Insured Repossession Company

RSIG Insurance re•pos•sess \, re-pe-'zes also -'ses \vt (15c) 1 a : to regain posession of b : to resume posession of in default of the payment of installments due 2 : to restore to posession - re•pos•ses•sion \-'zesh-en also -'sesh- \ n - re•pos•sess•or \ -'zes-er also -'ses- \ n

Repossession = Loss of Income, Loss of Profits
 


One wrongful repossession by an uninsured, unprofessional repossession company can cost your company thousands of dollars in legal expenses and possible astronomical court awards to the debtor.

Are you depending on inadequately or uninsured recovery companies to effect your repossessions in order to save money on recovery costs?

  • What kind of insurance protection is needed by the repossession agency?
  • What do banks, credit unions, financial and lending institutions need to know about repossession agencies?
  • Why is it important that a financial institution verify the insurance policies and coverages that are presented to them by repossession agencies?
INSURANCE COVERAGE FOR REPOSESSION AGENCIES

In ever increasing numbers, our courts are awarding judgments in staggering amounts for less than meritorious claims. As people fall on hard times they seem to turn to the courts demanding awards for the most outrageous of claims. Attorney fees mount and settlements are made because it is "just cheaper in the long run."

Although the professional recovery agencies have evolved over the years, have worked hard to train their employees, have formed trade associations and made attempts to keep their members informed of changes in laws, the latest in equipment and technology, they are not immune from these types of lawsuits.

INSURANCE AVAILABILITY

Therefore, high quality insurance coverage should be a top priority in the recovery business. If it provides proper repossession coverage, it is expensive and hard to find. It is a fact that some repossession agencies depend on financial institutions not knowing:

  1. The difference between a regular towing policy and a repossession policy;
  2. How to verify the coverages;
  3. What coverages are needed;
  4. If the insurance company is financially able to pay a large claim;
  5. To ask for a policy and read the exclusions; and
  6. If the repossession company is financially strong enough to handle the deductible portion of the insurance policy.

Many repossession agencies will insure with companies that may not be financially strong enough to pay a large loss.
Some financial institutions have brought potential losses upon themselves. They place great emphasis on obtaining the lowest fee available and virtually ignore the insurance aspect. They accept insurance certificates at face value and simply file them away without complete verifications of coverage, or knowing anything about the insurance company or the policy that has been presented to them.

Some collection personnel will hire towing companies to repossess vehicles. Most of these wrecker drivers are untrained or have little knowledge about repossessing collateral. The leinholder relies on the towing company's insurance to handle any claim or litigation that may develop. They accept certificates of insurance without verifying coverages. It is a fact that over 90 percent of the insurance companies who write towing insurance will exclude the transport or repossession of a vehicle. The few states that do not regulate repossession companies do not allow towing companies to pick up or transport repossessions.

Controlling repossession costs and minimizing the amount of loan deficiency are important priorities with all financial institutions. In an effort to minimize repossession costs and the amount of a loan deficiency, repossession agencies are asked to work their accounts on a contingent fee basis and to keep the recovery cost under a specified dollar amount. Banks and finance companies do not ask their employees to work for free but expect the repossessor to do so. NO CAR, NO MONEY is the mind set. What kind of problems can arise from this? If the repossessor does not get the car, he doesn't get paid. What kinds of chances will he take to recover a vehicle? What kind of losses can arise from an overanxious repossessor?

When a bank or finance company hires an employee they make sure they are trained in all aspects of the job. Training manuals and flow charts are given to the employee and their work is followed and reviewed by their supervisors.

  • What about the repossession agency that is hired?
  • How were they trained?
  • Who trained them?
  • How are they informed on new laws that may have an impact on them or their clients?

Recovery agencies are only licensed in a few states. California, Colorado, Oregon, Florida, Nevada, Pennsylvania, and New Hampshire. In most states, it only takes a regular business license. Most financial institutions take the background and training of a recovery agency for granted. Although a large portion of the industry is made up of former finance company employees and police officers, there are a great many who have not had any training or finance background.

  • What happens when a claim is filed, and the insurance company says that repossession activities are excluded from the policy?

The legal defense will fall upon the leinholder. They cease doing business with the repo agency, but the loss remains. Suddenly, the inexpensive repossession may cost them thousands of dollars in legal costs even if they win the lawsuit.

INDEPENDENT CONTRACTORS

When a lender assigns an account to a recovery agency to repossess a vehicle, is it the recovery agency they are dealing with or an independent contractor? It is important to you that the recovery agency employee recover the vehicle rather than an independent contractor. An independent contractor is a separate entity and generally recovers vehicles for more than one recovery company. When a loss occurs, the independent contractor's insurance should be responsible for the claim. Claims of wrongful repossession, breach of peace, etc. could come back on the financial institution to defend.

