Are Insurance Companies Selling Salvaged Cars As Clean?

A Tony Kovaleski Investigation

Two state agencies have begun pulling and reviewing hundreds of records of recent car sales because 7NEWS caught two insurance companies saying one thing and doing another.

Savannah Jakober loved her Jeep Cherokee. Last November, she hit a patch of ice and crashed her Jeep into a concrete barrier. She said her vehicle did not have a lot of damage.

"I had more or less a fender bender," Jakober said.

But the insurance company told her the car was totaled.

John Schafer's car was also considered a total loss by his insurance company after damage from a hail storm. He said he never expected that a hail-damaged Pontiac Bonneville would get totaled out like that.

"They told me that they were going to total the car out. If I wanted to buy it back from them it was going to have a salvage title," Schafer said.

Jakober said her insurance company told the same story.

"Every time I asked about the car they would just tell me it's totaled. It will have a salvage title. It will have an 'S' on the title from here on out," she said.

A salvage title in Colorado has one key purpose and one major impact, 7NEWS Investigator Tony Kovaleski said. First, it warns all future buyers the car has sustained serious damage. The financial impact comes once the state stamps the title with the letter 'S,' significantly dropping the car's resale value.

But Kovaleski found both Jakober's and Schafer's insurance companies selling their cars at an auto auction and both cars were sold with clean titles.

"That's pretty much lying straight to my face," said Schafer.

Savannah Jakober's Jeep Cherokee was damaged when she crashed into a concrete barrier. Her insurance company told her that it was totaled but then sold it at auction without a salvage title.

"If I had known it would have a good title, I would have my car today," Jakober said. "I didn't want a check. I didn't want money. I wanted my car back."

"This is just disgusting, and it's something that people shouldn't sit still for," said consumer protection attorney Bernard Brown.

Brown questions the motive of the insurance companies.

"The insurance companies are real aware of how much more they can sell cars for if they don't have salvaged titles," he said.

Insurance companies make more money with a clean title, and under Colorado law, it's all legal.

"Our titling laws are a joke, with regard to salvage vehicles," said Colorado house minority leader Rep. Joe Stengel.

Stengel is fighting to remove loopholes in Colorado's laws that essentially say a total loss does not equal a salvaged title. He said these two consumer situations are shining examples of why Colorado's laws aren't tough enough.

"I think clearly it is why we need to go back and re-examine our salvage titling laws," Stengel said.

John Schafer's Pontiac Bonneville was damaged by hail. His insuranced company told him that it was totaled and if he wanted to buy it back, it would have a salvage title.

Responding to 7NEWS' investigation, Schafer's insurance company, State Farm, said it regrets any miscommunication and considers his case an "isolated incident."

Jakober's insurance company, Farmer's Insurance, apologized for the miscommunication, saying in part, the contract adjuster handling this claim incorrectly advised the Jakobers.

"I don't know how to get the insurance company to understand what they took away from me," Jakober said. "They weren't listening to anything I had to say. All that was going through their heads was money, money, money."

"I'm sure the best way to penalize a place like that is in the pocketbook," Schafer said.

"I pay them to protect me, not take my money and rob me," Jakober said.

Although industry experts tell 7NEWS that cars with clean titles are more valuable than cars with salvage titles, the insurance companies said they did not profit from the miscommunications. Farmer's Insurance said it is launching an internal investigation to determine if there are more cases like Jakober's. State Farm said digging deeper is not necessary.

Because of this 7NEWS investigation, the Colorado Division of Insurance and the state Motor Vehicle Department are reviewing thousands of car and truck sales by insurance companies through salvage yards.

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