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Salvage and Nonrepairable Vehicles Hit the Market
- By: Guest Blogger
- On: 09/07/2017 15:29:31
- In: Texas Posts
- Comments: 14
By Karen Phillips
General Counsel, TADA
With Hurricane Harvey and its aftermath expected to destroy up to 1 million cars in the Southeast Texas area, now is a good time for dealers to take a look at the process that an insurance company and an individual is required to take when a vehicle is determined to be salvageable or nonrepairable. In this guest blog from Karen Phillips, General Counsel for the Texas Automobile Dealers Association, she explains that process.
Additionally, it is important for dealers to remember that while the Texas Department of Motor Vehicles (TxDMV) is preparing to process a mass of applications, it may be weeks before the notations appear in the state's motor vehicle records. All dealerships and buyers will be vulnerable during this time period and until the records are noted with the LEGAL RESTRAINT and REG INVALID remarks.
General Counsel, TADA
With Hurricane Harvey and its aftermath expected to destroy up to 1 million cars in the Southeast Texas area, now is a good time for dealers to take a look at the process that an insurance company and an individual is required to take when a vehicle is determined to be salvageable or nonrepairable. In this guest blog from Karen Phillips, General Counsel for the Texas Automobile Dealers Association, she explains that process.
Additionally, it is important for dealers to remember that while the Texas Department of Motor Vehicles (TxDMV) is preparing to process a mass of applications, it may be weeks before the notations appear in the state's motor vehicle records. All dealerships and buyers will be vulnerable during this time period and until the records are noted with the LEGAL RESTRAINT and REG INVALID remarks.
In Texas, an insurance company determines whether the damage on a motor vehicle suffices to classify it as a nonrepairable or a salvage motor vehicle. Generally, the ACV immediately before the damage and the cost of repairs, or some other uniformly applied method such as market surveys, is used by the insurance company to make the nonrepairable or salvage determination.
A Nonrepairable motor vehicle is:
- Damaged, wrecked, or burned to the extent that the only residual value of the vehicle is as a source of parts or scrap metal; or,
- In Texas, or comes to Texas, under another state's title or other ownership document indicating that the vehicle is nonrepairable, junked, or for parts or dismantling only.
A Salvage motor vehicle is:
- Damaged or missing a major component pail to the extent that the cost of repair, including parts and labor, exceeds the ACV of the motor vehicle immediately before the damage; or,
- Damaged and comes into Texas under an out-of-state title or ownership document that states “accident damage,” “flood damage,” “inoperable,” “rebuildable,” “salvageable,” or similar notation; and,
Does not include:
- An out-of-state vehicle with a “rebuilt,” “prior salvage,” “salvaged,” or similar notation;
- A nonrepairable motor vehicle;
- A motor vehicle for which an insurance company has paid a claim for the cost of repairing hail damage;
- A motor vehicle for which an insurance company has paid a claim for theft, unless the vehicle was damaged during the theft and before recovery, the cost of repairs exceeds the ACV of the vehicle immediately before the damage;
- The cost of materials or labor for repainting the vehicle; or,
- The sales tax on the total cost of repairs.
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.
Applications for Nonrepairable and Salvage Title
When a licensed insurance company acquires ownership or possession of a salvage or nonrepairable motor vehicle with a Texas title or an MCO/MSO, it must obtain a Nonrepairable or Salvage Vehicle Title before selling or transferring ownership of the vehicle.
Owner Retained Nonrepairable/Salvage Vehicles
If the insurance company pays a claim on a salvage or nonrepairable motor vehicle and the owner retains the motor vehicle as a pan 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.
An individual who retains a salvage or nonrepairable motor vehicle is required to complete Form VTR-441, Application for Salvage or Nonrepairable Vehicle Title.
The insurance company is required to submit Form VTR-436 before the 31” day after the date of the payment of the claim. Once Form VTR-436 is received by TxDMV, it is typically processed within 10 business days.
The TxDMV is expecting an onslaught of salvage and nonrepairable vehicle title applications as well as 7TR-436 forms. With the expected increase in volume, the time frame for turn-around may be delayed.
Once the TxDMV receives Form VTR-43 6, it will mark the motor vehicle record with the following remarks in order to prevent registration or transfer of ownership of the motor vehicle until the owner applies for the appropriate ownership document:
LEGAL RESTRAINT-CONTACT TXDMV (#ORSAL)
[for a salvage vehicle]; or,
LEGAL RESTRAINT-CONTACT TXDMV (#ORNR);
[for a nonrepairable vehicle] and,
REG INVALID
(to advise that the registration indicated on the vehicle record is no longer valid).
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.
The dealership is vulnerable:
- For receiving a vehicle that is determined by an insurance company as a Salvage or Nonrepairable vehicle until the Form VTR-436 is processed by the TxDMV for an owner retained nonrepairable/salvage vehicle and the information is recorded by the TxDMV in the motor vehicle record; or,
- Until the insurance company applies for and obtains a Nonrepairable or Salvage Title.
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