One way to help minimize this type of loss is to ask for a copy of the actual insurance policy and read it together with all endorsements and exclusions. Do not rely merely on the certificate of insurance, because it does not fully define the coverage and exclusions.

WORKERS COMPENSATION INSURANCE

Laws relating to workers compensation insurance vary from state to state. We recommend that you contact your state insurance commissioner and/or seek legal advice to determine your state's requirements.

Some recovery agencies may not be required to carry workman's compensation insurance. It may be advantageous to verify the hospitalization insurance that will cover the agent in the event of an accident.

Larger recovery offices are required to carry workers compensation insurance. Most states will issue a certificate of compliance which you can obtain from the recovery agency.

Why is Worker's Compensation Insurance Important to You?
Recovery agencies are working for their clients as independent contractors. Some of these agencies will hire other independent contractors to recover property or automobiles for them. Should they have an accident and the recovery agency does not carry workers compensation insurance, the injured agent could make a claim against the finance company or bank for their insurance carrier to pay the claim.

LENDER / RECOVERY AGENT RELATIONSHIP

Repossession agencies offer a unique service that is vital to the lending industry. The duties they perform are often dangerous, sometimes confrontational, and always carry a certain degree of risk. Therefore, it is vital for lenders to ask themselves several questions prior to hiring a repossession company. How important is it that a repossession company be properly insured? What kind of insurance should they have? And, why should the lender be concerned about these coverages? Rulings from the Texas and Mississippi Supreme courts have answered these questions.

The Texas Supreme Court noted that a secured creditor has two choices:
1. It may repossess the collateral if it can do so without breaching the peace; or
2. it may take legal action.

If the secured party chooses the first of these options, it runs the risk that the repossession may, in fact, breach the peace. When that happens, the secured party may be held liable in tort, whether it performs the repossession in-house or delegated to an outside repossessor.

The court also observes that generally, when the law imposes duty based on concerns for the public safety, the party that has the duty cannot escape it by delegating it to an independent contractor.

The court notes other jurisdictions have found a creditor cannot escape the duty of peaceable repossession by delegating it to an independent contractor. The Mississippi supreme Court has decided that an automobile lender that employs an 'outside" repossession agency is automatically liable for any tortuous conduct of the agency during repossession; such an agency can no longer be considered an independent contractor. This exception to the independent contractor doctrine is apparently based on the premise that tortuous conduct is foreseeable by the very nature of the task to be performed by the independent contractor. this simply means that a HOLD HARMLESS is of litter or NO value and that the financial institution is responsible for the actions of the repossession company.

PHASE ONE: THE INVESTIGATION OR SKIP TRACING

It is necessary to verify information and sometimes skip trace the assignment in order to locate the vehicle. Liability may arise from the debtor alleging slander, or that he or she had sustained damages because the agency invaded their privacy when talking to their neighbors or verifying residence or employment.

The coverage needed to protect the recovery agency would come under the personal injury portion of the Garage Liability policy. One could have a garage liability policy that EXCLUDES personal injury protection so it's important that personal injury is included. The RSI Group's current insurance coverage for this potential loss is $5,000,000.00 and includes personal injury.

PHASE TWO: THE ACTUAL ACT OF RECOVERING THE VEHICLE

The coverage needed to protect the recovery agency would come under the personal injury portion of the Garage Liability policy. One could have a garage liability policy that EXCLUDES personal injury protection, so it's important that personal injury is included. The RSI Group's current insurance coverage for this potential loss is $1,000,000.00 and includes personal injury.

The second type of recovery is one where the debtor or any family members are present during the recovery. This encounter can either be friendly or violent depending on the situation. the debtor may allege he was physically injured in some way or he may sue for breach of the peace or wrongful repossession. If the debtor should be struck by the tow truck or the repossessed vehicle while it is being towed, the repossessor's auto liability will respond (assuming it's not a tow truck policy that excludes repossession activity). Most other alleged injuries would be defended under the garage liability portion of the policy as long as it wasn't an intentional criminal act. Our broad form garage liability policy has a limit of $1,000,000.00 each occurrence with a $10,000,000.00 aggregate.

Owned Vehicles

Owned vehicles will include wreckers and other company-owned vehicles that are used in the daily operation. The liability coverage will be the most important.

A loss may occur when the recovery agent's truck is towing a vehicle which subsequently comes off the hook. it may strike another vehicle and cause damage to property or personal injury. Because the tow truck set the recovered vehicle in motion, the damage caused by the towed vehicle will be covered under the on-hook portion of the RSIG group carrier Fire & Marine insurance policy.

