Friday, Dec. 5, 2003 | 11:15 a.m.
The term "totaled" used to conjure up images of twisted, mangled wrecks that were beyond repair.
Now, the term is being applied to cars with only mild physical damage that can be safely repaired, especially for older vehicles that have more sentimental than monetary value, local body shop and wreckage company owners say.
Under a new state law, a car is totaled when the cost of repair -- minus paint -- is 65 percent or more of the fair market value of the car before it was wrecked. For a car worth $10,000, that means the costs of repair equal $6,500 or more. But for a mid- to late-1990s sedan or similar vehicle worth around $5,000, repairs would have to reach $3,250.
And that, body shop and wreckage company owners say, means that more and more cars will be considered totaled rather than repairable. Those hurt most will be consumers who cannot afford to buy a new car or whose settlement does not even cover the money they still owe for the wrecked vehicle, body shop owners say.
The law, which went into effect Oct. 1, is designed to keep wrecked cars from being rebuilt and sold to unknowing consumers, Assemblywoman Barbara Buckley, D-Las Vegas, said. Assembly Bill 325, which she sponsored, placed a cost-versus-value percentage on when a car is considered totaled to force registration of those vehicles with the Department of Motor Vehicles, not to mandate how insurance agencies decide whether to repair a vehicle, she said.
The bill was designed to help consumers know the history of cars before they buy them, and insurance companies supported the bill because it got unsafe cars off the roads. But some body shop owners and wreckage companies say the percentage used to determine a total is just two low. They fear they'll lose business and consumers will lose repairable cars while insurance companies rake in more profit from the salvage of these vehicles.
Insurance companies recover enough money from the salvage price of the vehicle that it is often cheaper for them to total a vehicle than to repair it, body shop owners said.
"They'd rather pay $5,000 to a customer and get $3,000 back" for salvage than pay out the $3,000 it would cost to repair the vehicle, Maty Perez, owner of D&N Auto Collision.
Other body shop and wreckage company owners said the law will hurt the automotive industry as a whole as well as consumers.
Some local body shop owners are so upset over the law they say uses an unfair monetary percentage in determining totals that they are organizing their own body shop association to protest it.
"It is my understanding that the law is designed to help a consumer but in reality it is going to hurt them," John Galli, Metro Collision Center manager, said. "(The percentage rate) is too low now. It's going to cause a lot of cars to not be fixed that easily could have been fixed. It's not a structural total, it's just the total dollar amount to fix it."
Others in the industry say the percentage is fair but is just being misinterpreted by some insurance agencies and body shops, who are including elements in the repair estimate that are prohibited by the law such as the cost of paint, towing, storage and rental car fees.
"Both body shop owners and insurance companies don't understand the law or how to apply it," Mike Spears of Green Valley Collision said.
Many body shop owners who talked to the Sun said they were confused about what the AB325 bill entailed, and those who said they did understand the bill said the percentage gave insurance companies too much leeway in how adjustors write estimates.
The bill gives insurance companies the right to use either new, used or rebuilt parts in the estimate, which Buckley said could make the difference on whether borderline cars are totaled under the law. She said the DMV may need to conduct more seminars to explain the bill to those in the industry.
Buckley said she wrote the law, which also protects against vehicle and title fraud, and after more than 400 flood-damaged cars from North Carolina were brought into the state.
"Those cars ended up being sold here, and nobody knew because the laws were so weak," Buckley said.
Buckley said she negotiated the 65 percent with B&E Auto Auction owner Robert Ellis, who works with most of the state's insurance companies, along with State Farm and Farmer's Insurance representatives, Enterprise Rent-A-Car, consumer advocates and other lawmakers.
"Everyone thought it was a fair compromise which would achieve the goal of getting these unsafe wrecks off the roads and let consumers know what they are purchasing," Buckley said.
Before, the law read that a car was totaled when the insurance agency and the customer determined it was uneconomical to repair. The cost percentage ranged from 50 to 80 percent depending on the company, Charles Knaus, an actuarial consultant for the state Insurance Division, said.
Knaus and representatives for several major insurances companies said the percentage really is not far off previously standards. The law also makes an exception for vehicles 10 years old or older that have minimal structural damage.
The law requires cars deemed a total loss to be registered as salvage vehicles with the DMV. The DMV must clear these cars before they are rebuilt, and then the car and all of its safety equipment must be certified by a licensed auto repairman as restored to the manufacturer's specifications, Ralph Felices, chief investigator with the DMV's Northern Compliance Enforcement Division, said. The car is then issued a new title that brands it as as rebuilt or restored vehicle, Felices said.
Representatives of the Nevada Insurance Council, State Farm, Allstate, Farmers and Progressive insurance companies, all said the law would have a minimal effect on insurance rates and served as a good bill to protect consumers from unknowingly buying rebuilt cars.
"The intent of the law is to protect consumers from buying cars that should have never been rebuilt," Joe Gacioch, corporate relations manager for Allstate's Southwest region, said.
The law may also reduce rates, Ellis said, because it keeps unsafe cars off the streets.
"(Before) if someone burnt a vehicle to the ground or a car rolled up in a ball, those cars could go back on the highway because we had no laws to protect the consumer," Ellis said. "Insurance companies don't want to put these cars back on the road and reinsure them."
Accent Auto Body manager Bill Emerson, 60, and other body shop managers and owners agree with the purpose of the law, but they say the percentage is just way two low.
"What they are trying to do is stop shops from fixing or putting back on the street cars that have been structurally impaired," Emerson said. "But it should be more depending on the vehicle itself. If it's an older car, but in tip top shape, the numbers are not going to warrant totaling it out."
Body shop owners said a flat cost percentage does not take into consideration other factors such as how the car was hit, whether it was structural or mechanical damage or simply cosmetic, what it would take to repair it and the previous condition of the vehicle such as the shape the engine or the transmission is in.
For instance, a car may only have a fair market value of $1,200, but it may have a brand new engine or transmission in it. That car would really be worth $2,700, Auto Body Rebuilders Inc. owner Henry Lucero said.
"They don't care what money has been put into that vehicle, all they are looking at is the $1,200," Lucero said.
"It shouldn't be a dead percentage, it should, to a point, be open to the condition of car."
The way cars are now built also make it easier to sustain a high amount of damage in relatively minor accidents, body shop owners and wreckage companies said. For instance, the bumpers on most cars are rated at about two miles an hour, Mark Roth, assistant manager at A Any & All Auto Wrecking, said.
"See, how these cars are made now-a-days it doesn't take much of a hit to hurt a car," Roth said. "It's not like the old days where you had a lot of steel. It's all plastic these days."
Lucero and other body shop owners also said the new law doesn't address a bigger problem -- individuals who rebuild cars themselves without the right knowledge or equipment.
Proponents of the law, however, say it will go a long way toward consumer protection because it is backed by stiff penalties.
Garages found to have given fraudulent inspection will lose their license and sellers who fail to notify consumers of a car's rebuilt status may face criminal felony charges and/or pay up to three times the cost of the car in restitution. This includes anyone who tries to sell a car out of state, as Nevada's DMV shares information with other states.
archive
