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State Farm's Rebuilt Wrecks

By Lisa Wade McCormick
ConsumerAffairs.com

September 25, 2006

• Certified Dangerous: Used Cars' Airbags • Insurers & the Rebuilt Wrecks Scam • State Farm's Rebuilt Wrecks • How To Protect Yourself • Airbags in New Cars Seldom Fail, Experts Insist • A Baffling Airbag Case • Airbag Safety Tips • A Short History of the Airbag --- Company Responses • DaimlerChrysler • Ford • GM • Honda • Kia • Mitsubishi • Nissan • Volkswagen --- More About Airbags • BMW Recalls 200,000 Vehicles for Airbag Failures • Feds Probe Airbag Failures in BMWs • Honda's Immaculate Airbag Deployment • New Airbag Rule on the Way • Researcher Says Airbags Pose Threat To Hearing

One of the most famous cases of rebuilt wrecks getting back on the road involved the county's largest car insurance company.

On January 10, 2005, State Farm Insurance publicly disclosed it had totaled at least 30,000 vehicles nationwide, but failed to change the titles to reflect the previous damage. The company admitted this practice happened for more than five years -- from 1997-2002 -- and called it a "mistake."

Many of those vehicles were repaired and sold to unsuspecting consumers as safe, used vehicles. They all had clean titles and consumers did not know they were rebuilt wrecks.

A Minnesota woman, for example, paid $19,000 for one of those vehicles -- a 1999 Acura. She didn't learn until later that State Farm had totaled the Acura because it was in a rollover accident.

State Farm later agreed to pay $40 million to consumers nationwide who were still driving the vehicles -- a settlement many consumer advocates called "inadequate."

State Farm, for example, offered the Minnesota consumer $3500 in compensation for buying the previously wrecked Acura. That was about one-fourth of its Blue Book value of $12,500 -- if it had a clean title.

The Acura, though, would never have a clean title again. The Minnesota woman had to retitle the vehicle as salvage, and its value dropped substantially.

Years earlier, Indiana officials caught State Farm engaged in this same practice of not changing the titles on totaled vehicles.

In those cases, State Farm agreed to give car buyers full compensation.

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