City will make insurers pay towing and impound costs

Gary Stephanson is an independent insurance adjuster; 20 to 30 times a year, he said, he goes to the Minneapolis impound lot to evaluate an accident-damaged car, take a few photos and process a claim.

He's been surprised that the impound lot doesn't make him pay the towing and storage fees and remove junk cars, he said. State insurance laws require such coverage if drivers have collision or comprehensive coverage or were not at fault in the accident.

Instead, Stephanson said impound lot staff has repeatedly told him that he could leave the junk cars. The city sells them at auction to scrap and parts dealers, but it does not recover the full tow and storage costs.

A recent city report estimated the impound lot lost $3.6 million in 2002 on unpaid towing and storage fees from abandoned cars. Some of those are accident-damaged vehicles.

"They are leaving a half-million dollars on the table at least," Stephanson said of the city. "They are giving away money."

Scott Wellan, a city parking systems analyst that works in the impound lot, agrees. The city is drafting policies to charge insurance companies if they abandon accident vehicles in the impound lot, and it should start charging by year's end, he said.

In 2002, the impound lot handled 2,668 accident-damaged cars, Wellan said. He did not know how many were abandoned, but estimated most were because the average stay was 13 days. Public Works' Mike Sachi said the number of abandoned accident cars was "big enough to notice," and estimated the figure at "hundreds of vehicles per year."

State Farm and All State spokespeople said their companies do not abandon vehicles at the lot. The city does not have solid numbers and is researching the matter, Wellan said.

If 2,000 accident-damaged vehicles were insured and abandoned (that's Stephanson's estimate) the city could have netted approximately $680,000 a year from insurance companies, according to Skyway News calculations -- enough, for example, to pay for nine full-time police officers.

Members of the City Council's Public Works and Transportation Committee learned at an Aug. 10 meeting that the city had not pursued insurance companies in the past.

Committee Chair Sandy Colvin Roy (12th Ward) said she was "stunned" and Councilmember Robert Lilligren (8th Ward) called it "shocking."

Not a new idea

St. Paul doesn't have a written policy to pursue insurance company payments, but the companies are "strongly encouraged" to recover their vehicles, said Sgt. John Wuorinen, St. Paul's impound manager.

He uses what might best be described as good old-fashioned guilt.

"I have had words with people -- insurance agents," Wuorinen said. "They are just going to leave the vehicle here. I get into the thing: 'Does your client, who buys the insurance, know you are going to stiff us with the bill? Are you a reputable business?'"

Some insurance companies abandon cars in the St. Paul impound lot, but most pay up, Wuorinen said.

In an interview prior to the Aug. 10 Council meeting, Wellan said he did not know why Minneapolis had not done more in the past to recover costs from insurance companies.

Of the new policy, he said, "When an insurance company comes to view the vehicle, they will not be allowed access to it unless they sign and antidumping statement, indicating they will accept responsibility for the vehicle if they discard it at the impound lot," he said.

Mo' money

The impound lot handled approximately 10,000 abandoned cars in 2002, some brought in during snow emergencies, street sweeps or for parking violations, according to Public Works. They cost the city an average of $403 each: $133 for the tow and $270 for storage and overhead. The city offsets some costs by selling abandoned cars at auction, often to scrap dealers.

Stephanson, owner of GLS Appraising and a consultant with the Web site CarSoup.com, said CarSoup would like to earn the city more money by selling all impound lot cars -- the scrap cars and the ones that run.

CarSoup could upgrade the city's auction Web site, providing vehicle pictures, mileage, options and condition reports, not currently available, he said. It could deliver a significantly larger pool of potential buyers.

Stephanson had another moneymaking idea for the city, one he says other tow lots use: Charge the insurance companies a $50 disposal fee for junk cars. It would save the insurance companies money, he said -- instead of paying a $75 tow to get the junk car off the lot, they could pay the lesser fee.

Stephanson and CarSoup made a comprehensive moneysaving pitch to the city last year, he said.

Wellan said the impound lot is considering the disposal fee idea. He said the city is considering putting out a request for proposals for an online pilot project, but it won't happen until 2005 at the earliest. The city would choose the pilot project's vendor by competitive bidding, he said.

"Online auction is certainly something that we are looking at. We haven't made any real decisions," he said.

At the Aug. 10 Transportation Committee meeting, Sachi said impound lot changes ranged from customer service improvements and reducing space demands to improving collections from abandoned car owners.