Welcome to the new RSLA Fair Value Committee BLOG. !!!
FAIR VALUE COMMITTEE : HISTORIC SUMMARY
In 2011 The Ontario Government established the Anti-Fraud Task Force, to determine the scope and nature of automobile insurance fraud and make recommendations about ways to reduce it. The Task Force identified abuse of the Repair and Storage Lien Act resulting in abusive vehicle storage costs, as a primary area of concern in the escalating insurance costs, that are fueling out of control insurance premiums in Ontario.
RECOMMENDATION #7 of the Task Force's Final Report to Government , spoke directly to the issue of storage fee gouging and the need to amend portions of the Repair and Storage Lien Act in order to address and contain this storage fee abuse:
"Changes to the Repair and Storage Liens Act
Recommendation #7 : The government should amend provisions in the Repair and Storage Liens Act to reduce unreasonable storage costs for vehicles damaged in a collision.
Abuse of the Repair and Storage Liens Act (RSLA) affects auto insurers and premium payers by increasing the costs for storage of a vehicle damaged in a collision. Addressing
provisions of the RSLA as they relate to the storage of vehicles will reduce the amount of revenue available to fraudsters and help prevent Ontario’s auto insurance system from being targeted by unscrupulous storage facilities.
In the present regulatory framework, a damaged vehicle may be taken to a storage facility after a collision. The facility will begin charging for its storage services immediately, but the owner of the vehicle may be unaware of these accumulating charges. We have been told that in some cases a daily rate of up to a thousand dollars has been charged.
The RSLA gives a facility 60 days to hold the vehicle before notifying the owner. Facilities attempting to maximize their revenue may wait all 60 days to notify the owner and allow storage costs to increase to unreasonably high levels. The vehicle’s insurer may be liable for these inflated
costs, which lead to higher claims costs and higher premiums for honest drivers."
In a presentation to the Task Force the Ontario Bar Association (OBA) indicated that it was preparing a submission to the Ministry of Consumer Services and the Ministry of Government Services. The OBA said that its submission will recommend changes to the RSLA that will help address unreasonable storage costs by changing the notice period related to vehicles from 60 to 15 days. We
support the recommendation the OBA presented to us although we wonder whether with modern technology, even 15 days is too long. We encourage the government to act in this area and any others identified in the pending submission that can be helpful in reducing abusive behavior in regard to auto storage."
"FAIR" VALUE FOR DAILY VEHICLE STORAGE
In April 2013, the Ontario Bar Association submitted a REPAIR AND STORAGE LIEN ACT
("RSLA") Reform Submission to the Government and specifically pointed out to the Minister
that steps must be taken in order to determine what the RSLA means by the words
"FAIR VALUE" . (note : the Task Force also neglected to address the issue of the determination of "what is Fair Value?"
Section 4 of the Repair and Storage Lien Act, states the following about Fair Value:
Storer’s lien
4. (1) Subject to subsection (2), a storer has a lien against an article that the storer has stored or stored and repaired for an amount equal to,
the amount agreed upon for the storage or storage and repair of the article;
(b) where no such amount has been agreed upon, the fair value of the storage or storage and
repair, including all lawful claims for money advanced, interest on money advanced, insurance, transportation, labour, weighing, packing and other expenses incurred in relation to the storage or storage and repair of the article, and the storer may retain possession of the article until the amount
is paid. R.S.O. 1990, c. R.25, s. 4 (1)."
The PROBLEM is that there is currently no industry wide accepted amounts for daily storage that can be regarded as "Fair Value".
SELF PROCLAIMED MANDATE OF THE FAIR VALUE COMMITTEE
Stakeholders representing the various sectors of the industry have proactively come together under
the Fair Value Committee flag in order to fill this void.
The Fair Value Committee (which includes stakeholders on BOTH sides of the issue, is in the process of executing an industry wide consultation in order to achieve industry consensus and as tthe appropriate methodology for the quantification of Fair Value, in the many different industrial and commercial Centres across Ontario. The quantification formula will allow for differences based upon fixed land costs, variable business operating costs, facility infrastructure attributes etc.
Once determined, this quantification formula (methodology) will stand as a "benchmark" for a Fair Value determination, that can be relied upon by all industry stakeholders including (but not necessarily limited to:
- Municipalities -Insurance sector
- Vehicle finance sector. - Police
- Ontario Bar - Ontario Judiciary
- Towing operators - Vehicle storage operators
- Accountants - Insolvency practitioners
- Self Storage Industry - Ontario Government Appointed Bailiffs
BILL 171- Tabled in the Legislature on March 4/14 for First Reading
As the next step in the government's Auto Insurance Cost and Rate Reduction Strategy, the government introduced the Fighting Fraud and Reducing Insurance Rates Act to protect consumers and continue its crackdown on auto insurance fraud .
The draft legislation includes provisions for legislation that will enable the government's ability to set (by Regulation):
1. Reduction of the 60 day "notice" provision in the RSLA, and
2. Determining a methodology for Fair Value quantification
The Ministry has already made it quite clear that the government has no particular interest in setting storage rates.
As of the date of this BLOG post, the Second Reading and debate of Bill 171 has been completed and the Bill has been referred to the Legislature's Standing Committee.
NEXT BLOG: MINISTER OF CONSUMER SERVICES INTRODUCES BILL 189........
"ROADSIDE ASSISTANCE PROTECTION ACT "
an Act to amend various acts with respect to to tow and storage service, the enhancement of consumer protection, commercial motor vehicle and tow truck regulation, ant the enforcement of legislation.
