Posted On: January 12, 2008, 11:27 am CST

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Tens of thousands of drivers across the nation have recently received notices from state attorney generals with some shocking news: used cars they purchased in good faith were actually salvage cars that had not had their titles changed, due to a "mistake" by State Farm Insurance. In some noticed letters, such as those sent in Pennsylvania, the consumer is advised that because of the glitch, the vehicle certificate of title must be "frozen" pending return to Pennsylvania Department of Transportation for issuance of a new salvage title. Consumers are then encouraged to accept a partial cash reimbursement for the loss of value, under a schedule based upon the purchase price paid for the car. Even if a consumer accepts and signs, the amount to be received is described as "an approximate", though the consumer is giving up their right to pursue other remedies. The amount offered is part of an agreement between attorney generals and State Farm, requiring the insurance carrier to pay millions of dollars directly to the attorney generals for "legal fees and expenses".

The Pennsylvania letter notifies consumers that by accepting, they are required to disclose the salvage history to any subsequent buyer of the vehicle, but does not indicate:

that salvage title cars are nearly worthless in the used car market;

that the amount being paid under the plan is but a small fraction of the actual losses related to the change in classification of title;

that mechanical or other charges incurred by the consumer as a result of the salvage history will not be reimbursed;

that the consumer is not required to accept the amount and may do much better by filing suit on their own against State Farm or their dealer;

Whether any of the "total loss" vehicles pose a danger to the driver or public from continued use.

The Automotive Consumer Advocacy and Lemon Law Firm of Kimmel & Silverman believes these proposals unfairly favor State Farm Insurance by limiting liability for its conduct to a small percentage of the true losses consumers have suffered by the "mistake", in ways that the attorney generals may not have recognized or appreciated when negotiating the settlement. If you purchased a State Farm salvage car and have recently found out about its history, we'd like to hear from you.