by Sean Preston, Coverall Law
The vehicle arrived at your shop. The vehicle owner signed your standard intake forms. You in-processed the vehicle and waited for word from the insurer. Whether you did all the work or simply found out that the vehicle was a “total loss,” now the vehicle is sitting there, and nothing is happening!
Your forms should make clear that your invoice gets paid directly to you, but perhaps (for some reason) the insurer pays out the vehicle owner in whole. Now you are left with a vehicle nobody seems to want and an open invoice. Your calls and emails are going completely unanswered.
What do you do?
Everyone in business has an idea of their ideal customer, who is easy to work with, understanding, appreciates your value and pays promptly. You may even have an ideal job, some part of the trade that you take extra pride in or that simply feels like a labor of love. The legal infrastructure of your collision repair business isn’t as much for your ideal customer or your ideal job. Although those two certainly benefit from the steps you take, not just to protect your relationships and your work, but the way in which your forms outline and establish everyone’s rights, responsibilities and expectations.
When a vehicle is taking up space on your property, and all you are getting is radio silence, you want one thing more than anything else: options!
You could try and sell the vehicle. You could try and sue somebody. But ideally, you want to be able to sell the vehicle and sue for a judgment on the remainder – if any.
The easiest place to start is to make sure the vehicle has enough value to be worth selling. Ideally, the value covers the entire open invoice plus your costs of sale, and you can return any remainder to the registered owner. But when a vehicle fit for scrap is taking up space on your lot, it might make more sense to simply tow it to the registered owner’s address of record, rather than try to collect storage on the world’s worst paperweight.
You really must consider the costs your shop has incurred and the value provided to the vehicle owner, lienholder (if any) and insurer (especially if the vehicle is a total loss). Under the Massachusetts Garage Keeper’s lien statute: your invoice must reflect “proper charges due [to your shop] for the storage, work and care of the [vehicle].” (M.G.L. c. 255, s. 25)
So, in our scenario, we don’t just have an abandoned vehicle, we have that unpaid invoice with proper charges which relate directly to the work done, including storing and caring for the vehicle. With that invoice amount in mind, and storage accruing daily, the value of the vehicle in question must make sense. (What good is collateral that literally nobody wants?)
The salvage value or potential value of the abandoned vehicle directly influences the decision whether to proceed with the sale of the vehicle – which also affects how vigorously the other parties will try to retrieve the vehicle.
Next, we look at the parties who have benefited from your shop’s services. These are the parties that would be most likely to pay your invoice and retrieve the vehicle.
The vehicle owner is the most obvious and (I believe, historically) overlooked. Shops are accustomed to being paid by insurers and benefiting from the patronage of vehicle owners. Typically, shops are far more comfortable pushing against insurers to get paid (with full support of the vehicle owner, ideally), rather than putting any amount of pressure on the vehicle owner.
These vehicle owners are members of our communities and may even be our friends. But at the end of the day, shops have the most direct legal relationship to the vehicle owners. It’s only because of the vehicle owners that shops have any interaction with the insurers because contractual relationships exist first between insurer and vehicle owner, then vehicle owner and your shop when work is requested. (Outside of referral programs, shops don’t have a direct contractual relationship with insurers.)
Your shop’s intake forms are the most crucial part of your business operations. The vehicle owner must acknowledge your rates and that those rates must be promptly paid. Part of those standard forms should include a direction that the insurer pays your shop directly (also known as a “Direction to Pay.”) And while the vehicle owner may, at any time, retract that Direction to Pay, there is language in Massachusetts insurance law which dictates an insurer’s responsibility to pay your shop; for example, on first-party claims:
“The insurer shall pay either to the insured or to a repair shop if the insured so indicates in writing to his insurance company….” (M.G.L. c. 90, s. 34O(1))(emphasis added)
So, while the vehicle owner owes your shop for anything agreed to within the agreement, and you have a lien on any charges which are proper, you also could recover directly from the insurer, so long as your shop’s forms are in order. I cannot stress enough how important forms are to your shop. On October 21, 2023, I will be presenting at the AASP/MA event: Breaking Free in ’23, Part III. I implore you to ensure your shop is represented at the event as I will be outlining the elements necessary for shop forms to afford you maximum protection and the most operational freedom available. (See page 10 for more information.)
The insurer may be liable to pay under the above form, or you might be able to couch the lack of payment within a claim for unfair claims settlement practices in Massachusetts General Laws, Chapter 176D, assuming there was coverage at all.
But if the vehicle was a total loss, and the insurer now holds title, your storage and services are more directly benefiting the insurer because of their primary property interest. All the proper charges incurred against the vehicle have then transferred from the responsibility of the vehicle owner to the insurer as the new owner.
Along the same vein, a lien holder (if any) holds a property interest…an interest which your shop has been protecting by storing and caring for the vehicle. Your protection of these interests is valuable and should be compensated.
The Garage Keeper’s lien is powerful in that it can completely wipe out a financing lien, will give you either the right to sell or justify a bond for as much as double your proper invoice and begins the moment you begin storing or providing any services on the vehicle. But you must make sure to give notice to each interested party, including that lien holder. You cannot deprive them of that property interest without due notice and the chance to square up with you and retake the vehicle.
Unfortunately, if the vehicle isn’t worth anything, the practical choices are limited. Whatever path you choose, there is no benefit to delay. Your goal is to keep vehicles moving, not simply accruing storage. If an insurer and vehicle owner aren’t being responsive, then you lean on your intake forms, give proper notice and keep your operations moving.
Want more? Check out the October 2023 issue of New England Automotive Report!