On a nationwide basis, PCI estimates the total excess amount of towing and storage charges to be about $570 million a year, accounting for 13 percent of the total annual towing and storage costs. 

To better gauge the scope of the problem, PCI surveyed its members, asking them to identify the most frequent towing- and storage-related problems and the cities and states where they occur most often. PCI members said that towing and storage abuse is a problem almost everywhere and identified Chicago, Philadelphia, New York, Atlanta and Houston the most for aggressive towing practices.

Below are findings from the report “Abusive Vehicle Towing & Storage Practices: A Half-Billion Dollar Problem”, reprinted with permission from PCI. 

The five states with the most aggressive towing practices were identified as Illinois, Pennsylvania, New York, New Jersey and California. And when you look at the data, these states' combined property damage liability and collision loss cost is 21 percent higher than all other states—the higher cost per vehicle in these five states may be partly attributable to excessive towing and storage fees.

However, the problem is by no means limited to the above cities and states. Forty-two states and 149 cities were specifically mentioned by respondents, an indicator of how widespread towing and storage problems are.

PCI found that the most critical towing-related problems for motorists and insurers are:

1. Artificially high towing and storage charges and miscellaneous fees
2. Inconsistent and difficult release process
3. A lack of transparency and communication from towing companies
4. Delayed access to vehicles for insurance adjusters and vehicle owners.

Insurers point to the release process as being one of the principal concerns in regard to towing. Generally, there are a multitude of steps and requirements for releasing a vehicle. The release procedures are increasingly complicated and often require cash payments and in-person signatures. 

Related: Read another article by Robert Passmore “Poisoning the Well.”

Claims professionals repeatedly cited problems regarding a lack of transparency and communication in the towing process. Often the insurer and vehicle owner cannot immediately locate a vehicle that has been towed and the automobile verification process can be delayed while storage fees are assessed. In many areas, there are no standards for statements and itemized receipts, creating widespread problems with invoices.

Insurers noted an inability to challenge towing and storage fees, dispute charges and negotiate on rates. Insurers and vehicle owners have little leverage in these situations,  because charges continue to accrue, leading to a “take it or leave it” attitude from towing facilities.

Unstaffed or understaffed lots with limited hours present more problems for both the insurance adjuster and the vehicle owner. Insurers were united in expressing frustration while attempting to inspect vehicles that were held by towing companies. Towing companies implemented inconsistent policies and requirements for when and how adjusters are allowed to access a vehicle. Many insurers cite staggering fees for adjusters to enter a towing yard for inspections. These claims professionals also note that the conditions within the towing yard made it very challenging as vehicles were parked too close together and the towing companies kept limited operating hours that resulted in additional daily storage charges. Vehicle owners had problems collecting personal items from their vehicles.

Insurers cite marketplace challenges as another problem. Generally, insurers are concerned with a lack of choice and competition among some jurisdictions. In many cities, towing companies enjoy exclusive relationships with law enforcement agencies on accident tows. A lack of towing industry standards, regulations, and uniformity in charges and policies severely challenge vehicle owners and their insurers' attempts to secure a timely release of vehicles.

The National Insurance Crime Bureau provide data that supports these concerns, which receives and analyzes referrals of questionable insurance claims where fraud is suspected. According to the NICB, the number of referrals related to inflated towing or storage bills have more than doubled between 2009 and 2010.

So what are the solutions?

Towing regulation varies widely, with layers at the state and local level, but most often they are limited to so-called “non-consent” towing. Common examples are cars towed while illegally parked or abandoned. While it can be argued that there are situations where a vehicle owner or operator may have little opportunity to choose a towing operator or bargain for services, court decisions have found that “consent” towing includes vehicles towed from accident scenes and after a breakdown.

Related: Read the article by Chad Hemenway “New York City Next to Charge Accident Tax.”

The distinction is important because although the states may fully regulate “non-consent” towing, states are unable to fully regulate “consent” towing as they are preempted by provisions in federal law. This preemption does provide some benefits for consumers by preventing duplicative regulation in multi-state metropolitan areas—avoiding absurd situations such as having to change towing companies at state or city lines—but it some cases it has been used inappropriately as an obstacle to common sense reforms.

PCI believes the right approach includes support for effective regulation of accident scene towing practices to increase transparency, provide for reasonable release processes and access to towed vehicles, and bring towing and storage charges under control. Effective towing regulation should include:

• Specific notice requirements, within 24 hours of the commencement of the towing, so the owner or insurer can be aware of accumulated charges. This should cover both non-consent and consent tow situations.
• Requirements that vehicles be released from a towing or storage facility to a properly designated insurance representative when a statement of owner consent is provided.
• Limits on the distance that a vehicle is towed for non-consent tows. There should not be a limit for consent tows on the distance as long as the tow contractor provides a specific estimate of the towing expense prior to the vehicle being towed.
• Clear disclosures covering the receipt and release of the vehicle, providing the street address, hours of operation and contact numbers of the storage facility to the owner, insurer, and insured. This covers both non-consent and consent tow situations.
• Prohibition against towing vehicles from private property without consent of the property owner. As such, this provision applies to non-consent tows.
• Itemized statements for all towing and storage services provided.
• No storage charge accrual on days when the facility is not open for the recovery of stored vehicles. This covers both non-consent and consent tow situations.
• Clear disclosures on storage charges, no extra charges for contrived charges such as vehicle access and inspection charges or charges for moving a vehicle from one place to another in the same facility.

If no action is taken, costs will continue to grow, resulting in increased insured loss costs that may translate into higher premiums and out-of-pocket expenses for consumers.