Damaras Gatihi was driving along Interstate 5 near Seattle in2003, when her car was bumped from behind. Her Toyota Corolla spunaround and hit another vehicle head-on. The 50-year-old nursingassistant's airbag did not open. A shady repair shop had removedher airbag and inserted a plastic cover over the empty cavity. Herbody hit the steering column so hard that the column buckled. In atragic irony, Gatihi died from massive bleeding of the heart: itwas Valentine's Day.

Airbag fraud is an expensive problem for auto insurers. It alsois a deadly public-safety threat that endangers the lives ofdrivers and passengers when dishonest body shops meddle withvehicles' airbags to make illicit profit at insurance companies'expense.

“Far more than financial fraud, airbag fraud is a public-safetyissue,” said Janet Bachman, vice president, claim administration,for the American Insurance Association. “It's the equivalent ofinstalling seat belts that are not hooked up. The unsuspectingdriver may be in for an incredible awakening that could killpeople.”

Nobody keeps complete data on how widespread and costly airbagfraud is, but the warning signs abound. Crooked body shops stuffthousands of fake and unsafe “remanufactured” airbags into carsthroughout North America, according to the Automotive OccupantRestraints Council. In the Miami area alone, police found thousandsof fake airbags, and also identified a shop that sold more than6,000 airbag shells. One insurer received more than 350 claims forcars involved in collisions and repaired with fake airbags, theinsurer told a California legislative committee last year. A surveyin Los Angeles found 66 fakes in 1,200 vehicles with replacedairbags.

Scams in Many Flavors

Most airbag swindles involve larcenous auto body repair shopsdrawn to the hefty insurance profits. Here are two commonversions:

The pullout You take your car in for repair after a minoraccident. A dishonest body shop pulls out your airbag so that itseems as if the bag had deployed during the accident. The mechanicthen inserts a cheap knockoff or salvaged bag after your insurerfinishes the estimate for replacing the original. Or worse, themechanic stuffs old rags, cardboard, or beer cans into your emptyairbag space. The body shop bills your insurer full price for“replacing” the bag, up to $2,000 or more.

The switch The body shop removes your undeployed airbag andinstalls another deployed one to make it seem as if the originalbag had inflated during the accident. The mechanic then puts backyour original bag after the insurance company makes a repairestimate. Or, the mechanic may simply insert rags and other junk,then sell your original bag on the black market. Either way, theinsurer is illegally billed for an expensive new bag and thedriver's safety is threatened.

The problem can be especially acute with salvaged vehicles, onesthat insurers declare totaled and sell at salvage auctions. Bodyshops can rebuild and resell them at hefty discounts. Up to 400,000later-model rebuilt wrecks now roam America's roadways, accordingto Consumer Reports magazine.

“There's just too much profit for airbag fraud not to be on therise,” said Larry Gamache of Carfax.com, which provides vehiclereports for used-car buyers. “Where this happens most is for newcars that have been salvaged.”

Shady, low-end repair shops often cut corners by installingshoddy or no airbags, safety groups warn. The shops can resell thesalvaged vehicles through murky networks, making it hard for buyersto trace who fixed the vehicles or what repairs were done. “If acar is totaled and goes to salvage, it's anybody's bet,” said MikeWilliams, a manager with the investigative unit of FarmersInsurance. “We're letting a lot of cars out of salvage yards thatshouldn't be let out. And it's coming back to bite us.”

States Set Standards

Federal law does not require repair shops to replace airbags invehicles that are repaired after crashes, nor does it regulate howsafe the bags must be. The states decide what is required, but mostdo not have laws specifically tackling fake and unsafe airbags.This often leaves consumers to fend for themselves.

“I think it's quite weak,” said Adrian Lund of the InsuranceInstitute for Highway Safety. “First of all, there are only ahandful of states that really even address it.” In many of thosethat do, it is a misdemeanor, and not a deterrent to body shops andmechanics.

Florida has, perhaps, the nation's toughest law. Anyone caughtinstalling a fake airbag could face several criminal offenses,including manslaughter. California also forbids reinstallingdeployed airbags, but only Utah requires deployed airbags to berepaired to their original condition, according to Lund. Last July,Delaware passed a law forbidding body shops to install fake ornon-working airbags. The District of Columbia, Hawaii,Massachusetts, Maine, Rhode Island, Vermont, and West Virginiarequire vehicles to have working airbags to pass safetyinspections.

Even state inspections have limits. States usually examine theairbag warning light, but do not check whether the airbag isproperly installed. “You can't take the airbag apart,” Lund noted.“It would be quite expensive, and you'd be modifying stuff youprobably shouldn't be modifying. So inspectors are just reading theairbag lights.”

Airbag cons may only increase in the years ahead. Federal rulesnow require that new cars have two frontal airbags to protectfront-seat passengers against head-on collisions. Increasingly,however, car makers are adding side airbags to protect the heads ofall occupants in side-impact crashes. New federal side-impact rulesalso are phasing in by 2009.

With so many more expensive airbags to steal, dishonest bodyshops may find the illicit insurance profits too tempting to passup. The insurance industry and auto-safety advocates need to pushfor a tighter state safety net now. This means tough, andcomprehensive, airbag laws that remove the profit incentive forbody shops, the Coalition Against Insurance Fraud warned.

“The most effective airbag laws would blanket a whole range ofsafety risks,” said Howard Goldblatt, the coalition's director ofgovernment affairs. Among the safety measures that he suggestedwere tougher state airbag inspections, as well as making it a crimeto install fake, deployed, and salvaged airbags, to removefunctioning ones, or to stuff junk into airbag compartments. Jailtime and fines should be stiff enough to discourage body shops andtheir cronies, he said.

In addition, he advocates that repair shops be required to havepaperwork proving where they obtained replacement airbags. Policeat crash scenes also should be required to note on accident reportswhether airbags had deployed. Many do now, but not all.

Swift action can stem costly airbag losses for insurers but,most important, it would reduce an urgent safety threat. As DamarasGatihi so fatally found, airbag fraud means more deadly drives foranyone who steps into a repaired vehicle.