Consumer fraud lawsuits could force VW to buy back diesels that cheat on emissions tests

Volkswagen almost inevitably will have to compensate owners of diesel cars equipped with emissions-rigging software. Some legal experts say the automaker could be forced to buy back the cars altogether.

Many of the more than 200 lawsuits filed in the past few weeks allege that for seven years VW marketed four-cylinder diesel Golfs, Jettas, Beetles and Passats as clean alternatives to gas engines, knowing all along that the cars were spewing pollution that far exceeded legal limits.

In September, Volkswagen admitted to rigging emissions tests in the U.S. Earlier this month, Michael Horn, the head of its U.S. operations, told a congressional panel that VW was considering compensating owners for the lost value of their cars. He also said that it could take from one to two years to fix all the affected cars.

Seattle lawyer Steve Berman seized on that time frame when he sued VW last week in Los Angeles, seeking full restitution for owners of nearly 70,000 affected cars in California.

In a somewhat unique approach, Berman is seeking to get his clients their money back under California laws requiring automakers to guarantee emissions control parts for up to seven years or 70,000 miles. His lawsuit says that VW can’t promptly make its diesels comply with the warranty, so under a different statute it “shall either promptly replace the new motor vehicle or promptly make restitution to the buyer.”

The Environmental Protection Agency has said the VW diesels emit 10 times to 40 times the legal limit of nitrogen oxide.

“Our clients don’t want to wait a year. They don’t want to be driving a dirty car,” Berman says.

The plaintiffs make the case that the cars can’t be driven legally since they violate pollution standards, says University of Southern California law professor Greg Keating, who specializes in consumer fraud cases. Even though the EPA says the cars can legally stay on the roads, eventually states with pollution tests will force owners to comply with the law, he says.

“They can’t give me the car that they told me I was buying, and they’re forcing me to inflict environmental harm and be out of compliance with California law because of the wrong they committed,” plaintiffs can argue, says Keating.

While Berman’s lawsuit covers only cars in California, the consumer fraud argument could be made successfully nationwide, according to Keating.

He and Erik Gordon, a business professor and lawyer at the University of Michigan, say the argument for a buyback is a good way to start settlement talks.

Gordon says the first option for judges would be to make VW pay buyers the difference between the value of the cars without the cheating software and what they are now worth. That could be hard to calculate. Lawyers also could argue that buyers based their purchase on VW’s promises of clean, peppy cars, and because the repairs will hurt performance, VW must buy the cars back, he says. “You have to demonstrate to the court’s satisfaction that (money) damages won’t make you whole,” Gordon says.

Most likely, Volkswagen will settle by paying customers to avoid a drawn-out process that keeps the scandal in the news, he says. “VW is going to get clobbered one way or another,” Gordon says. As the cars get older, a buyback order is less likely because the owners got considerable use out of them, he adds.

Volkswagen wouldn’t comment on pending lawsuits.

Product buybacks are rare, but not unheard of. In a July agreement with the National Highway Traffic Safety Administration, Fiat Chrysler agreed to make buyback offers to owners of more than 500,000 Ram pickup trucks and other vehicles. The Rams have defective steering parts, and some previous repair attempts failed.

Last month, Volkswagen admitted that 482,000 cars in the U.S. from the 2009 to 2015 model years have software that programs them to cheat on emissions tests. It later acknowledged that the same software was on 11 million cars worldwide.

The 482,000 cars are worth an average of $14,466, ranging from $8,409 for a 2009 Jetta to $21,474 for a 2015 Passat, according to Kelley Blue Book. At the average resale value, VW could be forced to pay more than $6.9 billion to repurchase the cars. That amount would cover most of the $7.3 billion that VW has set aside for the emissions scandal.

“It’s really enormous for VW to have to buy these things back,” Keating says. “But maybe they will have to.”

Some owners might forgo a buyback. Under California law, they have the option of getting a replacement vehicle.

Horn said whatever solution VW comes up with could require a compromise from car owners. He said the EPA mileage estimates probably wouldn’t change, but the fix could hurt the cars’ performance.

Attorneys now are vying to lead the cases, which can become very lucrative for lawyers. Lawyers usually get about 30 per cent of class-action settlements.


ICBC files 2015 basic rate application

Source: ICBC Press Release

ICBC will submit the remainder of its 2015 basic rate application today with the British Columbia Utilities Commission (BCUC), asking for a 5.5 per cent increase to basic insurance rates – lower than the earlier potential for 6.7 per cent. If approved, this will mean an average increase of $3.70 per month for customers’ basic insurance coverage.

“In the best interest of our customers, we have worked alongside government during the last few weeks to identify strategies to help lower both this year’s rate increase and to attempt to help alleviate the expected ongoing pressure injury claims will continue to put on insurance rates in future years,” said Mark Blucher, president and CEO of ICBC.

As a first step, government has approved a $450 million transfer of capital from ICBC’s optional account to its basic account. This transfer helps make a positive difference to basic insurance rates by rebuilding ICBC’s basic capital, which has come under increasing pressure in recent years.

