State Farm® Supports Uniform Salvage Titling Laws

State Farm handles in excess of six million auto physical damage claims involving vehicle damage or theft each year. Of those claims, some will result in the payment of the vehicle’s actual cash value to its owner, rather than payment based on an estimate of repairs – this is often called a “total loss” claim. Whether a vehicle is deemed a total loss depends on various factors, such as the vehicle’s age and the type or extent of the damage. Under certain circumstances, vehicles designated a total loss may require a branded or salvage title.

The differences among state vehicle titling laws make it difficult to comply with branded title requirements. This issue affects insurers, self-insurers and vehicle owners who retain salvage vehicles. This problem is compounded because vehicles move from state to state, and it is often difficult to determine which state's laws apply.

State Farm supports:

• Uniform definitions and procedures regarding the titling and registration of salvage, non-repairable, flood, and rebuilt vehicles designated as total losses as an important step toward deterring vehicle theft and consumer fraud.
• Consumer access to motor vehicle total loss information that conforms to privacy laws.
• The work of regulators and legislators toward public policy changes that will bring about better uniformity in branded vehicle title laws.

Actual Cash Value (ACV)

When settling total loss claims, the actual cash value (ACV) of a vehicle is determined by the market value, age and condition at the time the loss occurred. ACV is sometimes referred to as the amount a willing buyer would pay a willing seller. Note: Some vehicle title statutes reference ACV as a benchmark for determining when a branded title is required.

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Differences Among State Vehicle Titling Laws

Branded vehicle salvage laws and procedures vary significantly from state to state. In many states, whether a branded title is required for vehicles that are designated as total losses depends on a number of factors, including the cost to repair and the actual cash value (ACV) of the vehicle. While some states exempt certain vehicles from their salvage or branded title laws based on the model year or type of vehicle, other states follow different procedures.

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Following are some issues confronting insurers and consumers regarding branded vehicle titling.

Branded Vehicle Title Issues

The wide diversity among state branded vehicle titling laws makes it extremely difficult for insurers to meet their goal to comply with these requirements. The problem is exacerbated because vehicles move from state to state, and it is often difficult to determine which state's law applies. In addition, the various departments of motor vehicles have different capacities for searching records and may have limited resources, making it difficult to confirm branded vehicle titling in some states.

Among the 50 states, few, if any, have identical motor vehicle branded title laws. In addition, the types of branded titles and the terminology used to describe the vehicles also vary from state to state ("salvage," "rebuilt," "non-highway," "damaged," etc.) and the procedures for obtaining a branded vehicle title vary by state (inspections, VIN cancellation, notification only, stamping of titles, etc.). Because the various states do not use consistent terms to identify branded vehicle titles, terms applicable in one state may not be recognized by other states.

• Title Law Interpretations: Adding to the complexity and diversity of the states' branded vehicle titling laws is the fact that states differently interpret concepts and requirements set forth in their laws. This creates great ambiguity and the potential for misapplication of branded vehicle title laws. For example, states often exclude from their branded title laws vehicles of a certain age, but the wording of those age exemptions varies:
• Some states exempt vehicles that are a certain number of model years old on the date of loss or accident;
• Some states exempt certain model year vehicles based on when a new model year vehicle is released in the market-place;
• Other states exempt certain vehicles based on the raw age of the vehicle; and
• Still others exempt vehicles based on the year of manufacture.
• A few states require branded titles only on certain vehicles if their "gross weight" exceeds a certain threshold - but "gross weight" is not always clearly defined and thus could be interpreted as either a vehicle's gross weight capacity or the vehicle's unladen weight.

• Cross-State Handling: The problems relating to the differences in state laws can be further complicated when a vehicle moves among different states during the insurance claim process. For instance, a vehicle titled and/or registered in one state may be involved in an accident in a second state. By necessity, the vehicle might have to be towed to a third state, and possibly later sold to a rebuilder in a fourth state. A complex choice-of-law or conflicts analysis may be required to determine which state's branded vehicle title law applies to the vehicle.

• Repair Cost Percentages: In some states, title laws require a branded title only on a vehicle when its estimated repairs reach a certain percentage of the vehicle's pre-loss actual cash value. In some instances, it is possible that the initial estimates prepared on a vehicle may fail to account for all damage. This damage, if later found while repairs are being made, might increase the amount of the estimate over the repair cost percentage threshold and trigger the need for a branded vehicle title. It is important to note that percentage-based branded title vehicle laws have subjective components, and reasonable individuals may differ as to what repairs are necessary.

• Documentation: The issue of compliance documentation is complicated by the fact that in some states the DMVs do not provide confirmation of branded vehicle title status, such as after an application for a branded title has been made.

• Department of Motor Vehicle Records: While states generally allow for vehicle title history searches by insurers for claims purposes, few provide online access and many are limited to over-the-counter paper requests that often take weeks or months to process. Additionally, some state databases do not identify all brands a vehicle may have previously received from prior states' vehicle titling, making it nearly impossible in some instances to secure a complete vehicle title history.

Title Transfers: The American Association of Motor Vehicle Administrators (AAMVA) has recognized the continued problems resulting from confusion created by variances among state's vehicle branding title laws. This includes, for example, occurrences of salvage titled vehicles moving through less stringent states in order to obtain a clear title - a practice referred to as "title washing." Of course, State Farm strongly condemns such a practice and supports the efforts of the AAMVA to reduce title fraud and vehicle theft. To learn more about AAMVA's efforts, visit their web site.

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