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INSURANCE

Explanation of Coverages

To most, reading an insurance contract is about as dry as Texas trail dust and as exciting
as watching grass grow. It is, however, of critical importance that the collateral Recovery
Agency owner has a basic understanding of the various types of coverage needed to
protect his/her business and his/her client.

Following is a brief explanation of each coverage and examples of situations where each
would apply. These examples are not intended to be preparatory to a degree in the field of
insurance nor are they to provide legal opinions on insurance coverage or contracts.
Rather, they are to impress upon the recovery agency owner the importance of obtaining
coverage from insurance agents and carriers who are familiar with the insurance needs of
the collateral recovery industry.

General Liability with Wrongful Repossession Endorsement
This coverage, sometimes described as “premises” liability, is the foundation for
protection of the collateral Recovery Agent and the creditor, and responds to covered
claims specifically involving the act of collateral recovery. The Wrongful Repossession
Endorsement should contain the following or similar language:

“Garage operations include all operations necessary or incidental to a repossession
business, including Wrongful Repossession.” This language should be found at the
bottom of the Certificate of Insurance where the Certificate reads, “Description of
Operations.”

Example of Premises Coverage: A debtor arrives at the Recovery Agency’s office to
reclaim personal property. While there, the debtor trips on a loose step and falls, breaking
a leg and sustaining other injuries. If the debtor files a claim, this coverage would respond.

Example of Wrongful Repossession Endorsement: As the defaulted collateral is being
hooked up to the tow truck the debtor appears and begins yelling at the Recovery Agent
and orders him to stop the repossession. The debtor attempts to open the door to the
collateral but the Recovery Agent impedes his entrance while his helper continues to
hook up the collateral. They then leave with the collateral while the debtor continues to
yell for them to stop. By this time neighbors have come to the scene. If a claim is filed
against the Recovery Agent and the helper for Breach of the Peace and Wrongful
Repossession, the Wrongful Repossession Endorsement will provide defense costs.
But if the court finds that the Recovery Agent and helper committed criminal acts,
the carrier will not pay any monetary damages because all insurance contracts
exclude coverage for criminal acts.

(A definition of Wrongful Repossession is found in The Recovery Process, Section 6
of this manual.)