Car Salvage

Over the last few years, the introduction of new regulations has had a significant impact on the motor salvage industry.  Regulations including The End of Life Vehicles Directive (ELV) and Motor Salvage Operator licence aim to ensure salvage is disposed of in a way that limits the impact on the environment and minimises dangers to the public.

One of the most heavily regulated areas is the treatment of category B salvage vehicles. These are vehicles that can only be broken for parts and must never return to the road, due to being either severely damaged in accidents, or by fire or flood.  Over the last five years, in excess of 640,000 category B vehicles have been added to the Association of British Insurers (ABI) MIAFTR database (Motor Insurance Anti Fraud and Theft Register)– an average of 128,000 each year.  This equates to around 7% of the total number of vehicles scrapped each year.

The ABI’s Code of Practice for Motor Salvage makes it very clear that these vehicles should be treated as ELVs.  They must therefore be dismantled and disposed of in accordance with ELV legislation by operators who are an Authorised Treatment Facility for End of Life Vehicles.  Under other legislation they should also hold a Waste Carrier licence, a Motor Salvage Operator licence and Hazardous Waste Registration.

The latest guidelines on Hazardous Waste issued by The Environment Agency highlight that ELVs are to be treated as hazardous waste until they are de-polluted. Any operator accepting this type of waste must have suitable site licenses, and has a duty of care to; store the vehicles on an impermeable surface with sealed drainage, only pass the waste to someone authorised to deal with it and issue a waste transfer note to any carrier.

Currently there are approximately 1,250 operators that fit within these parameters across the United Kingdom. They are inspected by the Environment Agency to ensure compliance and also bear the increased costs of adhering to the various regulations. Actual costs involved will be very varied and are influenced by the current condition of the yard, and could include drainage, buildings, concrete, equipment and training. As an example, basic de-pollution equipment can be obtained for as little as £1,500 or a full size de-pollution rig could approach £40,000.

These operators are also responsible for completing the DVLA’s Certificate of Destruction (CoD) online.  Once this certificate is issued, the vehicle’s record is closed and a V5 cannot be issued, reducing fraud, as the vehicle’s identity cannot be cloned and it can’t be put back on the road. These certificates are also important as the Department for Business, Enterprise and Regulatory Reform (formerly DTI) uses them to compile their ELV statistics for the EU.

Using licensed operators to de-pollute, dismantle and destroy vehicles goes a long way towards guaranteeing that environmental regulations are adhered to.  It also ensures that the ABI Code of Practice is followed, preventing the vehicle from returning to the road in any shape or form.  Unfortunately we don’t live in an ideal world and category B vehicles do get into the hands of unlicensed operators. From here they can end up either in the UK or overseas, repaired and back on the road, which undermines both legislation and the Code of Practice and could have a significant negative impact to consumer perception of the motor salvage, motor insurance and motor repair industries.

Whilst the regulations are very clear for the salvage disposal operator, the insurer’s duty of care is a grey area. To adhere to the Code of Practice, insurers must demonstrate that they are exercising a reasonable standard of care, i.e. all category B vehicles should be dismantled and the vehicle structure destroyed in its entirety.  However, there is no explanation of what a ‘reasonable standard of care’ entails, so insurers must make decisions based on their own judgement.  Any failure to dispose of vehicles correctly, which then results in injury, may subject an individual or a company to liability; a PR nightmare for an insurer.

I believe that the insurance industry has a duty to take all reasonable steps to ensure that category Bs are dismantled, destroyed and not put back into use and that there are three very effective steps that could be taken.

1) Only sell category B vehicles to licensed operators who can de-pollute, dismantle and destroy vehicles in accordance with the ABI Code of Practice, ELV regulations and Hazardous Waste legislation, issue Certificates of Destruction and allow the DVLA to close the vehicle’s record.

2) Stop these vehicles being sold on by the licensed operator. Re-sale takes the dismantling and destruction of the vehicle out of the insurer’s control, and could be in breach of the latest Hazardous Waste guidelines issued by The Environment Agency.

3) Conduct periodic audits of salvage purchasers to show that they still fulfil all the ELV requirements and to check that vehicles are disposed of correctly, with all necessary administration completed accurately and swiftly.

In my opinion, the UK motor salvage industry would welcome and support these actions, as the vast majority of companies have invested considerable sums of money in achieving and maintaining their ELV licences, and legitimate operators are left frustrated by unlicensed operators undermining their business and investment in their future.