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1.2.4 Undisclosed Flood or Hurricane Damage

Often cars will undergo flood or hurricane damage, but the vehicle will not be declared a salvage vehicle, either because the damage is not quite a total loss, the vehicle is uninsured, or the state’s salvage law definitions are stricter than insurance company standards for a total loss. Challenging misrepresentation and nondisclosure of this serious flood or hurricane damage history is very similar to challenging sale of a salvage vehicle except that, by definition, the state salvage law will not apply. If the salvage law does apply, then see § 1.2.3, supra.

  • • The nature of undisclosed flood or hurricane damage is described in §§ 2.1.3 and 2.1.6, infra.
  • • How to investigate fraud relating to flood or hurricane damage is examined in §§ 2.2–2.5, infra.
  • • Fraud relating to flood or hurricane damage may involve common law fraud, which may lead to punitive damages. See Ch. 8, infra.
  • • Fraud relating to flood or hurricane damage may involve a breach of implied or express warranties, which may lead to revocation of acceptance, withholding of installment payments, and a claim for damages, even if the seller had no knowledge of the prior flood or hurricane damage. See § 9.2, infra.
  • • A breach of an implied or written warranty in a fraud relating to prior flood or hurricane damage may also lead to a Magnuson-Moss Warranty Act claim, which would provide for attorney fees. See § 9.2, infra.
  • • Fraud relating to prior flood or hurricane damage also will violate a state UDAP statute, which will often provide attorney fees, minimum, multiple, or punitive damages, and which may not require proof of the defendant’s intent or knowledge. See § 9.4, infra.
  • • Fraud relating to prior flood or hurricane damage may violate a state’s automobile dealer licensing statute or regulations, which will either provide a cause of action, leverage with the dealer, or an indirect cause of action under a UDAP, warranty, or fraud claim. See §§ 7.7, 7.9, infra.
  • • Fraud relating to prior flood or hurricane damage may also violate the federal or state RICO statute. The federal statute provides federal jurisdiction, attorney fees, and treble damages. See § 9.5, infra. The state RICO statute may provide similar remedies in state court. See § 9.6, infra.
  • • If the seller claims ignorance of the prior damage, rescission on the grounds of mistake may be available. See § 9.3, infra.
  • • How to litigate a fraud case relating to prior flood or hurricane damage is examined in Chapter 10, infra, including: advising the client, who to sue, what claims to plead, jurisdictional issues, res judicata, class actions, evidentiary issues (such as how to introduce evidence of the defendant’s misconduct against other consumers), trial of fraud relating to prior flood or hurricane damage cases, damage issues, settlements, attorney fees, and collecting judgments against the defendant, the defendant’s surety, related lenders, and auction companies. Discovery concerning a flood damaged car is available online as companion material to this treatise.