In my 27 years in the insurance industry, I have seen myshare of disputes over towing and storage charges. Talk to anyexperienced agent or claims person and they likely will be able totell you a story about a “vehicle held hostage” by a towing orstorage facility. There is little doubt that these situationscompound the aggravation of accident victims and their insurers,but they also impose significant costs. 

The towing and storage of private passenger automobiles is amulti-billion-dollar business. According to the National HighwayTraffic Safety Administration, 16 million traffic crashes occur inthe U.S. each year. Of these, PCI estimates that nearly 11 millionof those vehicles will be towed from the accident scene. With theaverage crash-related towing and storage fee at $412 per claim($228 for towing and $185 for storage) in 2010, that translatesinto a total nationwide towing and storing bill of about $4.5billion a year for damaged or disabled vehicles.

However, for many years there have been growing concerns relatedto excessive towing and storage fees generated by the practices ofsome unscrupulous towing companies. Although most of these firmsare honest and well intentioned, some engage in abusive businesspractices designed to increase towing and storage charges.

Related: Read the article “Utah Legislation PassesAccident Tax Restrictions” by Phil Gusman.

On a nationwide basis, PCI estimates the total excess amount oftowing and storage charges to be about $570 million a year,accounting for 13 percent of the total annual towing and storagecosts. 

To better gauge the scope of the problem, PCI surveyed itsmembers, asking them to identify the most frequent towing- andstorage-related problems and the cities and states where they occurmost often. PCI members said that towing and storage abuse is aproblem almost everywhere and identified Chicago, Philadelphia, NewYork, Atlanta and Houston the most for aggressive towingpractices.

Below are findings from the report “Abusive Vehicle Towing & Storage Practices: AHalf-Billion Dollar Problem”, reprinted with permission fromPCI. 

The five states with the most aggressive towing practices wereidentified as Illinois, Pennsylvania, New York, New Jersey andCalifornia. And when you look at the data, these states' combinedproperty damage liability and collision loss cost is 21 percenthigher than all other states—the higher cost per vehicle in thesefive states may be partly attributable to excessive towing andstorage fees.

However, the problem is by no means limited to the above citiesand states. Forty-two states and 149 cities were specificallymentioned by respondents, an indicator of how widespread towing andstorage problems are.

PCI found that the most criticaltowing-related problems for motorists and insurers are:

1. Artificially high towing and storage charges and miscellaneousfees
2. Inconsistent and difficult release process
3. A lack of transparency and communication from towingcompanies
4. Delayed access to vehicles for insurance adjusters and vehicleowners.

Insurers point to the release process as being one of theprincipal concerns in regard to towing. Generally, there are amultitude of steps and requirements for releasing a vehicle. Therelease procedures are increasingly complicated and often requirecash payments and in-person signatures. 

Related: Read another article by Robert Passmore“Poisoning the Well.”

Claims professionals repeatedly cited problems regarding a lackof transparency and communication in the towing process. Often theinsurer and vehicle owner cannot immediately locate a vehicle thathas been towed and the automobile verification process can bedelayed while storage fees are assessed. In many areas, there areno standards for statements and itemized receipts, creatingwidespread problems with invoices.

Insurers noted an inability to challenge towing and storagefees, dispute charges and negotiate on rates. Insurers and vehicleowners have little leverage in these situations,  becausecharges continue to accrue, leading to a “take it or leave it”attitude from towing facilities.

Unstaffed or understaffed lots with limited hours present moreproblems for both the insurance adjuster and the vehicle owner.Insurers were united in expressing frustration while attempting toinspect vehicles that were held by towing companies. Towingcompanies implemented inconsistent policies and requirements forwhen and how adjusters are allowed to access a vehicle. Manyinsurers cite staggering fees for adjusters to enter a towing yardfor inspections. These claims professionals also note that theconditions within the towing yard made it very challenging asvehicles were parked too close together and the towing companieskept limited operating hours that resulted in additional dailystorage charges. Vehicle owners had problems collecting personalitems from their vehicles.

Insurers cite marketplace challenges asanother problem. Generally, insurers are concerned with a lack ofchoice and competition among some jurisdictions. In many cities,towing companies enjoy exclusive relationships with law enforcementagencies on accident tows. A lack of towing industry standards,regulations, and uniformity in charges and policies severelychallenge vehicle owners and their insurers' attempts to secure atimely release of vehicles.

The National Insurance Crime Bureau provide data that supportsthese concerns, which receives and analyzes referrals ofquestionable insurance claims where fraud is suspected. Accordingto the NICB, the number of referrals related to inflated towing orstorage bills have more than doubled between 2009 and 2010.

So what are the solutions?

Towing regulation varies widely, with layers at the state andlocal level, but most often they are limited to so-called“non-consent” towing. Common examples are cars towed whileillegally parked or abandoned. While it can be argued that thereare situations where a vehicle owner or operator may have littleopportunity to choose a towing operator or bargain for services,court decisions have found that “consent” towing includes vehiclestowed from accident scenes and after a breakdown.

Related: Read the article by Chad Hemenway “NewYork City Next to Charge Accident Tax.”

The distinction is important because although the states mayfully regulate “non-consent” towing, states are unable to fullyregulate “consent” towing as they are preempted by provisions infederal law. This preemption does provide some benefits forconsumers by preventing duplicative regulation in multi-statemetropolitan areas—avoiding absurd situations such as having tochange towing companies at state or city lines—but it some cases ithas been used inappropriately as an obstacle to common sensereforms.

PCI believes the right approach includes support for effectiveregulation of accident scene towing practices to increasetransparency, provide for reasonable release processes and accessto towed vehicles, and bring towing and storage charges undercontrol. Effective towing regulation should include:

• Specific notice requirements, within 24 hours of thecommencement of the towing, so the owner or insurer can be aware ofaccumulated charges. This should cover both non-consent and consenttow situations.
• Requirements that vehicles be released from a towing or storagefacility to a properly designated insurance representative when astatement of owner consent is provided.
• Limits on the distance that a vehicle is towed for non-consenttows. There should not be a limit for consent tows on the distanceas long as the tow contractor provides a specific estimate of thetowing expense prior to the vehicle being towed.
• Clear disclosures covering the receipt and release of thevehicle, providing the street address, hours of operation andcontact numbers of the storage facility to the owner, insurer, andinsured. This covers both non-consent and consent towsituations.
• Prohibition against towing vehicles from private propertywithout consent of the property owner. As such, this provisionapplies to non-consent tows.
• Itemized statements for all towing and storage servicesprovided.
• No storage charge accrual on days when the facility is not openfor the recovery of stored vehicles. This covers both non-consentand consent tow situations.
• Clear disclosures on storage charges, no extra charges forcontrived charges such as vehicle access and inspection charges orcharges for moving a vehicle from one place to another in the samefacility.

If no action is taken, costs will continue to grow, resulting inincreased insured loss costs that may translate into higherpremiums and out-of-pocket expenses for consumers.