USAA Admits That Some ‘Totaled’ Cars Were Sold

Sept. 06--USAA officials now admit that some vehicles it branded as total losses after being damaged by Hurricane Sandy's floodwaters later were resold and put back on the road.

The San Antonio-based insurer totaled some 4,000 customer vehicles damaged during last year's storm in the Northeast.

USAA earmarked 174 of those vehicles to be sold for parts only because they had no titles. But USAA later found some buyers who bought them at auto auctions fraudulently obtained clean titles with the intention of putting them on the road again.

Last month, the ABC News program "The Lookout" reported on the problem of flood-damaged vehicles making their way back on to roadways. It tracked a 2006 Ford F-350 pickup that USAA had declared a total loss and wanted sold for parts.

The pickup was refurbished and purchased from a New Jersey used-car dealer for about $20,000 by an ABC News producer.

During a follow-up report that aired Wednesday night, a USAA official conceded its process for handling storm-damaged vehicles was "unsatisfactory."

"We learned some things about the situation that you discovered, one that we found to be just as disturbing as you did," Kevin Bergner, president of USAA'sProperty and Casualty Insurance Group, told ABC News reporter Bill Weir in an interview at USAA's headquarters. "It's a big deal and what you guys have shined a light on is a really serious problem."

That's a turnabout from USAA's reaction to the original report.

"It was apparent to us that ABC was more focused on driving viewership and sensationalizing the story rather than reporting the facts," USAA said after the first report aired.

In the report, Weir drove up to the front gates of USAA's headquarters in a tow truck called "Dragonslayer" with the F-350 on the flatbed. No one from USAA would come out to speak with him. ABC later deposited the pickup at a San Antonio salvage yard.

Asked about USAA's change in stance, company spokesman Roger Wildermuth said: "We were surprised and appalled to learn that a vehicle that we sold for parts only was back on the road illegally. We think it did shine a light on how fraudsters can exploit loopholes to get cars that were intended to be in the junkyard back on the road."

Bergner told Weir that USAA is working with the New Jersey Motor Vehicle Commission to determine how many of the 174 vehicles that were sold at auction with are being driven by new owners.

"We'll not stop until we're able to say all of them are off the road or in the right place, which is where that F-350 sits today, in a junkyard," Bergner said.

The dealership that sold the F-350 to the ABC News producer was suspended from doing business for three months. The case was turned over to the New Jersey attorney general's office for a criminal investigation.

Wildermuth said whoever bought the vehicles at auction fraudulently obtained duplicate titles. He didn't know how they accomplished that, however.

The owner of the F-350 had sent USAA the vehicle's title but the document was later lost, according to the company. Rather than go back to the owner to get a duplicate title, USAA chose to sell the vehicle in a parts-only sale.

A USAA official previously told the San Antonio Express-News that it wasn't required to have a salvage title because the F-350 was being sold for parts only, not to be driven again.

But the New Jersey Motor Vehicle Commission says, "Salvage vehicles, whether considered junk or not, cannot be transferred without first obtaining a salvage title from the MVC."

On Thursday, USAA's Wildermuth said: "I can tell you in New Jersey, we will never sell a vehicle for parts only unless there is a branded title." That means such a vehicle would be identified as salvage with a notation that it is flood-damaged.

He added, "Nothing is more important to us than consumer safety."

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