Wednesday, January 26, 2005

State Farm buys a Billion Dollar Insurance Policy for $50 Million
A wimpy settlement with state Attorneys General whitewashes 40,000 rebuilt wrecks

State Farm has entered into a settlement agreement with the state Attorneys General that may cost them $50 million. That's chicken feed for State Farm, a company that (for whatever reason) insures one out of five cars in this country. Even though it was caught laundering the title of rebuilt wrecks in Indiana in 1998, the practice apparently continued for another 6 years, affecting perhaps 40,000, and maybe more vehicles.

The most outspoken consumer advocate on this issue is a Kansas City attorney named Bernard Brown. I met Mr. Brown at a National Consumer Law Convention about a decade ago. He is an outstanding lawyer. In fact, if I had my pick of any consumer lawyer in the USA, my choice would probably be either Bernard Brown or Laura McDowall of Akron Ohio. But I digress. Attorney Brown is quoted below with some of the problems with the Attorneys General settlement. Here are some highlights:

--If the vehicle is in a junkyard, no one will get any money.

--If a consumer bought one of the vehicles, had trouble with it and sold or junked it, he or she would get nothing.

--Consumers who got rid of their cars would not even be notified that they had been driving a totaled vehicle.

Consumers will be paid based upon a percentage of the current estimated values of the aging vehicles – not the higher purchase prices that the owners paid, as laws in most states provide in such settlements. For example, State Farm will pay $1,400 to the owner of car with a book value of $6,000.

The settlement doesn't provide any money for anyone who might have been injured by one of the totaled vehicles. Neither State Farm nor the state attorneys general could say how many vehicles were involved in accidents after State Farm resold them, or how many people might have been injured.

The company could determine the number of injuries, using the same motor vehicle identification numbers it is using to track down the most recent owners. But the attorneys general signed the settlement without asking the company to provide that information.

As for State Farm, the settlement protects it against any additional actions by the attorneys general, the enforcers of their states' consumer fraud laws.

The settlement also goes a long way toward protecting the company against class-action lawsuits: To get the settlement money, consumers first must agree not to sue State Farm.
STLtoday - News - Illinois State News

If you are a consumer who receives an offer anywhere near the $1300 average for your rebuilt wreck, you should strongly consider turning down the offer, or at least don't accept it until you've had a thorough independent inspection of your vehicle. If you have any doubts, contact an attorney referred through the National Association of Consumer Advocates (www.naca.net).

A second news story on the topic is below:



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