Insurance Services USA, Inc. - Online Insurance Seminar

Without question, the self-help repossession process is one of the most invasive acts allowed by law. Entering upon private property without legal assistance for the purpose of taking defaulted collateral has, as the courts have ruled, "inherent" risks.

The new Uniform Commercial Code states, and courts agree, that due to the "inherent" risks associated with the self-help repossession process, THE CREDITOR CAN BE HELD LIABLE FOR THE ACTS OF THE COLLATERAL RECOVERY SPECIALISTS THEY HIRE.

It is not argumentative then that the two most vital criteria for reducing the potential for liability, litigation, physical injury and insurance claims are professional training and certification, and proper and adequate insurance coverage's. Collateral recovery insurance is a specially designed "package" of insurance coverage's designed to address all aspects of the self-help collateral recovery process.

In this seminar we will address insurance....the various specific coverage's that protect both the collateral recovery specialist and the creditor.

We believe this seminar is very important to all parties involved. Insurance contracts and coverage's are difficult to understand for many business owners as well as those in the lending industry responsible for making certain the collateral recovery specialists they hire have the proper coverage's.

Over the past six years, twelve insurance carriers have stopped writing coverage's for collateral recovery specialists due to excessive losses. There are two underlying reasons for the excessive losses insurance carriers and creditors have suffered; lack of requirements for training and certification of professional competency by both the insurance carrier and the lending community, and the lenders' reliance on insurance as the primary prerequisite for choosing their collateral recovery specialists.

Insurance responds only AFTER a claim or litigation is filed and only then if that claim is covered. Certainly insurance should NEVER be the primary determining factor in choosing your collateral recovery specialist. A much more important requirement should be proper training in Risk Management principles and certification of professional competency. This is a much more effective and logical approach for reducing the potential for claims and litigation.

Insurance carriers: "admitted" vs "non-Admitted" carriers

One of the most important aspects of the insurance contract, which seems to be overlooked by collateral recovery specialists and the lending community, is whether the carrier is an "Admitted" Carrier.

"Admitted" insurance carriers are members of the Insurance Guaranty Fund in those states where they offer coverage's. Insurance Guaranty Funds protect policyholders on behalf of all "admitted" carriers in the event of bankruptcy or financial hardship of an individual "admitted" insurance carrier.

"Non-admitted" carriers are not required to participate in these funds and therefore, in the event of insolvency or financial hardship of a "non-admitted" carrier, the insured and the insured's client suffer.

Note: Coverage through an "admitted" carrier should be a primary requirement of the collateral recovery specialist and the creditor. Both should require verification that the insurer is an "Admitted" Carrier.

Insurance Contracts

Occurrence Contract: A policy providing coverage's for a covered injury or loss that occurs during the policy period, regardless of when the claim is actually made.

Example: Under the Occurrence policy a claim may be filed even after the policy has expired as long as the covered incident happened during the policy period. Such a claim cannot be charged to any current held policy.
Claims Made Contract: A policy providing covered claims only if a written claim is made during the policy period or any applicable extended reporting period.

Example: A claim made during the current policy period could be charged against the current policy even if the loss occurred many years in the past. If the policy has a retroactive date a loss prior to that date is not covered.

Many lenders will not accept a Claims Made policy due to the uncertainty of retroactive dates and just how losses are covered.

"Package Policy" vs Multiple Carriers

"Package Policies", as they relate to the collateral recovery industry, are those insurance contracts that include the various coverage's necessary to cover all aspects of the collateral recovery process and are written by one carrier (these various coverage's will be discussed under the Explanation of Coverage's portion of this Online Insurance Seminar).

"Package" policies written by an "admitted" carrier assures the very best coverage's for the collateral recovery specialist and the creditor.

"Multiple Carrier" Policies are constructed from several different insurance companies and special care must be taken to insure that all the proper coverage's are included.

Punitive Damages

Punitive damages are those monetary awards by the courts to "punish" the offending party. Punitive damages are normally far in excess of any actual damages. There is no coverage for punitive damages in coverage's offered to the collateral recovery industry.

Insurance Company Ratings

A.M. Best is the industry standard for rating insurance companies. Collateral recovery specialists and lenders are well advised to look to "A" or "B+" rated "admitted" carriers. Admitted insurance carriers with such high credentials have the track record, financial resources and re-insurers to provide quality protection to all parties.