PHASE THREE: STORAGE AND TRANSPORTATION OF THE VEHICLE

Transport of the vehicle begins at the time of recovery. A vehicle can be transported by one of two methods. The first is by wrecker and the second is by driving the vehicle. In our ongoing search for insurance, we have found that most major insurance companies insuring wrecker services will exclude transporting repossessions from their policies. The exclusion will not be shown on a certificate, only in the actual policy. The RSI Group's carrier insures transporting the repossessions. The coverage ends when the vehicle is turned over to the client or their agent.

There are two kinds of Garagekeepers insurance. The first is Garagekeepers Legal. This coverage will not pay a loss if the insured has done everything he was legally obligated to do. For example, the insured has a secure facility and it is broken into. Several of the vehicles were damaged and the loss is reported to the insurance carrier. The claim could be denied because the insured has fulfilled his obligation by providing a secure lot, fenced in with lights and other security.

The second is Garagekeepers Direct Primary. This coverage pays claims and losses regardless of the recovery agent's neglect or legal liability.

The RSI Group has Direct Primary Garagekeepers coverage up to &1,000,000.00 including theft and vandalism.

INSURANCE COVERAGE

How do you Know if the Coverage is There?

If you are currently doing business with a recovery agency please verify that you have the coverages that protect you and your company. Check the Certificate of Insurance that is provided by the recovery agency's insurance agent. If the words "Repossession Liability" is written on the certificate, there is a good chance you are protected. If Repossession Liability is not on a certificate, there is a good chance you do not have the coverage. Some companies rely on their application for insurance to identify repossession companies. If the application is incomplete, a policy may be issued in error. If a loss occurs, the claim could be denied. If the insurance carrier depends on the application of insurance to determine what kind of business is being insured, then there should not be an exclusion for repossessions. Please remember that exclusions are not listed on the Certificate of Insurance. Call the agent and ask him to send another certificate with "Repossession Liability Included." It should not be a problem if the coverage is
there; it will be a problem if it is not.

Read the policy and the exclusions. Take time to make sure the recovery agencies have the coverages you need.

THINGS TO CONSIDER ABOUT THE COVERAGE AND THE INSURANCE CARRIER

How dependable is the insurance company?

The best way to find out is to simply call the Insurance commissioner's office in your state and ask them for the "Best" rating for that company. You can also inquire about any complaints or regulatory actions against that company.

What is a "Best" Rating and What Does it Mean?

All U.S. Insurance Companies are given a financial rating once they meet certain capital and experience requirements by the A.M. Best Company, The rating scale is from A+ (Superior) to F (In Liquidation). The RSIG group carrier Fire & Marine Insurance Company (RSI Group's carrier) enjoys an A- (Excellent) rating.

What is the Difference Between an Admitted carrier and a Non-Admitted Carrier?

An Admitted Carrier is one that has met various financial qualifications as set forth by that state's insurance commissioner, and is licensed or approved to transact business. The carrier also pays into and receives the protection of that state's Guarantee fund. This fund acts as a safety net whereby if the carrier becomes insolent, the fund would step in and pay back any unearned premiums or settle any outstanding claims. The RSIG group carrier Fire & Marine Insurance Company is admitted in all states.

Domestic, Foreign and Alien Insurance Companies

A domestic insurer is an insurance company formed under he laws of your home state and is authorized to transact insurance business. A foreign insurer is one that is formed but not domiciled in another state. They may or may not be authorized or admitted to solicit business in other states.

An alien insurer is simply one that is formed under the laws of another nation. They are often referred to as "OFFSHORE CARRIERS."

Both foreign and alien insurance companies could be authorized (admitted) to transact business in a given state. On the other hand, if they are not, they can only transact insurance through licensed surplus line brokers and are referred to as surplus line carriers. These carriers are not protected by a state's insurance guarantee fund and are not directly regulated by each state.

Many repossession agencies are insured by offshore carriers. A quick phone call to your insurance commissioner will help you to rule out disreputable offshore carriers. They will be able to provide information regarding outstanding complaints, current regulatory actions and the like.

SUMMARY

There is a cost of doing business. The professional recovery agency is focused on its business and is responsible to their clients for the actions of their personnel. They cannot work for free nor can they afford to get into price wars with recovery agencies who are not as responsible. The insurance protection that is needed by them is expensive. It will be advantageous as well as smart business to take time and verify the insurance on the recovery companies, If they do not have the insurance that is needed and they have a proven track record, please refer them to us.

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