According to the California (the nation's largest auto market) Department of Motor Vehicle, the state has approximately 2.5 million once totaled cars, on the streets. Those cars had at one point been in a crash and natural disasters mainly floods. Those cars now hold a salvage or reconditioned title.
The voracious profit drive, lead the insurance companies coupled with used car dealers to establish a system which allows for profit from frauds involving flood damaged cars. Once the insurance company totals a vehicle, the car or truck is hardly ever smashed, or sold as metal. Rather those vehicles are sent to car auctions where dealers are waiting for such an opportunity that could turn into a big profit. Some experts call those auctions salvage pools, and claim to be a arm of the insurance business.
Steve Poizner, the California Insurance Commissioner, along with consumer groups backed a legislation which would prohibit the sale of flood damaged, or reconditioned cars due to hurricanes. The legislation SB498, authored by Senator Jenny Oropeza never saw the light at the end of the tunnel. The legislation was apposed by some of the biggest contributors to the Republican Party. On the other hand, most senators representing the Democratic Party.
Basic Math involving a lot of zeros, would explain the reasons behind the failure of the legislation. If the insurance companies are able to recover only 2000 dollars per flood damaged car, taking into consideration it is estimated that a approximately 500,000 cars belong to this category, the insurance industry was looking at a 10 digit loss, a minimum of trillion dollars. A number of insurance companies were involved to kill the legislation. Insurance companies, yes including the big names you see advertising on TV everyday, and you can never deny the role car dealers played.
Car shoppers that purchase Brand new or nearly new cars that were at point damaged by floods, have already or soon to witness a harsh reality. Their cars are not covered by factory warranty. A consumer in Indiana took his car for repairs that are normally covered by factory warranty, and surprised by the fact that DaimlerChrysler refused to honor the warranty. The case was taken to the Attorney General's office, which discovered that a well known Insurance had violated the state of Indiana Laws by reselling cars that the company bought from their original owners due to flood damage. Those cars were not issued a salvage title. In other words, were sold as normal condition.
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