Car glass etching may be regulated
By John Duchemin
Advertiser Staff Writer
In the wake of several lawsuits claiming some Hawai'i car dealers are pushing buyers into paying for a questionable anti-theft device and warranty plan, the Legislature has passed a bill that would regulate companies that sell theft-deterrent devices.
The bill would require the licensing of companies that etch identity numbers on car windows as a theft deterrent and offer a "warranty" that, in some cases, pays the car owner if the vehicle is stolen and damaged. It also would regulate makers of car alarms, steering-wheel locks and other protection devices that come with warranties.
Critics of the etchings — offered as a dealer-installed option on most cars sold in Hawai'i, often for more than $100 — say the warranties associated with the product are overpriced and illegal.
Car dealers, along with a coalition of companies in the etching business, say the etchings and associated warranties are not only legal but also clearly optional, and that they're not misleading consumers.
"No retailer wants to be charged with engaging in unfair and deceptive acts when laws concerning the issues are inconsistent or unclear," said David Rolf, executive director of the Hawai'i Automobile Dealers Association, in a written statement. "(Dealers) feel that rules relating to the selling of warranty products should be addressed through the legislative process or state rule making rather than litigation."
Gov. Ben Cayetano has until Monday to approve or veto the bill. He has not said what he will do. State insurance commissioner Wayne Metcalf supports the bill.
"The industry recognizes there may be problems, and the idea of the regulation is to protect consumers," said bill sponsor Sen. Matt Matsunaga, D-9th (Kahala, Wai'alae, Palolo), who said he introduced the bill at the urging of etching-industry lobbyist Bob Toyofuku.
The glass-etching option is the focus of six recent lawsuits filed in Hawai'i that question their effectiveness, the prices charged by dealers, and whether the etching companies are legally allowed to offer warranties for their products.
Hawai'i is one of many states where such lawsuits have come up in recent years, said Rick Chalk, president of the National Vehicle Protection Association, an industry group of anti-theft device makers. Hawai'i is also the fourth state to pass legislation designed to regulate anti-theft warranties, following Florida, New York, and California.
Car dealers say the window etchings help deter theft, acting as "fingerprints" that police can easily identify. Etching companies make stencils for dealers to imprint numbers on car windows and windshields. The numbers — often the vehicle identification number — are then registered in a database and can be used to identify stolen cars.
If the car is stolen and declared a total loss, the buyer could get several thousand dollars from the etching company's "warranty."
Dealers including McKenna Motors, Windward Dodge, the Cutter dealerships, and Tony Hawaii Automotive Group sell the etchings for between $150 and $200, according to dealer statements and court exhibits.
"The idea is to lower the desirability of the car to a prospective thief," said Mark Caliri, general manager for McKenna's two dealerships. "If you want to (steal and) sell the car, you have to replace the glass."
The lawsuits against dealers — including Windward Dodge, Cutter, Tony and Makena Hawaii, the parent company of the McKenna dealerships — and etchings companies including Red Swan Inc., Georgia-based Safe-Guard International and Idaho-based WIS Inc., claim that selling the etchings is illegal in its current form.
The lawsuits say some dealers and etching companies are deceptive in the way they present the etching packages. In some cases, buyers claim they are told they have to pay for the package because the etchings have already been applied to the car. The lawsuits on behalf of at least nine car buyers in Hawai'i also claim that the warranties associated with the etchings are a form of insurance and should be regulated by the state insurance commissioner.
The lawsuits say a warranty covers the failure of a physical product — for example, a steering wheel lock. Because window-etching warranties protect against a future event — the theft of a car — rather than the failure of a product, they are essentially insurance, the lawsuits say.
"Insurance is a regulated industry — you have to follow all these laws that help make sure you'll be able to pay the claims when they arise," said George Van Buren, the attorney in three lawsuits against dealers Tony Hawaii Automotive Group, Cutter and Makena Hawai'i.
Some of the lawsuits also say the prices charged for etching are exorbitant; one court exhibit estimated the cost at 38 cents per car for Safe-Guard etchings. If the warranties were considered insurance, the cost to the consumer would be regulated.
But Chalk of the National Vehicle Protection Association said that lawyers for consumers are only interested in generating lucrative class-action lawsuits.
"These lawsuits aren't over damages that the consumers actually suffer, they're merely going after a gray area as to whether these are insurance or not," Chalk said. "It's strictly a theoretical argument and if a company settles and writes a check, the argument goes away."
The Hawai'i lawsuits seek refunds of the hundreds of dollars buyers paid for etchings, plus unspecified damages against the dealers and etching companies. A lawsuit against WIS has been dismissed on technicalities, and a suit against Safe-Guard was settled out of court.
Lawyers in the other four cases plan to seek class-action status, which could extend the suits to cover tens of thousands of people. None have yet gone to trial.
Safe-Guard attorney David Rosen of the Honolulu law firm Carlsmith Ball said he could not comment. Cutter president Nick Cutter declined to comment on the lawsuit against his company. McKenna Motors' Caliri, who also serves as vice president of parent company Makena, declined to comment on the Makena lawsuit. Windward Dodge and Tony Hawaii executives did not return calls over two days requesting comment.
Officials of WIS, an Idaho corporation, and Mililani-based Red Swan could not be reached for comment.
Reach John Duchemin at jduchemin@honoluluadvertiser.com or 525-8062.
