The American Repossessor

Trying to actually read an insurance (contract) policy of any kind is about as dry as Texas dust in August and about as easy to understand as advanced calculus. There is a “package” of coverage’s necessary to properly protect collateral recovery business owners, their clients and the public. Following is an explanation of that “package” of coverage’s so that you might better understand how the different coverage’s, in layman’s terms protect your collateral recovery business and your client.

• A. Commercial General Liability;
  Also known as “premises liability”, this coverage responds to Bodily Injury or Property Damage claims that occur at the business location designated in the policy. Example; a debtor, whose car has been repossessed comes to the business location to reclaim personal property, trips and falls on the steps, breaking a lag and sustains other injuries. If the debtor files a claim, this coverage would respond.
• B. Garage Liability;
  This is the very “heart” of the repossession policy coverage because it responds to claims occurring during the actual, physical repossession process. In some insurance contracts this coverage may now be written under the General Liability Section. In the Remarks Section of the Declarations Page, the insurance carrier should note words to the effect that, “Garage operations includes all operations necessary or incidental to a repossession business (including Wrongful Repossession)”. Example; the recovery agent has hooked the defaulted collateral to his tow truck when the debtor runs out of his home, a physical confrontation ensues, (Breach of the Peace) and the debtor files a claim. The Garage Liability section would respond.
• C. Garagekeepers Liability;
  This portion of the policy responds to claims of damage to the recovered collateral while in the CARE, CUSTODY and CONTROL of the recovery agent. This coverage is for physical damage to the collateral such as theft, vandalism, mischief, fire and explosion. Example; While in the recovery agent’s storage facility, the collateral is stolen and two other vehicles are vandalized. If a claim is filed the Garagekeepers section of the policy would apply. It is extremely important to know that there are three coverage options within the Garagekeepers section; Legal Liability, Direct Excess and Direct Primary. Rather than go into any lengthy discussion of these different coverage’s, suffice it to say that the most comprehensive and quickest to respond of these coverage’s is Direct Primary, and the recovery agent should insist upon this specific coverage.
• D. On Hook Coverage;
  The collateral has been repossessed and the recovery agent is towing it back to his storage facility when the collateral breaks loose from the tow truck and crashes into a large and very stationary telephone pole, causing extensive damage. The On Hook Coverage would respond to such a claim.
• E. Drive Away Coverage;
  simply stated, this coverage responds to claims made as a result of repossessing the collateral by driving it away, rather than taking it by tow truck.
• F. Personal Injury Coverage;
  This is NOT a coverage for “physical’ or “bodily injury”, but instead responds to claims such as; false arrest, detention or imprisonment, malicious prosecution, wrongful entry or eviction; and oral or written publications that libel, slander, or violate rights of private occupancy.
• G. Commercial Truck Coverage;
  When insuring the truck it is important to disclose that the truck will be used for repossession activity. Not providing such disclosure will result in denial of claims and it will usually result in cancellation of the insurance contract.
• H. Personal Effects Coverage;
  This coverage responds to claims where the debtor may claim that personal property contained in the collateral at the time it was recovered is now missing.

The coverage’s listed above are the normal coverage’s are the normal coverage’s currently being required by lien holders, in addition to the Dishonesty Bond, which is a Fidelity insurance and must be written on a separate policy.

Clients usually require that the “package” policy provides for Commercial General Liability and Wrongful Repossession Liability in the amount of $1 million per occurrence with either a $2 million or $3 million Aggregate.

What is the meaning of “Wrongful Repossession”? There are a number of different situations where a “Wrongful Repossession” might occur. Initially it was erroneously thought that “Wrongful Repossession” meant repossessing the wrong collateral. We now know that anytime collateral is repossessed where there is no legal right to repossess, it is a “Wrongful Repossession”. As in the example under Garage Liability, If the recovery agent ignores the debtor’s demand and takes the collateral, he could be charged with Breach of the Peace, at which point this activity becomes a “Wrongful Repossession”.

What many collateral recovery specialists do not realize is that, in the event there is a violation of Breach of the Peace, the recovery specialist can be sued either in local court or in federal court under the Fair Debt Collection Practices Act (FDCPA). Under Section 1692f(6) (a) of the FDCPA, it states, in part, “taking or threatening to take any non-judicial action to effect dispossession of disablement of property if; there is no present right to possession of the property claimed as collateral through an enforceable security interest.

Simply put, at the point of a Breach of Peace the recovery specialist no longer has the right to self-help repossession which means there is no longer a “present” right to take possession, and the repossession then becomes a Wrongful Repossession, punishable in local or federal court.

Joe Taylor – Vice President

RISC – joe@RiscUS.com

NOTE: Joe has been a licensed Property and Casualty Agent for the past eighteen years and deals exclusively with collateral recovery specialists all across the country.