If they didn't know about the damage, how can they tell you about it? But I'm no lawyer.
Do NOT depend on CarFax or any other of the reporting companies. They are only as good as the info they receive. When I had a 370Z, I had a wreck ($20K worth of repairs) that didn't show up on CarFax. That doesn't mean that the reports aren't valuable, just not infallible.
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