ICBC will continue to work with government to explore options to further help alleviate the challenge of increasing injury claims costs and the impact on insurance rates in 2016 and beyond.

One immediate area of increased focus is on fraud prevention. ICBC is increasing its resources to help better prevent exaggerated and fraudulent claims, which includes moving forward with the adoption of a new fraud analytics tool in early 2016. The tool will use data, algorithms and statistical methods to help quickly flag patterns and high predictors of fraud at the beginning of the claims process.

“The overwhelming majority of customers make honest claims but exaggerated and fraudulent claims are an increasing issue for all insurers,” said Blucher. “Analytics technology solutions are an emerging opportunity to help detect and further enhance investigation methods and will be a valuable asset in helping us prevent fraud.”

The pressure from the rising number and cost of injury claims – commonly the biggest single factor driving rates for auto insurers across North America and beyond – is also putting pressure on ICBC’s optional insurance rates as liability payouts above $200,000 are covered under optional extended third-party liability.

The average personal insurance customer who purchases optional extended third-party liability coverage – plus collision and/or comprehensive insurance – can expect to pay an additional $1.30 per month (a total of an extra $5 per month for their full basic and optional coverage).

The number of injury claims being reported to ICBC has escalated in recent months – almost 68,000 new injury claims reported from July 2014 to June 2015, approximately 7,000 more than the preceding 12 months.

ICBC’s bodily injury claims costs, which cover payouts for pain and suffering, future care and loss of wages, topped $2 billion for the first time in 2014 and are anticipated to escalate to $2.3 billion in 2015 – an increase of 64 per cent, or almost $900 million, since just 2008.

ICBC is also working with government to enhance customer service and make it easier and more convenient for British Columbians to access ICBC services in communities across the province. Work is already underway to identify options which will make day-to-day interactions with ICBC easier, with a focus on more online services.

ICBC is working toward customers being able to access their driver record and claims history via Further online options being explored include insurance renewal reminders and enhanced online claims service.

Later this year, ICBC will also be adding a direct translation phone line for Mandarin and Cantonese speaking customers, following the success of its Punjabi translation service which launched in 2013.

Calgary mayor warns Uber drivers they should be aware they are breaking the law

Calgary’s mayor has come out swinging against the online ride-sharing service Uber.

Naheed Nenshi, whose use of online tools has been seen as a key to his political success, is urging people in the city not to drive for the service.

Nenshi says he is disappointed that Uber has decided to start up in Calgary without adequate insurance or regulations to protect public safety.

He is warning Uber drivers that they will be breaking the law and could face fines of between $1,500 and $4,500 a day.

Neither the vehicles nor their drivers are licensed by the City of Calgary.

Uber has generated controversy in other communities, including Toronto and Edmonton.


Saskatchewan says new traffic laws have meant fewer road deaths, injuries

Saskatchewan Government Insurance says tougher traffic safety laws are helping to reduce the number of people killed or hurt on the province’s roads.

Preliminary numbers from SGI show there were 19 per cent fewer deaths and 18 per cent fewer injuries in the first year of the new laws.

Traffic fatalities and injuries in Saskatchewan were trending up before the new laws kicked in.

There were, on average, 158 crash-related fatalities a year from July 2010 to June 2014.

But that dropped to 128 deaths from July 2014 to June 2015.

The new laws focus on tougher penalties for high-risk driving offences such as impaired driving, distracted driving and speeding.

Don McMorris, minister responsible for SGI, says it’s encouraging to see fewer fatalities and injuries, but everyone needs to maintain safe driving habits.

“We can drive better and make our roads safer for everyone. At the end of the day, we all want to make it to our destination, or home to our families, safe and sound,” McMorris said October 14, 2015.


More trouble for Volkswagen: Software in 2016 diesels could help exhaust systems test cleaner

U.S. regulators say they have a lot more questions for Volkswagen, triggered by the company’s recent disclosure of additional suspect software in 2016 diesel models that potentially would help exhaust systems run cleaner during government tests.

That’s more bad news for VW dealers looking for new cars to replace the ones they can no longer sell because of the worldwide cheating scandal already engulfing the world’s largest automaker. And, depending on what the Environmental Protection Agency eventually finds, it raises the possibility of even more severe punishment.

Volkswagen confirmed to The Associated Press on Tuesday that the “auxiliary emissions control device” at issue operates differently from the “defeat” device software included in the company’s 2009 to 2015 models disclosed last month.

The new software was first revealed to Environmental Protection Agency and California regulators on Sept. 29, prompting the company last week to withdraw applications for approval to sell the 2016 cars in the U.S.

“We have a long list of questions for VW about this,” said Janet McCabe, acting assistant EPA administrator for air quality. “We’re getting some answers from them, but we do not have all the answers yet.”

The delay means that thousands of 2016 Beetles, Golfs and Jettas will remain quarantined in U.S. ports until a fix can be developed, approved and implemented. Diesel versions of the Passat sedan manufactured at the company’s plant in Chattanooga, Tennessee, also are on hold.

Volkswagen already faces a criminal investigation and billions of dollars in fines for violating the Clean Air Act for its earlier emissions cheat, as well as a raft of state investigations and class-action lawsuits filed on behalf of customers.

