On any given day there are roughly 225 million titled vehicles in the United States.[1] Titles, issued in all 50 states and governed by each state’s laws, are intended to protect the rights and safety of the people buying and owning the vehicle. In addition to the variance of titles by state, a vehicle’s title can be categorized or branded based on several factors, one being prior damage. In the case of a vehicle sustaining damage and posing potential safety issues, categories or brands of salvage titles are issued including categories or brands such as Salvage, Rebuilt or Junk; however, the criteria governing the categories or brands may vary considerably from state to state.

The variation in branding typically depends upon several factors, such as the amount of damage sustained, the pre-accident value of the vehicle or if the vehicle is deemed a total loss. In addition, states use differing thresholds to determine if a vehicle is deemed a total loss (value of the vehicle pre-accident versus the cost of the damage). These thresholds can range from damage equaling 50% of pre-accident value and may go as high as 80%. However, most states allow a severely damaged vehicle to be rebuilt, providing the vehicle carries the appropriately branded title. If the vehicle has sustained damage amounting to 90% of its pre-accident value, all states require that the vehicle only be used for parts.

Roughly within the last year, several states have amended their existing salvage title laws to eliminate certain items from the cost of repairs. Included are items such as air bags, sound systems, tires and paint. These changes have significantly impacted existing thresholds and allow more vehicles to be rebuilt.

While this article is not intended to be an all-inclusive list of such legislation, Nevada, Minnesota, Missouri, Kansas and Colorado have recently passed such salvage title laws. Currently there are similar bills pending in Louisiana, Kansas, Missouri, Indiana and New Hampshire. Other states such as Oklahoma and North Carolina have enacted similar legislation in the past.

Because salvage title laws differ from state to state, most notably in the area of determining a vehicle’s total loss threshold, there is room for the possibility of “washing” a title. This occurs when a vehicle is moved from one state to another, and the salvage brand is not carried forward when a new title is issued by the subsequent state. This may be the byproduct of differences in definitions and thresholds, or the lack of communication among states. Record-keeping systems and technology may vary between states, which may contribute to delays in recording title changes as a car moves to a new state.

All of these factors can converge to make it difficult for a buyer to be aware of the vehicle’s full history. This lack of knowledge can have an economic impact as a branded title affects the vehicle’s value, and may potentially hide safety issues. Although cars can be safely rebuilt, it is often difficult and expensive to do so. While some states require rebuilt vehicles to pass a safety inspection before they can be registered to operate on the roads, there is no such uniform federal requirement. And the inspection criteria for those having such a safety inspection program are not consistent.

There have been federal efforts at standardization and uniformity, but they are limited. For example, the Federal Anti Car Theft Act of 1992 provides for increased law enforcement against auto theft, combating title fraud, “chop shop” thefts and inspecting exports for stolen vehicles. Part of this effort required the United States Department of Transportation to implement a National Motor Vehicle Title Information System—known as NMVTIS—no later than January of 1996.

The NMVTIS was to facilitate the electronic interchange of title information between states in order to deter auto theft and related issues. While the interchange was solid in theory, it was an unfunded mandate. Some progress has been made, however, with an ongoing pilot project involving approximately a dozen or so states.

At least two other federal salvage bills were introduced in the late ’90s that would have provided uniformity standards—one by Sen. Trent Lott (R-Mississippi) and one by Sen. Diane Feinstein (D-California). However, each bill failed. As a result, the differences in state laws and the levels of technology continue to create obstacles in terms of vehicle titles.

The American Association of Motor Vehicle Administrators (AAMVA)—a non-profit association comprised of US and Canadian motor vehicle and law enforcement agencies responsible for administration and enforcement of motor vehicle laws—is encouraging titling control procedures. Vivienne Cameron, Vice President of Vehicle & Enforcement Services at AAMVA, stated that the organization continues to work to towards piloting the NMVTIS project, and champion further funding and implementation of uniform title control procedures.

It doesn’t appear that a uniform resolution to disparate salvage titling will be reached at the federal level in the near future, but its level of impact to the insurance and collision repair industries is almost irrefutable—a point proven by the number of states that have either passed or are proposing measures to gain some structure to the issue.

Mike Barber is Director of Regulating Affairs at CCC Information Services Inc. For questions regarding industry legislation, direct e-mail to mbarber@cccis.com.

This article is not intended as legal advice. Readers should seek specific legal advice before acting with respect to the subject of this article.

1. National Highway Transportation Safety Administration