California bill would prohibit sale of salt-water submerged vehicles
The alarm has been sounded for months now by auto recyclers - vehicles submerged in salt water from Hurricane Katrina have made their way to California on the black market. Now the California legislature is trying to do something about it. The full Assembly voted unanimously to pass A.B. 1854, a bill that restricts the sale, titling or registration in California of "nonrepairable vehicles," which it defines as any vehicle that had its passenger compartment fully or partially immersed in salt water such that any of its systems or components are not capable of conforming to manufacturer's specs; such vehicles could only be sold to licensed dismantlers to be scrapped; the dismantlers would be barred from selling the vehicles' parts: structural, mechanical, electronic, electrical, fuel, brake, safety systems, and computer-based components.
The bill, introduced in January by Assemblyman Jenny Oropeza (D- Carson), had the support of auto recyclers and the California Autobody Association. It provides for fines of up to $10,000 for repeated violations. Herb Lieberman of LKQ Corporation, a former president of the Automotive Recyclers Association, told Autobody News in January that investigators had observed vehicles from dealers' lots in New Orleans being loaded on trucks, supposedly to be taken north to be crushed by the manufacturers, but in fact the vehicles were trucked to Los Angeles and resold.
On May 9, the California Senate Judiciary Committee passed SB 1492 by a vote of 3 to 0, with Senators Dunn, Kuehl, and Escutia all voting aye. Senator Jackie Speier and Senator Dave Cox, co-authors of the bill, had recently amended SB 1492 to create a Rapid Resolution Program for auto repair disputes.
Existing law requires the Department of Insurance (DOI) to establish a program to mediate disputes between insureds and insurers arising out of claims under automobile collision or physical damage coverage.
SB 1492 would require the Department of Insurance to establish a Rapid Dispute Resolution program to
resolve auto repair disputes within five days. Participating insurers would be bound by the determination while the policyholder would not. Insurers who agree to participate will be required to notify policyholders of the program.
The program would apply to auto repair claims involving amounts between $500 and $7,500. A fee of not more than $300 will be paid by the insurer. The bill would become operative July 1, 2007 and remain effective until July 1, 2012, at which time it would expire if no further action is taken.
Testifying in support of the bill were Insurance Commissioner John Garamendi and California Autobody Association (CAA) members Lee Gamboa, Gamboa's Body and Frame, Roseville, and John Walker, P.J.'s Auto Body, North Highlands. They reported that there are numerous problems involving the consumer, repair shop and insurance company and currently the only option for resolution is through small claims court. Legislators hope that this quick and efficient resolution of disputes outside of small claims court would benefit thousands of consumers.
At a previous committee hearing held in November 2005, Gene Crozat, G&C Auto Body, Santa Rosa, testified that his customers had taken 250 disputes to small claims court and won over 90%. It was recognized at this hearing that for so many cases to be resolved in favor of the consumer, the system for resolving disputes before going to court is flawed.
According to the bill's author, Jackie Speier, "SB 1492 was introduced to provide some mechanism to reduce the number of disputed claims and to avoid having claimants going to small claims courts to seek recovery." Furthermore, Speier stated that "determination on most claims can be made within 5 working days because many of today's claims are settled using photographic evidence of damage to a vehicle and repair standards that are generally available to all parties."
Needless to say
Insurance companies dispute the extent of the problems. Jeff Fuller, executive vice president and general counsel of the Association of California Insurance Companies (ACIC) calls SB 1492 "legislation looking for a problem."
"As a threshold issue," said Fuller, "there appears to be no demonstrated problem that SB 1492 would resolve. There is no need to establish a rapid dispute resolution program, as proposed by the legislation, because there is no evidence that such a program is necessary," said Fuller.
In addition, he pointed out that the proposed program - which would be created in the Department of Insurance - would bind insurers to the state's decision, but not claimants. Fuller also questioned placing such a program within the Department of Insurance because the agency does not have any expertise in auto body repairs.
He added, "SB 1492 would accomplish nothing of benefit for consumers. Indeed, the bill would involve more inconvenience and waste of time for them, for insurers and the Department of Insurance.
"ACIC believes insurance consumers are well served by the current system which allows for both free market operation and consumer choice."