NICB Warns Against Illegal Resale of Flood-Damaged Vehicles

Special insurance industry teams will be assisting Gulf Coast law enforcement and insurers in identifying and cataloging vehicles damaged by Hurricane Katrina to prevent their fraudulent resale to unsuspecting consumers in the future.

The National Insurance Crime Bureau (NICB), based in Palos Hills, Ill., is dispatching special catastrophe teams to Baton Rouge, Louisiana and Mobile, Alabama. The effort is expected to last from six months to a year.

Authorities estimate that thousands of vehicles have been damaged by flooding in the New Orleans area alone. That number is expected to grow as claims from Mississippi are processed, and as other hurricanes hit the stricken Gulf Coast.

So far, estimates from several different agencies in Louisiana put the figure of flood-damaged vehicles at a minimum of 100,000 to as many as 300,000 in that state alone, said Frank Scafidi, NICB director of public affairs. This doesn’t include numbers from Mississippi and Alabama, he added.

Once the flood-damaged cars are towed to storage facilities, NICB catalogues the vehicles by VIN number with insurers who have already settled claims. Data will then be compiled by VIN number for electronic access to state DMVs, law enforcement and insurance company SIUs.

Reselling totaled vehicles is always a fraud problem, but the problem is exacerbated by the sheer volume of cars damaged by Katrina flooding, Scafidi said. Unscrupulous salvage operators and dealers often try to conceal the fact that vehicles have been damaged by a natural disaster from potential buyers. Scam artists buy flood-damaged vehicles at salvage, paying as little as $500 to $1,000 for a late-model SUV, Scafidi said. They then spend several thousand fixing up the vehicle, even repainting it, and reselling it for $20,000 and more, all of which is profit for them.

Meanwhile, Midwestern state insurance departments and attorneys general are warning citizens about flood-damaged vehicles. Kansas Insurance Commissioner Sandy Praeger warned that while flood-damaged cars are not often found in the state, the fact that thousands of autos were abandoned in the wake of Hurricane Katrina could mean some will make their way to the Midwest.

Insurers usually purchase damaged vehicles from policyholders, declare them “totaled” and then sell them at auction to be resold for parts, many of which will still be suitable for use in other cars and trucks. However, some unscrupulous “entrepreneurs” may clean them up and resell them to unsuspecting buyers, Praeger said.

“It is important that used car buyers be extra cautious right now,” Praeger said. “Consumers should do a little extra investigating if deals or prices seem too good to be true. Even when vehicles look clean and to be in good condition, there may in fact be hidden defects that could pose danger to buyers down the road.”

“Red flags” of flood-damaged vehicles could include those that end up at auctions, lower asking prices, water marks on the engine block or radiator, rust or corrosion on wires under the hood, carpeting witha damp or musty smell, or rusted jacks and tools in the trunk.

Topics Flood