The New Normal: Vetting Repossession Certificates

Hopefully, by the time you read this, we are in our “new normal.” We have weathered the storm of the pandemic and started recreating and rebuilding our lives. Storms bring change and this pandemic storm was no different. Yes, people will be buying cars, lenders will be lending money, and with moratoriums lifted the lenders will be sending repossession assignments to the Recovery Industry. For the lender, here is where things are not as they once were.

The repossession moratorium had recovery agents making massive changes to their financial responsibilities including their insurance policies. To stay afloat, they were parking trucks and reducing coverage on almost every section of their policy. The certificate of insurance lenders have on file, reflects the coverage the agent had at the time the certificate was issued. The certificate issue date only confirms a snapshot of the coverage for the date the certificate was issued, and for that date only. Insurance agents are not required to notify certificate holders on changes made to a policy. As a lender, you should assume changes were made on insurance policies for all your agents. For this reason, we recommend you request a new certificate to verify the correct coverages are in place. The new certificate should be received directly from a staff member of the insurance agent’s office to ensure it is current and valid.

Before COVID-19, lenders requested a Certificate of Insurance once a year. Collateral recovery agents normally had coverage in place to meet contract requirements during the entire year. Typically, the request for a Certificate of Insurance was requested and reviewed at the policy renewal date. In normal times, that process worked, but we have a “new normal.” In the “new normal,” it is recommended that you request a currently issued Certificate of Insurance from the insurance company before giving any open repossession assignments. The new certificate should be received directly from a staff member of the insurance company to ensure it is current and valid. The certificate should not be accepted from anyone else.

You will want to review the certificate carefully for changes that have been made since you received your original certificate. You should look for the following:

• Date certificate was issued
• General liability limit of $1,000,000 with a $3,000,000 aggregate
• Wrongful repossession insurance of $1,000,000
• ** Auto liability limit of $1,000,000 combined single limit: including hired and non-owned auto and driveaway at $1,000,000
• **Garagagkeepers direct primary limit per contract
• **On-hook/cargo limit of $100,000
• **The most common changes made during COVID-19

Please keep in mind, that insurance carriers will not recognize an additional insured without having a written contract in place with the recovery agent. The additional insured endorsement only applies to auto liability and general liability coverages. You cannot be listed as an additional insured for garagekeepers coverage.

As we move forward, it’s time to rethink everything. The lender’s process for vetting the recovery agent undoubtedly will change due to the COVID-19 pandemic. A smart lender will complete their vetting process multiple times a year to validate their collateral is properly insured. As you work through this “new normal,” please contact us with any concerns you have regarding certificates of Insurance or coverage questions.

The key to success is often the ability to adapt.

Co-author Renee Low has 19 years experience on the underwriting and risk assessment side of insuring repossession companies nationwide. In June 2019, she joined the Harding Brooks Team as the Training & Education Coordinator. Low has her Associate in Underwriting (AU), Certificate in General Insurance, and Certificate in Introduction to Underwriting.

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Mike Peplinski, vice president of Harding Brooks Insurance Agency, oversees the largest Insurance agency specializing in repossession insurance. In 2016, he was able to start an Exclusive Repossession Insurance Program for Harding Brooks clients. This exclusive program insures over 400 collateral recovery companies nationwide.