Car dealership didn't tell buyer that car was a repaired insurance 'write-off'

Sunday, 1 November 2020

Just because a car is “written off” by an insurer, does not mean it can’t be repaired. But motor dealerships are on notice they must tell prospective buyers when a car they are selling is a repaired insurance write-off.

A man who tried to sell his car just months after buying it from a secondhand car dealer was horrified to find it had previously been written off for insurance purposes.

Mark Thorn asked the Motor Vehicle Disputes Tribunal to order the dealership to take back the car and give him a full refund of the purchase price of $32,298, which included a refund for insurance.

The Taieri Motor Court Limited dealership argued the vehicle was roadworthy, and that it didn’t have to tell buyers if cars had previously been written off for insurance purposes.

But the Motor Vehicle Disputes Tribunal ruled Taieri Motor Court had breached the Fair Trading Act by not telling the man the car had been written off for insurance purposes.

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Tribunal adjudicator Jason McHerron, who heard the case in Wellington with evidence given by remote video link, ordered the dealership to pay Thorn $5000 in damages to reflect his losses.

Thorn bough the 2015 Volkswagon Tiguan on October 30, 2019, but after a change in his financial circumstances, he went to vehicle auction company Turners in Dunedin to get an appraisal.

McHerron recorded: “Turners told him that, as the vehicle had previously been written off for insurance purposes, it would not be interested in purchasing the vehicle from him. Mr Thorn was surprised to learn this information about his vehicle as Taieri Motor Court had not told him that the vehicle had been written off.”

On any given day there are around 650 damaged cars in Turners' 'End of life' vehicle yard in South Auckland. Each of them tells a tale of human misadventure. They are sold at auction, and some will be repaired, and resold.

Vehicles written off for insurance purposes can often be repaired, but insurers reserve the right to write-off cars, and sell them in the end-of-life market, if they decide they’re not cost-effective to repair, or if they believe they cannot be repaired safely.

Turners told Thorn the car had been sold by Turners’ damaged and end-of-life car yard in Christchurch, when the car was registered under different licence plates.

“Turners advised Mr Thorn that it would not be interested in purchasing the vehicle, because of its history,” McHerron said.

But the dealership argued it had followed “best industry practice” in disclosing on the consumer information notice (CIN) that the vehicle had been re-registered, McHerron said.

On the back of the CIN notice, which Thorn had signed to acknowledge, stated that a common reason for re-registration included a vehicle being “written off” by an insurance company, McHerron heard.

“It (Taieri Motor Court) says it did not need to go further and disclose that it had been written off,” McHerron recorded.

McHerron found no evidence the car had been inadequately repaired after the crash that damaged it.

But, he said: “I am satisfied that a reasonable consumer would have expected Taieri Motor Court to expressly disclose the fact that the vehicle had been previously written off, before selling it.

“For obvious reasons, a stigma attaches to vehicles that have previously been written off.”

He said: “A reasonable consumer would want the opportunity to assess the reason why the vehicle had been written off, whether any damage had been repaired adequately, and whether the vehicle’s previously written off status was suitably factored into the price.”

McHerron noted that the car dealership had also sold the man a mechanical breakdown insurance policy which specifically excluded claims on cars that had been written off for insurance purposes.

Autosure made a full refund of the premium to Taieri Motor Court, however, rather than refunding the $2,299 insurance premium to Thorn, the dealership arranged, without consultation with him, to purchase another insurance policy for the car, McHerron found.

In ordering the dealership to pay $5000 in damages, McHerron said: “I consider that the vehicle is likely to have been worth less than Mr Thorn paid for it at the time of purchase because of its undisclosed history as a damaged written-off vehicle and that the resale value of the vehicle will be affected.”

It costs $50 to make a claim to the Motor Vehicles Disputes Tribunal, which can hear complaints against motor vehicle traders on claims up to $100,000, though higher value claims can be heard, if both parties to the dispute agree.