WASHINGTON--Insurance companies will be required to send monthly data to a federally regulated database reporting vehicles they have classified as total losses, under a new regulation effective April 1.

The rule implements a law passed as an anti-fraud measure to prevent cars that had been declared total losses and sold for scrap from being retitled and later sold as working used cars by unscrupulous dealers.

Known as "title washing," the issue gained prominence in 2005 after cars that were declared total losses after Hurricane Katrina flooding were retitled in other states and resold without mention of their provenance.

The law was first passed in 1992 and updated in 1996 but not imposed until ordered by a federal court last September.

Under the regulation, insurers will have to provide the vehicle identification number; the date the vehicle was designated for junk or salvage; the name of the insured from whom the auto was obtained; and the name of the owner at the time of filing--that is, the insurance company.

Under the final rule, the name of the insured from whom the auto was obtained by the insurer will be kept confidential and available only to law enforcement.

The final regulation under which the data will have to be supplied was published by the Department of Justice Jan. 30.

The DOJ issued a proposed rule Sept. 22 because it anticipated an unfavorable decision in the court case, which was handed down Sept. 29 by Judge Marilyn Patel, according to Melissa Shelk, a vice president of public affairs at the American Insurance Association, and David Snyder, an AIA vice president and its associate general counsel.

The final rule was issued Jan. 30 in compliance with Judge Patel's order.

At the same time, the National Automobile Dealers Association is pushing for a parallel private system that would be funded and administered by the insurance industry.

Legislation that would require the parallel system has been introduced this year in both the House and Senate.

But Cliston Brown, director of federal public affairs for the Property Casualty Insurers of America, said enough is enough.

"We do not understand why the dealers think further legislation is needed," Mr. Brown said. "It appears that the Justice Department rules give them everything they wanted," he said.

Specifically, insurers now will have to report total loss vehicles starting at the end of March, and the states are required to be fully participating in the system by Jan. 1, 2010, Mr. Brown said. "This provides everything they want and we are puzzled about why they are not satisfied," he added.

The bills, H.R. 1257 and S. 202, would require insurance companies to disclose the vehicle identification numbers (VINs) of totaled cars to vehicle history providers before the vehicle gets back into the marketplace.

Arguing for more regulation, Ivette Rivera, National Automobile Dealer Association executive director of legislative affairs, said that because the NMVTIS (National Motor Vehicle Title Information System) rule is based on a 1992 statute, it only requires monthly reporting from "insurance, junk and salvage yards."

H.R. 1257 and S. 202 would make the reporting requirement electronic and timelier to eliminate the window for fraud, she said.

Special Reports /

Insurers Must Report Monthly Data On Total-Loss Cars To U.S.

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