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Damaged cars could end up being resold.
By Sharon Silke Carty, USA TODAY
DETROIT — One of the enduring images from Hurricane Katrina is of cars, trucks, even school buses submerged up to their roofs in slimy, oily floodwaters.
A New Orleans car
dealership under floodwaters
on Sept. 1. By Phil Coale, AP
Consumers are being warned to watch out for flood-damaged cars ending up on the used car market, but insurance experts working in the area say the cars are so far gone that it will be hard for scam artists to hide the flood damage.
"And they smell," says Kip Diggs, a spokesman for State Farm, which is the leading car insurer in the Gulf states. "It's not something an evergreen tree hanging from the mirror can take care of."
Flood-damaged cars appeal to unscrupulous sellers. They can buy them cheaply from salvage yards, clean them up and resell them as if in tip-top shape because water damage can be difficult to detect. But an insurance company often will consider a car a total loss if water came just to the bottom of the door frame because that could mean electrical system problems.
Diggs says State Farm has received 79,000 claims for cars damaged in Katrina and subsequent New Orleans flooding. Some vehicles were damaged by falling trees and debris; others were simply washed away and are missing. Those that were stuck underwater are covered in "strange sediment and gunk" that smells "musty and funky," Diggs says.
"Many times after a very wet storm, we have to be careful about people trying to dry out cars and then sell them," says Bill Bailey, managing director of the Hurricane Insurance Information Center. But, this time, damage is so severe "that it's going to be hard to disguise that the car came from Katrina."
Still, insurance companies aren't taking any chances that these cars will get back on the road. Water damage can make air bags, brakes and other critical systems malfunction, so State Farm is putting flood-damaged cars in secure areas until it can figure out what to do with them.
Once a car has been totaled because of flood damage or other reasons, some states add that information to the vehicle's title.
Louisiana doesn't, but it requires sellers to disclose water damage to buyers, says Erica Eversman, general counsel for Vehicle Information Services.
"The problem is, if you take that vehicle out of Louisiana and you sell it in Michigan," the seller is no longer obligated to follow Louisiana's regulations, Eversman says. "We are going to see a lot of these vehicles moving all around the country."
The National Insurance Crime Bureau has sent teams of investigators to Baton Rouge and Mobile, Ala., to begin a national registry of cars damaged by Katrina to prevent dealers from reselling them.
"By creating a registry of damaged vehicles now, the potential for this type of fraud can be greatly reduced," Robert Bryant, CEO of NICB, said in a statement.
What to look for
There are some ways to determine whether a used car has been damaged by a flood, says Lauren Fix, co-host of Talk2DIY Automotive on the DIY Network.
Rust. A car shouldn't have rust underneath the dashboard or on interior trunk or hood hinges.
Water stains. An oddly shaped brown ring is a sign that the rug or upholstery has taken a bath. New or mismatched upholstery also should set off alarms.
Droplets in light fixtures. Water may get clogged in the interior or exterior lamps.
Evasive answers. Someone trying to pass off a flood-damaged car may give evasive answers on whether a car was in water. "Answers like, 'Not to the best of my knowledge' or 'The last owner didn't tell me' should be a big sign," Fix says.
VIN stickers. Buyers should look at the VIN number on the vehicle title and make sure it matches the number etched on the driver's-side door post and on the driver's-side dashboard near the window.
Independent inspector. Many auto repairmen will check out a used car for a fee. If a car seems like too good a deal, it may make sense to spend the extra money to make sure further repairs won't be needed.
By Sharon Silke Carty
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