Explanation of Coverage's

It is very important that you first determine from your prospective client the amounts of coverage's in each of the following categories they require and whether they will accept a financially strong "Admitted" B+ carrier.

Example: Debtor goes to recovery agent's office to redeem the repossessed collateral or personal property, trips on office steps and files a physical injury claim.

"Garage operations includes all operations necessary or incidental to a repossession business, including Wrongful Repossession".

Responds to covered claims for physical damage, theft, fire, etc., while recovered collateral is in recovery agents' care, custody and control.

Example: Recovered collateral catches on fire or is damaged or stolen while in the recovery agent's storage facility.

Legal Liability: If a loss occurs and the recovery agent has done everything he/she is "legally liable" to do in order to protect the recovered collateral and a loss occurs, this coverage will not respond.

An example of when this coverage would respond is if the recovery agent neglected to close and lock the gate to his storage facility and collateral was stolen by driving it through the unlocked gate.
Direct Excess: If a covered loss occurs, the insurer will search for any other insurance coverage that might cover this loss. If there is other coverage that might apply, the insurer may determine that their policy is in "excess" (secondary) and may not accept liability for the loss.
Direct Primary: If an insured loss occurs, the insurer will respond regardless of who is liable or whether there may be other coverage.

Note: Direct Primary coverage is the most comprehensive coverage and should be required. Direct Primary is not excessive in cost compared to the other two coverage's.

On Hook Coverage: Responds to covered physical damage claims to recovered collateral while that collateral is being transported by recovery agent's tow truck.

Example: Recovery agent has just recovered the vehicle and is transporting by tow truck to storage facility when the driver of another vehicle collides with the recovered vehicle.

Drive-Away Coverage: Responds to covered claims when collateral has been recovered by driving it away rather than being towed.

Example: Recovery agent is driving vehicle from point of recovery to storage facility and collides with another vehicle or object.

Hired and Non-Owned Coverage: Hired and Non-Owned coverage's apply to situations where the vehicle is not owned by the insured, but may be used in the business of the insured.

Tow Truck Coverage: Liability and collision coverage for covered claims for property damage and/or bodily injury.

Note: Certificate of Insurance should state that tow truck(s) is/are covered for repossession activity.

Personal Property of Others: This coverage applies to debtors' person property contained in recovered collateral.

Note: Debtor personal property contained in recovered collateral should be inventoried immediately upon arrival at storage facility by the recovery agent who recovered the collateral. The recovery agent should then sign and date the inventory sheet, attach an identification tag to the personal property container and place the personal property in secured storage.

Building/Business Personal Property: This coverage applies to damages of your office and/or business and personal property contents in your office (fire, theft, hail, windstorm, etc.).

Summary

In working with your insurance agent, you should be sure your policy meets the following criteria.

The insurance carrier is either an "A" or "B+" rated carrier.
The insurance carrier is an "Admitted" carrier.
The Garage Keepers coverage must be Direct Primary.
The policy is written as an Occurrence policy. Request that the insurance agent provide written confirmation that the policy is written on an "Occurrence" form.
The policy includes Wrongful Repossession coverage.
The Certificate of Insurance includes (in the "Description of Operations" section located near the bottom of the form) wording indicating that this policy covers for repossession activity.
Certificate of Insurance should state that tow truck(s) is/are covered for repossession activity.

Fidelity (Employee Dishonesty) Bond
The Fidelity (Employee Dishonesty) Bond is required by virtually every creditor and protects against dishonest or fraudulent acts by employees of the collateral recovery business owner.

Fidelity Insurance is defined as, " an agreement to indemnify an employer (client) against a loss arising from the lack of integrity or honesty of an employee, such as a loss from embezzlement, fraud, theft, etc" . The standard amount of coverage required by creditors is $1 million dollars .

*Disclaimer: The online insurance seminar is intended to provide a general explanation of the various coverage's required by the lending community for collateral recovery specialists who service collateral recovery (repossession) assignments. To determine specific information regarding coverage's, exclusions, or other insurance legal questions, it is recommended that you consult with your insurance agent or your attorney.