Fighting Fraud

(Photo courtesy of Property Casualty Insurance Association) Thousands of fllod damaged vehicles are sold to unsuspecting motorists every year, creating headaches for insurers, motorists and shops alike. (Photo courtesy of Allstate) Insurers often send reps to speak directly with customers with complaints over their estimates. Shops can help both sides reach an agreement.

Use the following steps during damage analysis to locate flood damage:

Step 1. Note any unusual corrosion, specifically rust, occurring in areas where moisture isn't typically an issue or rust not consistent with a vehicle's age.  

Examine the paint near chrome or rubber for bubbles, which indicate rust hiding under the paint. Look for corrosion on trunk brackets or latches under the dashboard. Pay special attention to door hinges and screws, along with areas where the door meets the body, including the bottoms.

Also check for rust on the vehicle interior and undercarriage, especially on the springs beneath the seats.

Step 2. Examine the interior. Obvious indications of flooding include grass, mud and silt under the seats and in the glove compartment. Also look for loose-fitting or mismatched carpeting or upholstery (mismatched based on color and age), which are signs that they have been replaced. Note too if the shape of the interior is consistent with the vehicle's age. An eight-year-old vehicle with a like-new interior should raise suspicions.

Inspect the entire interior, seats included, for brown, blotchy water stains. Note any musty odors or indications of mildew. If the upholstery looks fine, but you still suspect water damage, try running your hands along the carpet to locate moisture. Pat areas that appear or feel damp. If the carpet has pulled away from the vehicle, peel it back and feel it for moisture. Look for any rust.

Step 3. Test the electronics. Note any malfunctioning exterior, interior or dashboard lights, along with the stereo, A/C, heater, power outlets or windshield wipers. Look for warning lights, particularly those indicating problems with the airbags or ABS. Finally, look under the dashboard for any brittle wires.

Step 4. Examine the trunk and wheels. Check the trunk carpet for moisture and water marks. Remove the spare tire and check that area for any moisture.

While the vehicle is on a rack, examine the brakes and wheel components for mud and silt. Check the underside of the vehicle for flakes and other signs of excessive corrosion.

Not every vehicle that visits your shop will need this level of examination for water damage (though it pays to be vigilant if you work in or near an area subject to flooding). According to Allstate, most evidence for flood damage is easy to spot and usually turns up during a typical inspection. The object here is spotting the more obvious signs and then looking for additional evidence to corroborate your suspicions.

From there, you'll need to determine the extent of the damage. That will involve a thorough inspection of the engine since the most expensive, critical damage usually occurs there.

Estimating challenges

After identifying a flood-damaged vehicle, you'll have to inform both the customer and the insurer. Since you're dealing with a vehicle that probably was sold or titled dishonestly (not titled as a salvage or flood damaged vehicle as the law requires), all sorts of complications will set in.

First off, the insurer won't be responsible for the flood damage since it was incurred before the current owner took possession. Repair costs of that damage, according to Allstate spokesperson Justin Herndon, could force the insurer to total out the vehicle. Helping drive this possibility is the fact that flood damage drastically lowers the vehicle value (by as much as 75 percent)—making it a more obvious candidate for totaling and decreasing the amount the insurer pays out.

In short, you'll be dealing with a customer who's going to receive some bad news. Because insurers handle these situations on a case-by-case basis, both you and the customer will be left waiting for a decision on what work is covered, if any can be done.

This decision will have to be worked out between owner and insurer, but there are some things you can do to help. First, share any information you have and prepare customers for some potentially bad news. Also, offer any solutions you have for repairs they may have to cover. Finally, since so many of these situations must be resolved in the courts with fraud charges against the vehicle seller, it doesn't hurt to be able to recommend an attorney.

(Photo courtesy of GM) When searching for flood damage, always check the trunk for water and silt rapped near the spare tire and in other spaces. (Photo courtesy of GM) Examine carpeting and areas under the seats for water stains, dampness and rust.

Rotten repairs

Mike Walker, South Euclid location manager for 2014 Top Shops winner Mayfield Collision Centers, rarely sees flood damaged vehicles at his Northeast Ohio shop. He does see something similar—vehicles with previous repairs that are substandard, even dangerous. These repairs can affect current work since they can interfere with new repairs or may need addressed to ensure the vehicle is safe and roadworthy. Insurers, again, will evaluate their financial responsibility on a case-by-case basis.

One of their chief concerns is determining whether the policyholder had knowledge of these repairs or approved of them. Walker says that most customers, fortunately, own up to any responsibility they may have. "They usually tell you right away what they know," he says.

This kind of admission can result in the customer having to cover some repair expenses, but the important thing here is that honesty speeds the insurer's decisions, meaning that work can start on the vehicle sooner. Everyone involved benefits.

Tough complaints

Honesty also is at the heart of settling some common customer disputes raised during the estimate—namely, disagreements over what constitutes damage on the current claim.

Most shops eventually have to deal with customers who declare their estimate ignores additional damage created during the collision. Walker says Mayfield helps head off these problems by walking every customer through the estimate, giving them both the time to understand the repair and opportunity to raise questions.     

"We take the time to explain our findings and why the insurer might dispute anything additional," he says. "That usually solves most of these issues."

In rare instances, some motorists aren't satisfied and continue to pursue their claims. Herndon says Allstate prefers to handle these cases directly. "We would either set up a drive-in appointment or send an auto technician to the body shop at which time the shop would discuss the concern with an Allstate auto tech," he explains.

In some of these cases, insurers speak directly with the claimant. Walker says shops also can lend a hand here to create a resolution. Mayfield preps customers by reviewing the kind of questions the insurer will most likely ask and explaining the information they'll need.

There is that small minority of customers who will attempt to defraud an insurer with claims they know to be false. Shop integrity and a firm focus on evidence should stop these fake claims in their tracks. By offering them support, customers with legitimate concerns who receive disappointing decisions from insurers come away from the experience knowing the shop did all it could to help.

Unfortunately, fraud anywhere in the automotive industry creates many victims. Shops can do their part in fighting it. That starts with professional estimating and customer care centered on open communications and honesty.