If EPA rules the new software is a second defeat device specifically aimed at gaming government emissions tests, it would call into question repeated assertions by top VW executives that responsibility for the cheating scheme lay with a handful of rogue software developers who wrote the illegal code installed in prior generations of its four-cylinder diesel engines.

That a separate device was included in the redesigned 2016 cars could suggest a multi-year effort by the company to influence U.S. emissions tests that continued even after regulators began pressing the company last year about irregularities with the emissions produced by the older cars.

The software at issue makes a pollution-control catalyst heat up faster, improving performance of the device that separates smog-causing nitrogen oxide into harmless nitrogen and oxygen gases.

“This has the function of a warmup strategy which is subject to approval by the agencies,” said Jeannine Ginivan, a VW spokeswoman. “The agencies are currently evaluating this and Volkswagen is submitting additional information.”

Automakers routinely place auxiliary emissions control devices on passenger vehicles, though they are required by law to disclose them as part of the process to receive the emissions certifications that are required to sell the cars.

EPA’s McCabe wouldn’t say if VW’s failure to disclose the software in its 2016 applications was illegal. “I don’t want to speak to any potential subjects of an enforcement activity,” she said.

If VW was cheating a second time, that would probably mean higher fines against the company, said Kelley Blue Book Senior Analyst Karl Brauer.

Regulators are “going to be even more angry than they already are,” Brauer said. “The punitive actions from the EPA are only going to get more aggressive.”

The German automaker already faces up to $18 billion in potential fines over the nearly half-million vehicles sold with the initial emissions-rigging software.

AP first reported Oct. 7 that the EPA and California Air Resources Board were investigating “the nature and purpose” of additional software on the new VW models, but at the time both the company and regulators declined to provide details about what the device does or how it works.

Volkswagen of America CEO Michael Horn said in congressional testimony last week that the German automaker had withdrawn applications seeking certification of its 2016 diesels because of on-board software that hadn’t been disclosed to regulators. However, Horn’s statement left unclear whether the issue with the 2016 models was the same as that in the earlier models, or whether it potentially constituted a new violation.

A congressional staffer briefed on the issue told AP that VW probably didn’t need the additional software to meet government emissions standards, but that the device appears intended to ensure the 2016 cars would pass inspection by wider margins. The staffer spoke on condition of anonymity because he was not authorized to talk publicly about the ongoing investigation.

VW is now working with regulators to continue the certification process needed to sell its 2016 diesel cars.


Sousa predicts car insurance rates will drop; mandates discount for winter tires

Ontario’s opposition parties say the Liberal government failed to keep its promise to cut auto insurance rates by 15 per cent and call a mandated discount for winter tires “a gimmick.”

The Liberals promised to reduce car insurance premiums an average of 15 per cent by last August as part of a deal to get NDP support for the 2013 budget when they were still a minority government.

Finance Minister Charles Sousa said some companies have cut premiums 10-to-15 per cent while others haven’t cut them “near enough,” but he’s confident they will be down further when new figures are released October 15, 2015.

“What we want to do is ensure that we have a sustainable approach that enables those insurance companies to reduce rates by reducing the costs of those claims,” he said.

The New Democrats said the Liberals broke their pledge to cut rates 15 per cent in two years in a “colossal” way.

“They’ve consistently put the interests of insurance companies ahead of the interests of Ontario drivers, who are paying the highest auto insurance premiums in the entire country,” said NDP auto insurance critic Jagmeet Singh.

The Liberals never had a real commitment to cut rates 15 per cent, and only made a promise to “buy off the NDP” in 2013, said Progressive Conservative finance critic Vic Fedeli.

“It was a hollow plan,” said Fedeli. “It was only words and never backed up with any action.”

Premiums actually increased slightly during the last quarter, but Sousa said new legislation will lower costs further for insurance companies, which he insisted will lead to reduced rates for drivers.

“We are going to continue to be vigilant in order for those rates to go down on an ongoing basis,” he said.

The government was also working with the insurance sector to find ways of lowering premiums for new drivers, who often cannot find an affordable rate.

Sousa announced insurance companies must offer a discount starting Jan. 1, 2016 to drivers who install winter tires, but there is nothing to say how much of a cut in premiums must result.

“You would think that if you were serious about mandating a cut, you would know the percentage,” said Fedeli. “It’s more gimmicky than anything.”

Sousa rejected the idea of making winter tires mandatory in Ontario as Quebec has done, saying not everyone uses their car year-round.

“What we do want is for people to have the benefit of reduced rates when they do buy those tires,” he said. “We want that safety, but we want to leave that discretion up to the consumers based on their activity.”

The NDP said insurance companies saved over $1 billion after regulation changes introduced by the Liberals in 2010, but didn’t pass along the savings to drivers.

“They’ve consistently lowered the cost for insurance companies without making sure premiums actually go down,” said Singh. “So they’ve given insurance companies all these cost saving tools, cut their costs in so many ways, but there hasn’t been any proportional reduction in premiums.”


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