Dear Michigan Consumer
When you purchase a used vehicle in Michigan, you have certain rights and remedies when it turns out that you have unknowingly purchased a "rebuilt wreck." A rebuilt wreck is a vehicle that has been declared by an insurance company to be a total loss and then later rebuilt and sold without disclosure of the prior accident damage. Consumers who have been sold a rebuilt wreck may be entitled to have the vehicle bought back.
Although this letter is lengthy, we believe it contains important information that will be of interest to you if you are one of the thousands of victims of State Farm Insurance Company's salvage title debacle.
Salvage Title Law
Under Michigan law, an insurance company who acquires title to a vehicle after declaring the vehicle to be a total loss is required to obtain what is known as a "salvage title" if the estimated cost of repair is 75% or more of the vehicle's pre-crash fair market value. If the estimated cost of repair is 91% or more of the vehicle's pre-crash value, then the vehicle is to be titled as "scrap" and not rebuilt or resold to consumers, such as yourself. Typically, a salvage title will reduce the value of a vehicle by at least 50% or more when compared to a similar vehicle with a regular title. Further, rebuilt wrecks frequently have more mechanical and structural problems, many of which render the vehicle unsafe. The purpose of the salvage title law is to protect consumers from unknowingly purchasing vehicles that may be unsafe and worth far less than the purchase price.
State Farm Insurance Company Failed to Obey the Law
Recently, several state attorneys general, including Michigan's Attorney General, began investigating claims that State Farm Insurance Company had failed to obey the salvage title law after declaring vehicles to be a total loss. You are receiving this letter because, according to State Farm Insurance Company's records, you may have unknowingly purchased one of these vehicles. If so, you will likely be receiving a letter from the Michigan Secretary of State requiring you to have your vehicle re-titled as "salvage." This letter will offer you compensation which, the Attorney General's office has estimated, will average from $800 to $1,850.00, depending on the current value of your vehicle. You can read more about the State Farm settlement by going to: "http://www.michigan.gov/ag" and clicking on "key initiatives," and then "Consumer Protection."
State Farm Settlement is "Opt-In"
You are not obligated to accept State Farm's settlement offer. We thought you might want to know about your rights and remedies, so that you can make an informed decision as to whether the settlement is right for you. While each individual case must be evaluated and this information is not a substitute for legal advice, what follows is general information concerning typical claims that may arise from the failure to follow proper titling procedures. If you would like us to evaluate your individual situation, we will be glad to do so at no charge to you.
FREQUENTLY ASKED QUESTIONS
Q - What if I already signed the State Farm claim form and sent the paperwork back?
A - The settlement is not final until you receive and cash a check. This means that as long as you have not received your settlement check and cashed it, you still have the option of pursuing other remedies.
Q - What are my rights and remedies against State Farm?
A - Michigan law allows you to bring a claim against State Farm based on State Farm's failure to obey the salvage title law. Remedies can include recovery of your actual damages, statutory damages or even a repurchase of the vehicle, plus your costs and attorney fees. These damages may well exceed the amount being offered under State Farm's settlement with the Michigan Attorney General. For example, in 1998, when State Farm got caught doing the same thing in Indiana, State Farm was ordered to refund each consumer's original purchase price, plus finance charges, taxes, insurance premiums and repair costs. For consumers who no longer had their vehicle or, who wanted to keep their vehicle, the minimum settlement was $2,500.
Q - Do I have any rights against the dealer that sold me a rebuilt wreck?
A - Michigan's Motor Vehicle Code requires a used vehicle dealer to show the consumer-buyer any reassigned titles in its possession. The reason for this statute is to allow the buyer an opportunity to see who previously owned the vehicle. When you see an insurance company or body shop in the chain of title, this normally means that the vehicle was in a serious collision and rebuilt.
If the dealer fails to follow the law, it is generally presumed that the dealer was attempting to defraud the consumer by failing to disclose the vehicle's true history. Under the law, a consumer who has been defrauded in this manner may be entitled to a repurchase of the vehicle and/or 3 times his or her actual damages or $1,500, whichever is greater. Further, the law requires that the dealer pay the consumer's costs and attorney fees.
Q - What if the dealer did not know about the vehicle's history?
A - As between an innocent dealer and an innocent consumer, the consumer normally wins. This is because the law recognizes that the risk of loss should be on the dealer who is in the business of selling vehicles, rather than on the consumer who is relying on the dealer to sell a vehicle that meets the contract description. Remember, too, that a truly innocent dealer will have its own claim against State Farm for any losses that it sustains as a result of State Farm's failure to obey the law.
Q - My vehicle is financed - do I have any rights against the bank or finance company?
A - If the dealer arranged your financing, state and federal laws provide that you have the same claims and defenses against the bank or finance company. This often means that you can recover the payments made under the contract and even cancel the remainder of the contract.
Q - Will having a salvage title affect my insurance coverage?
A - Most insurance companies will not offer you collision coverage on a salvage vehicle. Further, even if your insurance company will continue to provide collision coverage, you may still have a problem in the event of a claim because the insurance company will not want to pay for damage that was pre-existing or damage that was worse than normal because of the previous damage. If your vehicle is financed, these insurance issues can be an even bigger problem - if you are unable to maintain full collision coverage on your vehicle, the bank or finance company may declare you in default on your loan and accelerate the balance due under the finance contract.
Q - What if I purchased my vehicle from a private owner?
A - You may still have claims against State Farm for failure to obey the salvage title law. In addition, if the repairs to the vehicle were shoddy, you may have claims under the Motor Vehicle Service and Repair Act against the repair facility that did the work. This Act provides for double damages if the misconduct was willful and also provides that the consumer is entitled to recover costs and attorney fees.
Q - Will it cost me any money to hire a lawyer to help me?
A - We do not charge a fee for evaluating your case and advising you as to your rights and options. In most cases, the applicable statutes will require that the other side cover your costs and fees.
Q - Should I start or join a class action?
A - Class actions are often helpful in cases where the damage to each individual is small but, the misconduct is spread across a large number of people. However, we have found that class actions are not helpful where the damage to each individual is substantial and may require individualized relief, such as the repurchase of the affected vehicle. Although our firm handles consumer class actions, we believe that most salvage title cases should be addressed on an individual basis, so as to afford each individual the fastest, most complete remedy possible.
A - The statutes we mentioned above are just a few of the many consumer-oriented laws that apply to vehicle sales and repairs. State laws include the Uniform Commercial Code, the Consumer Protection Act, the Motor Vehicle Service and Repair Act, and the Motor Vehicle Finance Act. There is also a federal law called the Magnuson-Moss Warranty Act. As with the laws mentioned above, these laws also provide for recovery of costs and attorney fees if you win your case.
Our firm has been representing consumers in automotive fraud and warranty claims for more than 23 years. We have successfully handled well over 10,000 consumer claims on behalf of vehicle owners. If you have questions or concerns, please call us. We will be glad to talk with you by telephone or to meet with you in person -- and there is no charge for our initial consultation. Although you may decide to accept State Farm's offer, you will have the peace of mind of knowing that you explored all of your options and made the decision that is right for you.
Thank you for taking the time to read this letter. We look forward to hearing from you.
Dani K. Liblang
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