Auto anti-theft
packages draw
local lawsuits

Deterrents sometimes are
included without the buyers'
knowledge, several suits claim

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By Lyn Danninger
ldanninger@starbulletin.com

When Danielle Maffi bought her Jeep Cherokee in February 2000, she paid for more than just her new car. By the time she concluded the sale, unknown to her, she also purchased an anti-theft device and warranty plan.

The theft deterrent system is now the subject of a handful of lawsuits that question not only its effectiveness, but prices charged, the method of sale and whether companies that produce the system can legally offer this type of product in Hawaii.

The suits also charge that the optional anti-theft plans are a form of insurance because they protect against a possible future event -- the theft of the vehicle -- and therefore should be regulated by the state's Insurance Commission.

A bill now on the governor's desk would accomplish that regulation, but Gov. Ben Cayetano has not said whether he intends to approve it.

Auto dealers, who sell the packages, say the lawsuits are not the way to settle questions relating to the anti-theft devices or determine if a service needs to be licensed. The dealers lobbied in favor of the bill that would regulate the packages.

"Issues like this should be worked out in the Legislature and the rule-making process, not in the courts where much harm and damage can come to individuals," said David Rolf, executive director of the Hawaii Automobile Dealers Association.

The theft deterrent system consists of etching identity numbers on the car windshields and windows as well as an accompanying warranty. If the car is stolen, the number -- either the vehicle identification number or another number assigned by the dealer -- should make the car easier to identify. The packages also provide compensation to the owner if the car is stolen.

Local dealerships named in the suits include Windward Dodge, the Cutter dealerships, McKenna Motors and Tony Hawaii Automotive Group. Three companies who produce the etching stencils for the dealerships, Safe-Guard International, Red Swan Inc. and WIS Inc., are also included in the suits.

Prices for the systems, often referred to by such names as Vehicle Theft Reduction, or VTR, vary in price from around $150 to several hundred dollars. Benefits also vary. A buyer could get up to several thousand dollars if the car is stolen, under the terms of the package.

Maffi said she paid $495 for the "Owner Security Plus" system by WIS Inc.

She later found it also included collision coverage if she happened to be driving the car and got into an accident.

Maffi said she had no idea that the VTR system was included in the fees she paid when she bought her car at Windward Dodge.

"I didn't even know I was sold the thing," she said. "They snuck it in with documentation and license fees."

Moreover, Maffi said she was baffled after finding out she had purchased the glass-etching system and warranty when she could not find any kind of etching on her car. Last year, she filed a lawsuit against the dealership.

Windward Dodge referred calls to Rolf at the auto dealers association, who handles questions for dealers involved in the suits.

Rolf said he did not want to talk about the merits of individual lawsuits or specific VTR packages.

Hawaii is not the only place in the nation where the plans have found their way into new auto transactions and become the subject of litigation.

In a California case this year, seven former senior managers at a large Chevrolet dealership were convicted of defrauding their customers, most commonly for the etching package, the Wall Street Journal reported.

State regulators in a number of other states have also filed lawsuits against dealerships.

In Hawaii, the packages have also come up before. In 1999, the state Office of Consumer Protection filed a lawsuit involving the plans.

The suit alleged a variety of unfair or deceptive trade practices and misrepresentations including the manner in which the packages were sold.

The suit was later settled, but the issue of VTRs was not included in the resolution, OCP Executive Director Steve Levins said.

Even if the packages are eventually classified as an insurance product, Levins said his office would pursue the matter if unfair or deceptive practices are involved.

"This law doesn't change that," he said. "If someone slips in a VTR and the customer is not told or are told they cannot buy the car without it, then it will get our attention."

Some of the current crop of related lawsuits also charge that the cost of the etching is exorbitant. One court exhibit estimates a dealer cost of 38 cents for a Safe-Guard etching, which is sold to a consumer for up to several hundred dollars.

The suits seek refunds for money paid by buyers plus unspecified damages from the dealers and the etching companies.

Some of the cases also seek class-action status which, if allowed by the court, could potentially cover thousands of people.

Attorney George Van Buren, who filed several of the suits, said there is no way to estimate how many people may have unknowingly purchased VTR systems.

Van Buren refers to the VTR plans as "insurance add-ons."

"It's essentially theft insurance that you're buying," he said.

Hawaii auto insurers likely would not lower an automobile owner's premiums for having the plans, Geico Insurance President Tim Dayton said.

"I'd be surprised if anyone did," he said. "Any discounts we give are based on statistical data and we don't have that here."