Comment On August 24, 2013, at 12:04 PM, thanlannt wrote:
Report this Comment On August 24, 2013, at 12:07 PM, TMFTwoCoins wrote:
Report this Comment On August 24, 2013, at 12:09 PM, CTNEMISIS wrote:
Report this Comment On August 24, 2013, at 12:10 PM, screenname100 wrote:
Report this Comment On August 24, 2013, at 12:16 PM, wonsuni12 wrote:
Report this Comment On August 24, 2013, at 12:19 PM, Zochin wrote:
Report this Comment On August 24, 2013, at 12:24 PM, badsheep wrote:
Report this Comment On August 24, 2013, at 12:25 PM, lierlaky wrote:
Report this Comment On August 24, 2013, at 12:25 PM, theomdude wrote:
Report this Comment On August 24, 2013, at 12:26 PM, Eds2468 wrote:
Report this Comment On August 24, 2013, at 12:30 PM, kmshew wrote:
Report this Comment On August 24, 2013, at 12:30 PM, jeffreycourtney wrote:
Report this Comment On August 24, 2013, at 12:30 PM, kca124cain wrote:
Report this Comment On August 24, 2013, at 12:37 PM, slim1969 wrote:
Report this Comment On August 24, 2013, at 12:37 PM, Bobt1892 wrote:
Report this Comment On August 24, 2013, at 12:38 PM, kca124cain wrote:
Report this Comment On August 24, 2013, at 12:38 PM, ElijahFox69 wrote:
Report this Comment On August 24, 2013, at 12:39 PM, BloviationNation wrote:
Add your comment.
Please be respectful with your comments. Review our Fool's Rules.