We must reconsider the word “free” and why are we giving a service away for free that cost our office thousands of dollars annually to cover?
The second in a series of arsonist / firebomb attacks occurred last week in Chicago, IL where 18 vehicles being stored were totaled. A similar attack occurred on May 20 when Reliable Recovery Services in West Phoenix, AZ was hit with a firebomb attack that was recorded on the owners’ cameras.
The recovery industry and our people are in a state of collective shock. The dangers of doing the job are already high enough, and the stories of our brothers and sisters being shot, injured, and killed in the line of duty are now all too commonplace. The economic pinch of the recent years brought about by intermediation, and Covid’s impact on repossession assignments and executive orders locking us out of being able to do work added significant enough strain to eliminate over 25% of our repossession industry. Now we have this…
So, what is a recovery company to do to protect themselves about the latest threat? Recovery professionals are all too familiar with insurance requirements that serve as table stakes to allow them to take assignments. They are also well familiar about the high cost of insurance, and how it has become harder and harder to find insurance companies that want to work with them.
We asked Mike Peplinski of Harding-Brooks Insurance Agency to help us understand what recovery shops would be up against were an act of terrorism (yes, I used that word and I mean it) were to come down on them and their assets under their control. “Garage Keepers coverage is responsible for the 2nd most frequent claim we see for a recovery professional behind auto accidents and 3rd most costly. It’s simple, paid claims = higher premiums” started Peplinski.
He goes on, “Recently, 18 recovered vehicles were burned on one lot. The incident has been deemed as Arson. Recovery professionals are required by contract to carry Garage Keepers Direct Primary Coverage. This arson incident would be covered under the “direct primary” portion of Garage Keepers. Hypothetically, if a recovery professional’s Garage Keepers limit was $350.000, (industry standard) and the value of each unit was $10,000 (and all 18 units were totaled due to the fire), the insurance company’s payout would be $180,000 minus the deductible which is normally $500 or $1,000 per vehicle with a cap of $2,500 or $5,000 per claim. $180,000- $5,000 = $175,000 total paid out!”
When asked about the longer-term impacts of such a claim on the recovery professional, Peplinski commented “In the example above, the recovery professional will now have a $175k claim on their loss runs. This will undoubtedly trigger an increase in their premium at renewal.”
It is unfortunate to see the pain and loss involved in the incident itself, and it is an extra kick in the gut to realize that your premiums will now increase or could result in being dropped entirely if you had prior claims that broke the camel’s back.
As we move deeper into the 3rd quarter of this year, we, as recovery agents, must consider what we collectively can do to bridge the gap in what it cost to store these units that are under our care, custody, and control vs. what our profit margins are to store them. The answer we should all come up with is there is no profit, as there is no charge to store a vehicle.
We must reconsider the word “free” and why are we giving a service away for free that cost our office thousands of dollars annually to cover? Why are we giving one day storage away free? If a peril occurs while we have custody of our client’s collateral, we are bound by contract to accept the liability, however daily we are putting our businesses at risk accepting this type of liability with zero compensation.
The days of “free” must end. Of course, buy one get one free has strings attached that, in the end, will net the proprietor a financial gain; there is no such reward for recovery agents that store units on their lots for free, not even for one day.
Unity is key. This is not price fixing, the phrase that’s used to keep us in check; this is simply starting a conversation to educate our industry and causes all agents across the county, in the words of Nancy Regan, to simply, “just say NO”!!
Related Articles;
ARA – Wrongful Repossession & Owning Liability
Top of CFPB’s 2022 Supervisory Highlights; Auto Servicing and Wrongful Repossessions
ARA Statement – Arson at Repossession Lots – ARA – American Recovery Association
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