Ark. Says Water Damaged Vehicles Must be ID’d

November 18, 2005

In the wake of the catastrophic property damage occurring during the 2005 and 2004 hurricane seasons, the Arkansas Insurance Department has received information indicating that owners may be selling cars and other vehicles without disclosing the fact that the vehicle has been damaged by water.

As a result the department issued a reminder to insurers that state law requires “water-damaged” insured motor vehicles to be identified as “damaged” on the certificate of title.

Arkansas Code Annotated Section 27-14-2301 et seq., which defines a “water-damaged” insured motor vehicle for purposes of requiring a “damaged” certificate of title, states:

“When a motor vehicle is water-damaged or sustains damage in an amount equal to or exceeding seventy percent (70%) of its average retail value … the owner, or insurance company if it obtains ownership of the vehicle through transfer of title as the result of a settlement of an insurance claim, shall forward the properly endorsed certificate of title to the office [Office of Motor Vehicles Division of the Arkansas Department of Finance and Administration] together with a fee in the amount now or hereafter prescribed by law for the registration and issuance of a certificate of title.”

Proper notification to the Office of Motor Vehicles by insurers allows a vehicle title to be identified properly and puts the end purchaser on notice of past vehicle use, defects, damages, and restrictions regarding sale and transferability. This is especially important given the many losses to motor vehicles sustained during the 2004 and 2005 hurricane seasons.

The owner or insurance company, as the case may be, may not dispose of a motor vehicle that is water-damaged before it has obtained a damage certificate from the Office of Motor Vehicles. Willful violations of these provisions of Arkansas law are punishable as misdemeanors.

In addition, the department may take administrative action, as it may deem necessary, against licensed insurers violating these requirements.

Questions should be directed to the Arkansas Insurance Department Legal Division at (501) 371-2820 or e-mail to

For more information on flood-damaged vehicles, see the Consumer Alert of Sept. 23, 2005, issued by the Consumer Protection Division of the Arkansas Attorney General’s Office. The Consumer Alert entitled “Attorney General Warns Arkansans of Flood Damaged Vehicles” can be found at

Interested persons can also visit to search the National Insurance Crime Bureau’s database for vehicles and watercraft affected by Hurricanes Katrina and Rita.

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