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December 29, 2017 01:00 AM

Rising risk from uninsured, flooded cars

Fixed Ops Journal
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    Derrest Williams photo
    Flood waters from Hurricane Harvey swallow up a car along the streets of Houston.

    DETROIT — As Hurricane Harvey was dumping up to 50 inches of rain on pancake-flat Houston in late August, auto insurers hastily assembled vehicle inspection teams to catalog the damage.

    But even as thousands of trained inspectors descended on the Bayou City, they realized things weren't going as planned.

    "We weren't busy enough," recalled Eric Widmer, senior vice president of Alliance Inspection Management.

    It was clear that many flooded vehicles simply weren't insured.

    Mr. Widmer said insurers make sure that flooded vehicles damaged beyond repair are retitled as junk or salvage and share those vehicle identification numbers with national anti-fraud databases. But uninsured vehicles "don't get branded as junk or salvage and may be resold in private sales," he said.

    "The fraud starts now," Mr. Widmer warned. Those damaged vehicles "are going to go everywhere. The airbags may work now, but later when corrosion sets in, they may not."

    Jonathan Smoke, chief economist for Cox Automotive, said used-vehicle specialists must be alert.

    "The industry has many years of the possibility of vehicles in the market with significant flood damage," he said. "It will require a level of due diligence for five years until those vehicles fall out of the commercial market."

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