Columbians who have bought used cars from State Farm Insurance Co. since 1997 might receive compensation later this year. Their eligibility for compensation could be a surprise because many owners unknowingly bought cars that had been stolen or salvaged after being totaled.
State Farm, the country’s largest home and car insurer, will pay $40 million nationwide for totaled cars it sold without proper titles. It signed an agreement with attorneys general in 49 states and the District of Columbia to acknowledge the title errors. Indiana made a separate deal. The company is working with motor vehicle departments to locate an estimated 30,000 to 40,000 cars.
Hundreds of those cars will be in Missouri, according to a news release from the Missouri attorney general’s office.
“This case is unique because many consumers may not be aware,” attorney general spokesman Jim Gardner said.
Insurance companies often assume ownership of stolen or damaged vehicles from policyholders and obtain “branded” titles that indicate the condition of the vehicles before they are sold.
Jessica Robinson, a spokeswoman for the Missouri Department of Revenue, said insurers can make their own judgments about the degree of damage to vehicles. When the companies assume possession of a car and register it with a title declaring it salvage or junk, the vehicle is exempted from sales tax.
Columbia car dealers said cars that carry damage titles sell for an average 50 percent less than those with clean titles.
State Farm spokesman Phil Supple said the company is providing Vehicle Identification Numbers of wrongfully titled cars to motor vehicle departments so they can check whether the cars are registered in their states. Once identified, the owners of the cars will receive a letter from the attorney general instructing them how to apply for compensation. Payments will be sent out from late summer to early 2006.
Supple said the process will take a long time because “cars are mobile. It can be sold in one state and bought in another state.”
State Farm, which is based in Bloomington, Ill., and has a regional headquarters in Columbia, approached the Iowa attorney general in November 2003 and reached a multistate settlement, which was announced in January.
“We are talking about 30,000 consumers nationwide,” Gardner said. “Surely it’s more significant than local individuals who renovated six or seven cars and sold them without proper title.”
Compensations will range from $400 to $20,000, depending on the vehicle’s value. Most payments will be between $800 and $1,850.
The payment will be made only for cars still on the road. Supple said some improperly titled cars were purchased as long as 10 years ago and might have been junked already. Those owners are ineligible for compensation.
Only current owners will receive money, regardless of who bought the car from State Farm. The reason, Supple said, is that “if you bought a car, drove that for four years and sold it, it would be under the same title and people won’t pay you less.”
State Farm has concluded that 1.5 percent of the 2.4 million cars and trucks it has sold in recent years have title problems. Its explanation for failing to get proper titles, Supple said, is that “different states have different regulations.” In Illinois, for example, vehicles with greater than 73 percent damage are declared a total loss. In Missouri, the threshold is 75 percent.