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State Farm reaches deal on salvage vehicles in Illinois, 7 other states

November 22, 2010

About 680 vehicles in Illinois which previously were deemed "total losses" by State Farm Insurance were not branded as such, leading to a $40 million settlement between the insurer and attorneys general from eight states, including Illinois. 

The affected vehicle owners in Illinois were sent letters dated Oct. 18 from the vehicle services department of the Illinois secretary of state, telling them how they might obtain rebuilt titles and whether they may be compensated for State Farm’s error.


In the settlement, individual payments to current owners range from $400 to $20,000, based on the average retail value of the vehicle. And, depending on how many of the estimated 32,000 victims elect to settle, individual shares could increase. 

Persons who accept a settlement from State Farm would relinquish their right to sue whoever sold them an affected vehicle. Assistant Illinois attorney general Deborah Hagan downplayed any impact on dealers.


If a dealer had no knowledge that any vehicles really were salvage vehicles, "then that’s what they should assert," she said, adding she expected most victims will pursue the State Farm settlement rather than confront dealers. 

Hagan and other assistant Illinois attorneys general discussed the matter in an Oct. 13 conference call with representatives of the Chicago Automobile Trade Association and the Illinois Automobile Dealers Association.


"We couldn’t have changed the negotiations, even if we had informed the dealer associations" earlier, said Hagan. 

Gil Fergus, another assistant Illinois attorney general, said that, based on when State Farm’s error occurred, a three-year statute of limitations would prevent most consumers from suing over the vehicle transactions.


According to State Farm’s records, some time after June 1, 1997, but before the current owners bought the affected vehicles, the insurer branded 32,000 vehicles as a total loss, as part of insurance claim settlements, but did not confirm that the vehicles subsequently were issued "salvage" or "branded" titles. 

Ernie Dannenberger, director of the Illinois secretary of state’s vehicle services department, notified affected owners in Illinois, in an Oct. 18 letter, that their current vehicle titles have been revoked.


The owners of vehicles 9 years old or older must send their titles to Dennenberger’s office, which will issue "rebuilt" titles. For vehicles 8 years old or newer, inspections are required by the secretary of state’s office, to check for stolen parts; and by the Illinois Department of Transportation, for a safety inspection. 

There are four salvage vehicle inspection stations in Illinois, including one in Villa Park at 630-693-0551.


The Texas attorney general said he believes 25 percent of all consumers impacted by the issue are Texans.