Amongst the various trends uncovered by this year’s Fraud Index were some big numbers related to storage and recovery claims. Here, Fraser McAndry dissects this increasingly prevalent element of many credit hire claims, to discover the issues and potential solutions for insurers.
The prevalence and volume of fraudulent credit hire claims is well known and claims frequency is certainly on the increase. However, it is now very common for other heads of loss to accompany the claim for hire such as fictitious medical expenses (physiotherapy or CBT) and property damage. This tactic of claims layering is becoming more popular as accident management companies look to maximise claims revenue. By far the most widely seen additional head of loss is the almost-inevitable claim for storage and recovery charges. These often four figure claims seem to follow credit hire claims with depressing regularity.
One notable difference between credit hire claims and storage claims is the total lack of regulation in respect of the latter. There is no ABI GTA equivalent for storage claims arising out of road traffic accidents and no requirement for contractual, mitigation and credit agreement documentation to be provided in support. It is not uncommon to see a brief, one page invoice disclosed in support of a storage and recovery charge running into thousands of pounds.
Our own experience in the Keoghs pre-litigation credit hire fraud team probably strikes a chord with most credit hire handlers reading this. Of all the claims handled by our team in 2015, 60% of them featured a claim for storage and recovery charges with cumulative charges totalling an eye watering £393,818.34 and therefore certainly demands our attention. The sheer volumes of these claims for storage and recovery mean that they warrant validation and investigation just as much as the credit hire claim that it accompanies.
The first issue to consider is whether the claim for storage and recovery charges is actually enforceable against the claimant and thus recoverable. We have certainly seen ‘Storage Credit Agreements’ disclosed in support of the claim but, equally, we see a lot of storage invoices wholly unsupported by any such document. Are the requirements of the Consumer Credit Act 1974 somehow suspended for storage agreements? In the absence of a credit agreement for the storage claim is the debt unenforceable? The answer is an unsatisfactory “not necessarily”.
The common retort from the other side is to argue that the invoice is not a credit invoice at all but, merely, a standard “invoice for services provided”. It just happens that the claimant, often years down the line, has not paid the charges nor been required to by the storage provider.
How would this odd set of circumstances be viewed by a trial Judge? In these instances, we always ask for proof of payment of the charges by the claimant and/or evidence that the storage provider has pursued the claimant for payment. Usually, the claimant’s solicitors are not able to provide either. We would then consider Part 18 questions on the issue to be put to the claimant. How far one runs this argument would really be dictated by the size of the claim itself and the strength and cogency of evidence provided by the claimant.
The issue of storage charges and their recoverability was addressed very briefly in the County Court case of Zaman v Woolley where Recorder Worster dismissed the claim for storage charges in their entirety as they were not supported by any kind of agreement between the claimant and the storage provider (Road Angels). In that case (remember it is first instance so not binding) the storage was also provided by the CHO/AMC and the District Judge considered that the storage service formed part of the accident management services provided to Mr Zaman just as much as the credit hire. Indeed, a representative of Road Angels gave evidence at trial to the effect that the storage was provided on a credit basis. Therefore, the Recorder’s decision was relatively straightforward.
If you come across a case where the storage invoice is in the name of the credit hire organisation then always ask for a credit agreement on the basis of Zaman. If storage formed part of the accident management services then the natural conclusion is that that head of loss was also provided on a credit basis. If one is not provided then there are valid grounds to repudiate that head of loss.
If a storage agreement is suddenly produced (we have seen that on a number of claims) then put the claimant and the CHO to strict proof as to when and where the document was signed and why it was not produced when the payment pack was submitted. If you do not receive the required documents then a repudiation is a strong option.
The next issue to consider is the often-excessive rate applied for storage and recovery charges. We have seen recovery charges of £350 + VAT applied where the alleged route of recovery was less than three miles. We have also seen storage charges in excess of £40 per day. What possible justification can there be for these wholly excessive charges? The answer would seem to be “none at all”.
It is worth bearing in mind the industry and police recommended charges for recovery and storage. For instance, The Removal, Storage and Disposal of Vehicles (Prescribed Sums and Charges) Regulations 2008 provide that two wheeled vehicles should be stored at a cost of £10 per day yet you would see certain motorcycle CHOs charging more than double that rate. The same regulations provide for standard cars being stored at a rate of £20, yet it is not uncommon to see storage rates charged at north of £30. The highest we have seen is £45 per day which is wholly excessive.
The motor repair industry’s trade body (AVRO) recommends a roughly similar charging structure, so why is the credit hire and accident management industry existing in a bubble where their charges are so excessive as to bear little resemblance to industry and statutory recommendations?
Recovery charge levels are equally as perplexing. We have seen AMCs charge well over £300 + VAT for allegedly recovering the claimant’s “unroadworthy” vehicle less than three miles. Conversely, we have seen a similar sum claimed by a CHO who “recovers” a vehicle from Milton Keynes to Blackburn to be stored (question – does the claimant even know where Blackburn is?) which is a considerably greater distance - but that is another story!
Whilst the 2008 regulations and the AVRO rates are not binding per se, we would definitely seek to negotiate on both the recovery charge and the daily rate of storage if and when it comes to settling those heads of loss. Generally, we do find CHOs / AMCs prepared to negotiate if we approach them robustly.
If there are suspicions around the storage and recovery claim then a process of validation should follow to ensure that the claim is reasonable. During our investigations into storage claims we have seen such “secure” storage facilities as a mosque car park, an alleyway, a field, a supermarket car park and the forecourt of a travel agency. CHOs / AMCs will attempt to justify their excessive charges by touting the storage facility as being undercover, secured and covered by CCTV but on many occasions, it is no such thing.
To validate a storage claim there are several issues to consider:
We would recommend that the above investigations be undertaken so as to ensure that the claim presented is valid. The amounts involved certainly, in our view, warrant a bit of digging into these heads of loss.
Earlier, we talked about the frequency and value of storage claims that we face within our pre-litigation credit hire fraud team. Whilst storage and recovery claims featured on 60% of the claims handled, we paid nothing at all on 127 of those claims. On the claims we did settle, we paid an average of £140.15, a far cry from the average claimed value of nearly £1,400.
These savings made an important contribution to the team’s 2015 savings figures and demonstrate the importance of identifying, validating and investigating suspect storage and recovery claims.
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