WATERLOGGED CARS, INSURANCE AND EVS CATCHING FIRE, OH MY!

Hurricane Ian stormed the southwest coast last month, flooding cities and destroying homes, buildings, and vehicles in its path. The economic damage of this deadly storm is estimated to reach up to $75 billion, according to a projection released by data firm Enki Research. The firm also stated that Hurricane Ian would be among the 10 costliest storms in U.S. history.

While our hearts and prayers go to all those impacted by Hurricane Ian, we had the chance to speak with Tom Appel, Publisher of Consumer Guide Automotive, also a listener favorite on the Green Sense Radio show. We sat down with Tom to ask him what exactly happened to all the vehicles submerged in garages and streets. 

Robert: Do you have an estimate of how many cars were damaged and how many cars were considered totaled?  

 Tom: CARFAX estimates that as many as 358,000 vehicles were damaged by Hurricane Ian.  

Robert: Are these cars covered by insurance, or is this excluded from auto policies and homeowners’ policies because it’s considered an act of God?

Tom: Flood damage is generally covered under the comprehensive portion of an auto insurance policy. However, this is a complex issue with exclusions spelled out in individual Hurricane, Flood, and Auto insurance policies.

The extreme flooding, high winds, and destruction left vehicles severely damaged. This is a big safety concern because vehicles with any level of water damage can face mechanical, electrical, and safety issues. From the outside, the cars look fine but to put it simply; they are rotting from the inside out. Even if they were only submerged for a short time, the damage could be irreversible.

Robert: What will happen to these damaged cars?

Tom: After salvageable parts are removed (wheels, maybe glass), the vehicles are destroyed.

When faced with a car that has been damaged in a flood, owners are only left with a few options. Some insurance companies will take possession and reimburse the vehicle owner if it is more than 75% ruined. Owners without insurance might try to sell the car, and not all owners will properly disclose the car’s history and damage.

While it is not against the law to sell a damaged vehicle, it is illegal not to disclose the car’s full history, and there are thousands of cases where owners try to resell a waterlogged vehicle without full disclosure. CARFAX spokesperson Emilie Voss stated, “we are seeing these flooded cars show up all around the country, putting unsuspected buyers at risk.” Some red flags to spot when looking for signs of water damage are a musty odor, damp and loose carpeting, and upholstery, moisture in the headlights, and any signs of rust or brittle wires. Also, check the title to see where the car was licensed.

Many experts warn buyers that these vehicles can end up at dealerships across the country, and with an increasing demand for cars mixed with supply chain issues, many consumers are desperate to purcahse a vehicle.

Robert: The new car market is already constrained by supply chain issues making new cars difficult to purchase.   With 358,000 vehicles damaged by the storm, how long will it take owners to get cars repaired or purchase new ones in the resource-constrained marketplace?

Tom: The supply of cars is currently running under 1.5 million units--half the normal supply--adding another 300,000 units to near-term demand will strain the vehicle supply chain and increase already inflated transaction prices. 

Robert: The rental car market is also constrained, with more demand than supply.  Will car owners without transportation be able to get rental cars?

 Tom: Not easily. I have not seen projections for this--but as the auto rental industry is already working with a thin supply of inventory, it is safe to assume that locating a rental vehicle in Florida will be extremely difficult. 

Robert: We live in a precarious world with just-in-time production creating a brittle supply chain.  Impacts from weather, war, and pandemics have shown us how easy it is to disrupt the global supply chain. What are auto manufacturers doing to make their supply chain more resilient?

Tom: Ironically, stresses in the new-vehicle supply chain have made auto manufacturers and new-car dealers more profitable. While securing a reliable supply line of critical parts, especially microchips, is a top priority for carmakers, returning to pre-shortage volumes may not be. That said, most automakers are not firming up critical parts and systems supplies by contracting further out timewise than in the past. Another issue arising from the storm surge is the report of submerged EVs exploding.