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Vehicle damage disclosure: When is it required, and by whom?

November 23, 2010
Failure to disclose damage to new and used vehicles continues to be a fertile area for litigation, the general counsel of the Chicago Automobile Trade Association, Dennis O'Keefe, said recently.
According to a 1995 Illinois law, a manufacturer is required to disclose in writing to a dealer, before delivery, all in-transit, post-manufacturer or other damage to a vehicle that was sustained at any time before it is delivered to the dealer.
In turn, O'Keefe said dealers must disclose in writing to the purchaser, before delivery, any damage to a new vehicle which they are aware of having occurred between the end of the manufacturing process and the time of customer delivery. The threshold for disclosure is 6 percent of the vehicle's MSRP.
Disclosure is not required when the cost to repair does not exceed 6 percent of the MSRP. Further, damage to glass, tires, bumpers and in-dash audio equipment is not considered as damage, if replaced with OEM equipment.
No Illinois statute concerns damage disclosure to used vehicles. However, O'Keefe said "the  theory of common law misrepresentation provides for dealer liability for an intentional misrepresentation of a material fact relied on by the customer to his detriment.
"In this context, intentional means the dealer 'knew or should have known' of the damage. Accordingly, it is time well spent to investigate a vehicle's history. 
"In addition, one can document due diligence in trying to determine the history and present condition of a vehicle by having the customer fill out and sign a disclosure form." Such a disclosure form could include:
1. Customer's name
2. Year, make and VIN
3. Declaration by seller that vehicle is NOT a salvage or
former police, fire or taxi vehicle
4. Statement verifying odometer mileage and that the odometer
is in good working order
5. Certification that none of the following conditions are
• welded or bent frame;
• welded or bent chassis;
• motor or cylinder head(s) cracked, welded or repaired;
• air bag has been deployed;
• if air bag was replaced, it was OEM equipment;
• emissions or exhaust systems modified or removed;
• prior damage from accident, hail, theft, vandalism or
other causes.
6. Statement accepting financial responsibility for undisclosed liens, incorrect payoff information or hidden deficiencies. Finally, there is no substitute for a thorough inspection of the vehicle by a qualified person. Look for obvious prior damage and signs of most noticeable damage.
"Remember," O'Keefe said, "a dealer is regarded as a 'car expert' and may be held responsible for disclosing all prior damage, whether the dealer had direct knowledge or not.
Dealers can obtain vehicle history reports from Experían, through Call 847-806-4270.