AB 987 makes insurers liable to towing and storage providers for “ordinary and reasonable” charges when a vehicle is towed or stored after an accident or stolen-vehicle recovery, and lets insurers discharge that liability either by paying the provider directly or by paying the insured or claimant. The bill also makes any insured or claimant who was paid by the insurer liable to the tow/storage provider for those amounts.
The bill establishes how reasonableness is judged—using fees charged for similar services to public agencies and comparable local facilities—and enumerates a long list of fees that are presumptively unreasonable (administrative fees, security fees, dolly fees, certain after-hours markups, and more). It also creates narrow protections for tow operators acting at police direction during emergencies and preserves written law-enforcement agreements.
At a Glance
What It Does
The bill makes the insurer responsible for ordinary, reasonable towing and storage charges tied to accidents or stolen-vehicle recoveries and allows the insurer to pay either the service provider or the insured/claimant. It sets a reasonableness standard based on public-agency contract rates and local comparators and lists specific fees that are presumptively unreasonable.
Who It Affects
Private automobile insurers writing policies that cover towing/storage, towing and storage companies that service accident scenes or stolen-vehicle recoveries, insureds and claimants who receive payments, and law enforcement agencies that enter written towing agreements.
Why It Matters
Claims departments will need to adjust payment practices and documentation to meet the new standard, towing operators must reassess fee schedules (or risk fees being struck down), and dispute volume could rise where reasonableness or exceptions (like law-enforcement contracts) are unclear.
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What This Bill Actually Does
AB 987 ties insurer liability to the ordinary and reasonable costs of towing and storage after accidents and stolen-vehicle recoveries. The insurer becomes directly liable to the service provider but can discharge the obligation by paying the tow company or by paying the insured or claimant; if an insured or claimant receives such payment, they in turn are liable to the provider.
That creates a clear payment chain but also leaves room for assignment, subrogation, and collection disputes when the insurer pays the insured instead of the provider.
The bill defines how to judge “reasonable.” A fee is presumptively reasonable if it does not exceed rates charged for similar services on requests initiated by public agencies (for example, CHP or local police) and if storage rates are comparable to other local facilities. AB 987 then lists specific categories of fees that are presumptively unreasonable—everything from general administrative or security surcharges to dolly, load/unload, pull-out, and many after-hours markups—while preserving a limited set of accepted charges tied to DMV documentation or lien-sale activity.There are several concrete caps and exceptions that will matter in practice: gate fees are only allowed when the owner or insurer requests release outside of normal business hours (defined as Mon–Fri 8 a.m.–5 p.m.); additional towing charges tied to after-hours calls cannot exceed 10 percent of the normal towing rate when gate fees are reasonably assessed; storage charges exceeding 50 percent of the daily rate for vehicles recovered within the first four hours are presumptively unreasonable; and storage fees cannot be charged for days when the facility, having been paid, still fails to release the vehicle.
The bill also shields tow-operators from civil liability for property damage when, in good faith, they remove vehicles at police direction to clear roadways during declared state or local emergencies—subject to a gross-negligence or willful-misconduct carve-out.Finally, AB 987 requires insurers to comply with existing claims-handling regulations in Title 10, Chapter 5, Section 2695.8 of the California Code of Regulations, and it preserves any fees authorized by written agreements between law enforcement and tow/storage companies for tows initiated by police. In practice that means insurers, tow operators, and police agencies will need to coordinate: insurers must document and justify payments under the reasonableness test; tow operators must document their rates and the circumstances of service; and law enforcement agreements will remain a potential pathway for higher fees where locally negotiated.
The Five Things You Need to Know
The insurer is legally liable to the person performing towing and storage for ordinary and reasonable charges after an accident or stolen-vehicle recovery; the insurer may satisfy the obligation either by paying the provider directly or by paying the insured or a claimant on the insured’s behalf.
A towing or storage charge is presumptively reasonable if it does not exceed rates charged for similar public-agency-initiated requests (e.g.
CHP or local police) and if storage rates are comparable to other local facilities; deviations are allowed only if otherwise reasonable.
AB 987 lists a set of presumptively unreasonable fees, including administrative or filing fees (except DMV- and lien-sale-related), security fees, dolly fees, load/unload and pull-out fees, most gate fees (with a narrow release exception), certain after-hours towing markups exceeding 10% of the normal rate, and caps on holiday and early-recovery storage charges.
When a tow operator removes a vehicle at a law-enforcement officer’s direction to clear a roadway during a declared state or local emergency, the operator is protected from civil liability for resulting property damage if they acted in good faith, but not for gross negligence or willful misconduct.
Insurers must comply with California Insurance Code claims-handling rules in Title 10 CCR §2695.8; the bill defines “normal business hours” as Monday–Friday, 8:00 a.m.–5:00 p.m.
and preserves fees authorized by written agreements between law enforcement and tow companies for police-initiated tows.
Section-by-Section Breakdown
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Insurer liability and discharge options
This provision makes the insurer responsible for ordinary and reasonable towing and storage charges arising from accidents or stolen-vehicle recoveries, and it names the person performing the services as a direct payee. The insurer can discharge that obligation either by paying the service provider directly or by paying the insured or a claimant on the insured’s behalf. Practically, that creates two settlement pathways: direct-pay vendor relationships (which reduce provider collection risk) or payments routed through the insured (which preserve insurer control over claimant settlement but may shift collection work back to the provider).
