The Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, was enacted to amend various statutes in the interest of reducing insurance fraud, enhancing tow and storage services and other matters. This article addresses the amendments to the Repair and Storage Liens Act and Consumer Protection Act, 2002, and Regulations thereunder, that came into force on January 1, 2017.
A statutory lien arises under the Repair and Storage Liens Act when a vehicle is towed, repaired and/or stored. This lien permits a person, providing tow, repair and/or storage services (“lienholder”) to withhold vehicles from their owner or insurer. But this lien may not arise if the lienholder fails to comply with the new amendments that came into force on January 1, 2017. The amendments are discussed in more detail below.
How does the Repair and Storage Liens Act affect motor vehicle property claims?
Motor vehicles must be cleared from accident scenes as quickly as possible for the safe and orderly movement of traffic. Given the urgency of the situation, the insured person must use the tow operator on scene. The insured is usually more concerned about personal safety than tow fees. Too many insured persons mistakenly believe that tow companies have an agreement with insurers on the fees to be charged, and thus do not discuss fees. The insured signs any documentation the tow operator may request. The documentation could include an authorization to repair the vehicle. The vehicle is then towed to a storage facility or repair facility.
The Insured then reports the motor vehicle accident to his/her insurer. The insurer requests the location of the vehicle and where the insured wants it repaired. It is not uncommon for these locations to be different. Problems may arise when the insurer tries to move the vehicle to another repair facility or salvage yard. The lienholder, having possession of the vehicle, may demand payment of excessive fees or refuse to release the vehicle altogether, alleging it is authorized to repair the vehicle. In some cases, vehicles are torn down and repairs started without the insured’s consent and before the insurer can inspect the damage to the vehicle.
The insured is a consumer with rights protected by the Consumer Protection Act, 2002. The insurer is subrogated to all rights of the insured consumer, including rights under the Consumer Protection Act, 2002.
Historical shortfalls of the Consumer Protection Act, 2002
Part VI of the Consumer Protection Act, 2002, deals specifically with repairs to motor vehicles. The definition of repair includes the towing and storage of motor vehicles. Part VI requires that the lienholder obtain authorization before providing services and provide invoices, all of which must contain specific information for the consumer. Authorizations and invoices in writing must include ancillary services such as storing the vehicle, picking up or delivering the vehicle, among other things.
In 2009, the Divisional Court held that Part VI of the Consumer Protection Act, 2002 does not apply to accident tows or subsequent storage, if the vehicle is not repaired. It does not matter if the service is performed by a tow company or repair facility. Part VI only applies if the lienholder repairs the vehicle.
Avoiding application of the Consumer Protection Act, 2002 is important because failure to comply negates any claim in quantum meruit. In other words, it cannot be argued that a service was performed, for which a benefit was received and therefore the lienholder ought to be compensated. After the Divisional Court decision, the Consumer Protection Act failed to protect insured consumers when the vehicle was not repaired after an accident. The Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014 has changed this by adding Part VI.1 titled “Tow and Storage Services”. Part VI.I is similar to Part VI and has some additional provisions that specifically address the tow and storage of vehicles.
January 1, 2017 Legislative Amendments
As noted above, the Repair and Storage Liens Act creates the lien that permits the lienholder to withhold vehicles from the owner or insurer. But this lien no longer arises under the Repair and Storage Liens Act if the lienholder fails to comply with new sections of the Consumer Protection Act, 2002. If the lien does not arise, the lienholder cannot withhold the vehicle.
The following sections of the Consumer Protection Act, 2002 will prevent the lien from arising under the Repair and Storage Liens Act:
Section 65.3: a Tow and Storage Provider shall not charge for any tow and storage services, unless it provides the consumer with specific information including its company name and contact information, a statement that its rates comply with the Consumer Protection Act, 2002, the amount of the fee, address and location where the vehicle will be towed including every anticipated stop, a statement that it accepts payment by credit card and if the information is not given in writing, it must be recorded and retained.
Section 65.4(1): a Tow and Storage Provider shall not charge for any tow and storage services, unless the service is authorized. The Regulations set out the requirements of proper authorization and more importantly, authorization is not effective unless given to the consumer before the tow and/or storage service is commenced.
Section 65.6: a Tow and Storage Provider shall not demand payment until it has delivered an invoice detailing the services provided. The invoice shall be in writing, include the consumer’s name, service provider’s name, telephone, unique number identifying tow truck providing service, business license number, make model VIN and license number, date and time the service commenced, address where service commenced, address where the vehicle was towed including all stops, unique invoice number, name of tow truck driver and payment by credit card or cash is accepted.
65.7(2): a Tow and Storage Provider is required to carry minimum insurance coverage, including coverage for damage to vehicles in its care, custody or control and cargo liability.
65.10(2): a Tow and Storage Provider shall not demand payment before disclosing the nature and extent of its interest in a location where the vehicle may be towed for repair or storage.
The following are some additional amendments that ought to assist the day-to-day adjusting of motor vehicle property claims, although they will not affect the lienholder’s rights to withhold vehicles:
Section 65.8: a Tow and Storage Provider shall maintain a current statement of its rates to be charged and make the rates publicly available.
Section 65.9: a Tow and Storage Provider shall not charge more because the charges will be paid by an insurer.
Section 65.11: a Tow and Storage Provider shall provide consumers with a copy of the Tow and Storage Consumers Bill of Rights.
65.12(1): a Tow and Storage Provider shall provide access to the vehicle to permit removal of personal property inside the vehicle. The Tow and Storage Provider must be open from 8:00 am to 5:00 pm on all business days and provide a telephone number to call after business hours to gain access to the vehicle. If access is refused during business hours, this amounts to an unfair practice which is another breach of the Consumer Protection Act, 2002.
65.15: a Tow and Storage Provider shall accept payment by credit card or cash.
65.19: a Tow and Storage Provider is required to maintain copies of all authorizations or records of authorizations, invoices, insurance policies, statements of rates, disclosure of interest or record of disclosure for three years.
Lisa M. Carr focuses her litigation practice on motor vehicle property disputes, special investigation disputes, fraud disputes and coverage disputes. Lisa is recognized by many insurers as an expert on the Repair and Storage Liens Act.