New Texas Flood, Same Salvage Problems
It is starting to feel like a broken record.
It is starting to feel like a broken record. Every year around this time we are reminding dealers of the vulnerabilities that exist immediately after ANOTHER flood devastates the Texas and Louisiana coast.
In next month's Texas Dealer (October ‘20) you will find tips on how to protect yourself and your consumers by spotting signs that a vehicle has been flooded. In this week's blog, we will look at the process an insurance company and an individual are required to take when a vehicle is determined to be salvageable or nonrepairable due to flood.
Flood Damage is a title remark used by the TxDMV that is initially indicated on a Salvage or Nonrepairable Vehicle Title to denote that the damage to the vehicle was caused exclusively by flood. This remark is carried forward on subsequent title documents. All requirements for Salvage or Nonrepairable Vehicle Titles and sale restrictions apply.
However, it may take weeks for these remarks to appear on a title and there may be some instances when the remarks never appear. All dealerships and buyers will be vulnerable during this time.
Let's dig in.
When a licensed insurance company acquires ownership or possession of a salvage or nonrepairable motor vehicle with a Texas title, it must obtain a Nonrepairable or Salvage Vehicle Title before selling or transferring ownership of the vehicle. Straightforward, right? Ah, if only the world was that easy.
If the insurance company pays a claim on a salvage or nonrepairable motor vehicle and the owner retains the motor vehicle as a part of the settlement, the owner must obtain a Nonrepairable or Salvage Motor Vehicle Title before selling or otherwise transferring ownership of the salvage or nonrepairable motor vehicle. In this instance, the insurance company is required to submit an Owner Retained Report (Form VTR 436) to the TxDMV stating that the insurance company paid a claim on the motor vehicle and has not acquired ownership of the motor vehicle.
The insurance company must submit Form VTR-436 before the 31st day after the date of the payment of the claim. Once the form is received by TxDMV, it is typically processed within 10 business days.
An individual who retains a salvage or nonrepairable motor vehicle is required to complete Form VTR-441, Application for Salvage or Nonrepairable Vehicle Title.
Starting to see the issue here?
An individual can possess what appears to be a clean title on a vehicle that has been deemed salvage (flood) for over a month before any remarks appear on the title. If the individual doesn't submit VTR-441 the system is dependent on the insurance company to report, and that doesn't happen overnight.
Once the TxDMV receives Form VTR-436, it will mark the motor vehicle record with the appropriate remarks in order to prevent registration or transfer of ownership of the motor vehicle until the owner applies for the appropriate ownership document.
Until a Salvage or Nonrepairable Vehicle Title is issued for an owner retained vehicle, the owner may not sell or otherwise transfer ownership of the vehicle; or operate or permit operation of the vehicle on a public highway. Unfortunately, enforcement regarding these requirements is unknown.
Oh, and there is more.
If the owner of the flooded vehicle does not have comprehensive insurance coverage, there is a good chance the vehicle title will never reflect the fact the vehicle was flooded.
As you can see, dealers and consumers face considerable risk of receiving a vehicle that is determined by an insurance company as a Salvage or Nonrepairable prior to Form VTR-436 being processed by TxDMV for an owner retained nonrepairable/salvage vehicle and the information being recorded. And if there is no insurance involved, the risk is even greater.
TxDMV has a flood damage check list that includes additional resources dealers can use to protect their investment.