This article is a companion piece to this video
What happens when an auto body shop holds your insured’s vehicle hostage, claiming storage and tow fees have not been paid? And what if those claimed storage fees are extravagant and unreasonable? In the above episode of On Subrogation: Body Shop Storage & Tow Fees, subrogation attorney Jason Sullivan explains the varying nature of body shop fees and how a carrier and their subrogation counsel should navigate these legally muddy waters.
Highway Robbery: Subrogation Recovery of Auto Shop Storage Fees
Auto repair shops charge storage fees that kick in when a customer fails to pick up their repaired car after a certain amount of time has passed. In addition, there may be associated tow and/or mechanics fees. What do you do as a carrier who needs their insured’s car back but the body shop is holding it hostage at an inflated price?
There are three things a subrogating attorney must explore when guiding their carrier towards a path of recovery:
1. Consumer Protection Laws
Most state, federal trade and consumer protection laws require (1) the body shop to give written notice of any storage charges and (2) that said notice is presented and signed by the consumer (your insured) beforehand.
2. Fee Caps & Limitations
Does the breakdown of the storage fees follow any state limitations on fee caps? For instance, a lawyer subrogating an auto case like this in FL will find that storage fees may not begin until 3 days after service to the vehicle is completed.
3. Mechanic’s Liens
Mechanic’s liens are created by statute, most states don’t have them in case law. A mechanic’s lien states artisans who do work on a project can retain possession of the project until their work is compensated. These can be difficult to define because not all work counts as a mechanic’s lien and like everything in insurance law, conditions vary by state statute.
Subrogation & What is a “Reasonable” Storage Fee
Backing up, the question of what is a reasonable storage fee for a typical auto body shop has a muddled answer at best. On a societal scale, you have repair shops advocating for what they view as fair compensation vs consumers and carriers advocating for lower fees for obvious reasons. On a state-by-state scale, you have confusion. Take, for example, California.
In California, this type of motor vehicle subrogation claim is of particular issue because of the conflicting standards of reasonability of storage fees. A law passed several years ago states a reasonable fee rate should be set at either/or:
- Whatever the state highway patrol’s fees are
- Whatever the local police force charges
- What the typical body shop in the area charges
The result of this law created chaos, because insurance carriers limited their coverage to highway patrol rates while body shops continued to charge much higher fees. This left insureds with large gaps in their coverage. The questions that arise are:
- Who bears the duty to prove what a reasonable charge is?
- Is highway patrol accurate? Who can show that a higher rate is reasonable?
Tips for Subrogating Claims for Tow & Storage Fees
How does a claims adjuster or lawyer handling a subrogation claim involving auto shop storage fees define reasonable vs unreasonable charges? Chain body shops that work regionally or nationally often work on contract, which makes this simpler. However, most often you will deal with an independent shop, which can be more difficult to nail down. Things to consider:
- What legislation, if any, exists about reasonable storage fees in your jurisdiction?
- Did the body shop follow consumer protection rules about disclosure of storage rates?
- Did your insured consent to the rates (i.e. sign a contract)?
- Who currently has possession of the vehicle?
As the old adage goes, possession is 9/10ths of the law. If you have managed to acquire the vehicle before paying out the claim, it will almost always be easier to come to an agreement with the shop. If they still have the vehicle, it may be harder to work with them because your insured needs that vehicle, regardless of what losses you as the carrier incur to get it.
Then there are the conditions of the payment. There is a case to be made that by paying storage fees you have agreed that the cost was reasonable. As such, you may functionally waive your right to subrogate the overcharge.
Finally, considering all the moving targets at play in pursuing subrogation recovery for body shop storage fees, and insurance attorney should weigh the cost:benefit ratio of recovering those payout. Subrogation is the best way forward in many cases, but not in every case. Carriers should have a law firm take a second look at these subrogation claims to ensure you are protecting your bottom line.
If you would like to know more about this and other relevant topics in subrogation and insurance law, visit our YouTube channel and podcast library for all episodes of On Subrogation. On Subrogation is a video and podcast series hosted by Rathbone Group subrogation attorneys that provides education and informational resources to subrogation and insurance professionals interested in maximizing subrogation recovery while minimizing the cost of pursuit.To ask a question or suggest a new topic for a future episode of On Subrogation, reach out at [email protected] or [email protected].