November 3, 2017 by Lisa M. Carr
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:
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:
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.