Progressive Insurance Will Pay $87,500

Auto insurance company acknowledges that damaged cars should have been given a "salvage title" before being resold.

DES MOINES-- Attorney General Tom Miller announced Thursday that Progressive Insurance Company of Ohio has agreed to pay $87,500 to 45 consumers who purchased used cars that should have been given a "salvage title" designation by the insurance company because of prior damage to the vehicles.

Miller said an investigation determined that one of Progressive's Iowa branch offices had failed to obtain salvage titles after the company had taken ownership of vehicles from policyholders whose vehicles had been damaged. As a result, Iowa and other states issued titles without indicating a salvage title. The vehicles later were resold.

"The result was that subsequent buyers purchased the vehicles with no notice that the vehicles should have had salvage titles because of damage," Miller said. "Consumers very likely paid too much because the retail value of salvage vehicles is significantly less than non-salvage-title vehicles, even if vehicles have been repaired."

Miller said his Consumer Protection Division concluded that Progressive's violations occurred at only one Iowa branch office. The insurer owned up to the situation when it was called

to the company's attention, he said, and Progressive cooperated fully in remedying the problem.

Progressive is paying the State $127,500. Miller's office will be contacting the 45 consumers by mail shortly to notify them they are eligible for refunds totaling $87,500. Progressive also is paying the State of Iowa $10,000 for investigation costs and $30,000 to be used for consumer education and litigation.

Miller said twenty owners of vehicles with model years 1993 or newer will be eligible for payments of $2,500 each, and twenty-five owners of vehicles of model year 1992 or older will be eligible for payments of $1,500 each. Most of the vehicles were five or more years old. The Attorney General's Office identified the vehicles with cooperation by Progressive.

Miller also credited staff of the Iowa Dept. of Transportation for recognizing the situation and assisting in the investigation. South Dakota's Division of Motor Vehicles also assisted.

Progressive settled the matter under an "Assurance of Voluntary Compliance" with the Attorney General's Consumer Protection Division. Progressive agreed to comply with Iowa's salvage title laws in the future but admitted no liability under the Consumer Fraud Act or other law.

Progressive Insurance Company is part of Progressive Corp., an Ohio corporation which insures motor vehicles in Iowa and other states and is licensed to do business in Iowa as Progressive Casualty Insurance Company, Progressive Classic Insurance Company, Progressive Northwestern Insurance Company, and Progressive Specialty Insurance Company.

Miller said salvage titles are required in Iowa when insurance companies settle with their policyholders by taking ownership of vehicles from the policyholders because of damage to the vehicle, or because the vehicle was reported as stolen and not recovered. Salvage titles also must be obtained by licensed auto dealers and auto rebuilders when they take ownership of a vehicle that is damaged to the extent that the cost of repair exceeds 50% of the fair market value of the vehicle before it was damaged.

Miller said failure by sellers to disclose prior damage is one of the main ways buyers can be short-changed in purchasing used vehicles. He offered tips for buyers to avoid the problem:

Always test drive a used car, and take it to an auto technician and a body shop you trust for an inspection before you buy. Never buy a used car from a dealer or person who will not let you test drive it and have it inspected prior to purchase.

Check out the history of a vehicle before buying. Review the front and back of the most recent title and any damage disclosure or odometer statements, if available, for indications of problems. Ask if the seller can provide the name, address and telephone number of the prior owner and, if so, contact the prior owner for information about the vehicle.

Miller said that consumers should contact the person or dealer who sold them a vehicle if they find out they unknowingly purchased a vehicle that had previously been titled as salvage in Iowa or any other state, or had otherwise been involved in a major wreck. If that does not resolve the problem, buyers should contact a private attorney, consider pursuing the matter in small claims court (for claims under $4,000), or file a complaint with the Consumer Protection Division: 515-281-5926.