When a problem gets bad enough that insurers and insureds begin to combine their resources to combat it, people take notice.

That was the case on April 5, 2021, when the American Trucking Association (ATA), the American Property Casualty Insurance Association (APCIA), and the Coalition Against Insurance Fraud (CAIF) made headlines by announcing that they will coordinate their efforts and resources toward enacting legislation to tackle one of the trucking industry’s biggest problems – towing fraud. The scenario is all too familiar to transportation and insurance professionals alike: a truck is involved in an accident or otherwise becomes disabled, and a tow-truck operator is summoned to the scene, tows the truck to the towing operator’s lot, then submits an eye-popping charge for the service and holds the truck hostage until the charge is paid. Towing fees in the tens and even hundreds of thousands of dollars are often the result of such blacktop piracy. With the ATA, APCIA, and CAIF now teaming up to pool their monetary and lobbying resources to address this problem at the state and federal levels, however, the days of the surprise tow charge may be numbered.

There are already laws on the books in the Commonwealth potentially implicated by “tow-truck fraud,” however, and it behooves both the trucking industry and the insurance industry to be aware of them. One is the crime of “larceny by false pretenses,” as codified by statute. Under Virginia’s criminal code, “[i]f any person obtain, by any false pretense or token, from any person, with intent to defraud, money . . . or other property that may be the subject of larceny, he shall be deemed guilty of larceny thereof. . . .” Va. Code Ann. § 18.2-178.A. The commission of such an act of larceny by “false pretenses” is punishable as a Class 4 felony. See id.

Whether the typical tow-truck scam rises to the level of this crime is heavily fact-dependent, and given the variety of circumstances under which potential towing fraud can occur it is impossible here to offer a one-size-fits-all analysis. Under one extreme example, however – such as where a tow-truck operator receives an inside tip that a truck has been disabled and needs to be towed, and then shows up unsolicited at the scene and tows the truck to his lot without being asked – it is certainly within the realm of possibility that the operator has committed larceny by false pretenses within the statute’s meaning.

To prove this crime, a prosecutor must show that (1) the tow-truck operator intended to defraud the truck’s owner and/or insurer, (2) an actual fraud was committed, (3) the operator used false pretenses to commit the fraud, and (4) the fraud was accomplished by means of the false pretenses. Anable v. Commonwealth, 65 Va. (24 Gratt.) 563 (1873); Riegert v. Commonwealth, 218 Va. 511, 237 S.E.2d 803 (1977). In this hypothetical scenario, the tow-truck operator first must have intended to defraud the truck’s owner and/or insurer by showing up, uninvited, and towing away the truck without anyone asking him to do so. Second, the operator must be proven to have taken the truck in this fashion. Third, the tow-truck operator must be shown to have used false pretenses – ostensibly, by pretending to have been summoned to the scene by the truck’s owner or insurer. And finally, the operator must be shown to have carried out the fraud by towing away the truck and keeping it until his fee is paid, however exorbitant that fee might be.

Virginia’s false-pretenses statute is, of course, a criminal statute and not a law affording a private cause of action to trucking companies or insurers. Nevertheless, enforcing the statute is important to suppressing crimes that affect both industries. The statute’s potential applicability to tow-truck fraud is suggested by an observation shared recently with The Claims Journal by the CAIF’s Executive Director, Matthew Smith, in connection with the new initiative mounted by the ATA, APCIA, and CAIF. Mr. Smith noted that “[t]here are classes that tow truck drivers can go to, ‘how to double or triple your billings,’ and it’s promoted as ‘it’s just insurance, you’re not hurting anyone.’” [Truckers and Insurers Form Partnership to Fight Tow Truck Scams, Claims Journal, https://www.claimsjournal.com/news/national/2021/04/06/302954.htm.] “The games that are played in a lot of this stuff is just frightening.” [Id]

Mr. Smith’s observation cuts to the heart of the trucking industry’s and the insurance industry’s shared interest here. The Code of Virginia defines “insurance fraud” to mean “any commission or attempted commission of the criminal acts and practices defined in [Code section] 18.2-178” – the false-pretenses statute – “which involve any type of insurance. . . .” Va. Code Ann. § 52-36. By law, if “any insurer, any employee thereof, or any insurance professional has knowledge of, or has reason to believe that a violation of [the false-pretenses statute] will be, is being, or has been committed, that person shall furnish and disclose any information in his possession concerning the fraudulent act to” the Virginia State Police. Va. Code Ann. § 52-40.A. In other words, if an insurance company handling a claim involving a suspicious towing charge believes that the charge might be fraudulent, the insurer must notify the Virginia State Police of the suspected fraud. Under Code section 52-40, an insurer does not have the option to ignore its suspicions.

Furthermore, and importantly, “[n]o cause of action in the nature of defamation, invasion of privacy, or negligence shall arise against any person furnishing information concerning any suspected, anticipated or completed criminal violation when the information is provided to or received from the [Virginia State Police], the National Association of Insurance Commissioners, another insurer, any federal or state governmental entity established for the purposes of detecting and preventing insurance fraud, or the National Insurance Crime Bureau.” Va. Code Ann. § 52-41.B. Similarly, “[n]o insurer, its officers or employees, insurance professional or any other person shall be subject to such cause of action for cooperating with, or furnishing evidence or information regarding any suspected criminal violation to” the State Police. Va. Code Ann. § 52-41.C. The only exception to these statutory immunity provisions is for the furnishing or disclosing of false information, either out of malice or the willful intent to injure. See Va. Code Ann. § 52-41.D. Thus, Virginia law grants broad civil immunity to anyone who furnishes the Virginia State Police or other competent investigative authorities with information relating to suspected insurance fraud, and it provides specific protections to insurance professionals in this regard.

What does all this mean for trucking companies and their insurers when faced with possible towing fraud? If a towing service and/or charge appears potentially fraudulent, a company or insurer should furnish all relevant information and documents in its possession to the Virginia State Police and, if an insurer, reference the reporting provisions of Code section 52-40. Reporting should be strictly limited to the facts, and what it is about those facts that raises suspicion. Better still is to have in-house or outside counsel convey the information in question. If the State Police or other investigating agency requests further information, documents, or input, the reporting entity should respond accordingly. Seeking competent legal counsel to assist in working with the investigators to ensure compliance with relevant law is highly advisable.

Under Virginia law, therefore, the takeaway for trucking companies and their insurers is that if there is reason to suspect a towing company has engaged in fraud in connection with its services, the facts giving rise to that suspicion should be reported to the State Police or other investigating agency, and the reporting company or insurer should consult with counsel to ensure that the reporting is done in accordance with governing law.

Companies and insurers having questions regarding Virginia law governing the reporting of suspected insurance-fraud are welcome to contact Kevin Streit (kstreit@setlifflaw.com) at 804-377-1270 or Steve Setliff (ssetliff@setlifflaw.com) at (804) 377-1261.