Subrogation/insured liability to service provider
If the insurer elects to pay the insured or claimant, that person becomes liable to the tow/storage provider for those charges. That preserves providers’ ability to collect after an insurer pays the insured, but it also opens the door to disputes over whether insurer payments actually covered the towing/storage component and whether documentation supplied by the provider was adequate to trigger that liability.
Reasonableness standard and presumptively unreasonable fees
Subdivision (c) sets the core test for charges: fees are reasonable if they do not exceed those charged for similar services in response to requests by public agencies (for example, CHP or police) and if storage rates are comparable to nearby facilities. The section then lists specific fees that are presumptively unreasonable—administrative or filing fees (except certain DMV and lien-sale costs), security fees, dolly fees, load/unload and pull-out fees, most gate fees (with a narrow exception), after-hours towing markups above a 10% threshold when gate fees are assessed, excessive holiday storage charges, and caps tied to early recovery (no more than 50% of the daily rate for recoveries within the first four hours). These enumerated items operate as a rebuttable presumption: they flag categories likely to be struck down absent strong justification or a qualifying exception.
Emergency removal charges and operator liability
The bill specifically treats tows ordered by law enforcement to move a vehicle to the nearest shoulder or level ground to clear a roadway during a state or local emergency as presumptively not chargeable (towing fees in those circumstances are listed as unreasonable). Simultaneously, it grants tow-operator immunity from civil liability for property damage caused by that removal if the operator acted in good faith; that immunity does not shield actions amounting to gross negligence or willful or wanton misconduct. The combined effect discourages opportunistic billing for emergency clearance while protecting operators who respond to police directions in urgent circumstances—subject to the usual standards for negligent conduct.
Coordination with existing insurance claims rules
The statute expressly requires insurers to comply with Title 10 CCR §2695.8, the California Department of Insurance’s rules on claim payments. That means claims-handling timelines, documentation practices, and dispute processes in existing regs will govern interactions under this statute; insurers cannot rely on the new statute to avoid obligations under the claims-handling framework and will need to integrate this reasonableness test into their payment workflows.
Law-enforcement agreements and definition of normal business hours
Subdivision (e) preserves any fees that are authorized in a written agreement between a law-enforcement agency and a towing/storage company for tows initiated by the agency, so negotiated local contracts can lawfully exceed some of the bill’s presumptions. Subdivision (f) defines “normal business hours” as Monday–Friday, 8:00 a.m.–5:00 p.m., excluding state holidays—this definition matters for gate-fee and after-hours-fee exceptions and for applying the 10% after-hours surcharge limit.
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Who Benefits
- Vehicle owners and claimants — face fewer opportunistic or opaque add-on fees (administrative, dolly, security, excessive after-hours markups), and they gain clearer entitlement to release once fees are paid.
- Towing and storage providers that charge rates comparable to public-agency contracts — benefit from a predictable comparability standard and the insurer’s direct liability option, which can reduce collection risk when insurers pay providers directly.
- Insurers and claims units — gain a statutory framework that clarifies when they are liable and how to discharge liability, enabling standardized vendor contracts and more defensible payment denials where fees fall outside the reasonableness benchmark.
Who Bears the Cost
- Towing and storage companies that rely on add-on fees — will see revenue pressure from categories now presumptively unreasonable and may need to restructure rates or absorb disputed charges.
- Insurers — bear direct payment responsibility and will need to revise claims processes, vendor panels, and documentation practices to apply the public-agency comparators and defend reasonableness determinations.
- Local governments and law enforcement agencies — may bear additional administrative burden to negotiate, maintain, and justify written tow agreements that preserve higher fees and to coordinate with vendors on acceptable rates and documentation.
Key Issues
The Core Tension
The central dilemma is balancing consumer protection against abusive towing/storage fees with ensuring tow operators are fairly compensated and willing to respond—especially after hours and in emergencies; the bill reduces opportunistic billing but risks undercompensating providers whose higher-cost operations previously relied on add-on fees, shifting disputes to insurers, courts, and local contracting processes.
The bill leans on “reasonableness” and public-agency comparators without creating a new monitoring or enforcement mechanism; enforcement will largely occur through insurer-provider disputes, consumer complaints, and litigation. That invites predictable ambiguity: what counts as a valid public-agency comparator contract, how to normalize rates across different service mixes (e.g., long-distance tow versus local recovery), and who bears the burden of proof when a fee is challenged.
The statute’s long list of presumptively unreasonable fees provides helpful bright lines, but those are rebuttable and will require administrative or judicial interpretation in close cases.
Another implementation tension arises from the slotted exceptions. Written agreements with law enforcement can preserve higher fees, which is sensible for negotiated services but creates a potential loophole for localities to permit charges the statute otherwise forbids.
The emergency removal immunity coupled with a prohibition on charging for emergency-clearance tows is also a mixed signal: operators are protected from civil suits for property damage but lose a charging opportunity in those circumstances—potentially reducing willingness to respond quickly to police requests unless municipal contracts or other compensatory mechanisms exist. Finally, requiring insurers to follow CCR §2695.8 folds these towing/storage obligations into the broader claims-handling regime, but it also means insurers must reconcile administrative timelines and documentation expectations across two overlapping rule sets, increasing compliance cost and the chance of procedural disputes.
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