A Look at Recently Proposed or Enacted State Legislation or Regulations Related to the Industry
By John Yoswick
Lawmakers and regulators can have a big impact on the day-to-day lives of collision repairers. Here’s our annual round-up of recently proposed or enacted state legislation or regulations around the country related to the industry.
Restrictions on parts use
Perhaps the most intently-watched bill in the early months of 2017 was Arkansas Senate Bill 291, which would have repealed that state’s existing law requiring insurers to use OEM crash parts on any vehicle still under the manufacturer’s warranty (unless the vehicle owner gives written consent to the use of other parts). The bill was introduced by Republican lawmaker Greg Standridge, president of an independent insurance agency in Russellville, Ark.
The bill passed the Senate 21-9, largely along party lines, with 20 out of 22 Republications voting in favor, and seven out of eight Democrats opposing the bill.
But as the bill moved to the Arkansas House, the Automotive Service Association (ASA) was among those encouraging Arkansas shops to voice opposition to the bill. The association’s lobbyist, Bob Redding, wrote a letter to the House committee chairman, noting that “Arkansas is one of a few states that assures vehicle owners have notice as to what types of replacement crash parts are used in the repair of their vehicle and consent to the use of these parts.”
In late February, that Arkansas House committee gave a thumbs-down to the bill by a voice vote.
“In essence, the Committee upheld written consent as an important tool for consumers,” the ASA said in a statement.
Parts-related bills have been introduced in a number of other states this year as well.
In Indiana, proposed legislation (H 1559) would extend to third-party claimants the same right “to approve the type of body parts used to repair a motor vehicle” currently spelled out in state law for first-party insureds.
Bills (SB 2959, A 2612) introduced in both the New Jersey Senate and General Assembly would require dealers to give new-car buyers a written statement noting that federal legislation makes it illegal for automakers or dealers to “void a motor vehicle warranty or deny coverage under the motor vehicle warranty simply because an aftermarket or recycled part was installed on the vehicle, or simply because someone other than the dealer performed service on the vehicle.”
Senate Bill 768 and House Bill 1098 introduced in Tennessee would require any estimate calling for the use of non-OEM parts to include specific language notifying the customer that crash parts supplied and warranted by a source other than the vehicle manufacturer will be used.
A bill in Iowa (SF 81) would prohibit insurers from recommending a repair shop without also informing the insured or claimant that they are not required to use the recommended shop; the bill also would prohibit insurers from requiring a shop to use a specific parts vendor or procurement process, nor from requiring the use of non-OEM crash parts for the repair of a vehicle five-years-old or newer (although an insured could consent in writing at the time of repair to the use of non-OEM parts).
A short-bill in Maryland would have required insurers in that state to use either OEM parts or non-OEM crash parts certified by an organization meeting specific requirements; those requirements seemingly would allow the use of parts certified by the Certified Automotive Parts Association (CAPA) but not NSF-certified non-OEM parts. The Automotive Body Parts Association (ABPA), which has been a proponent of the creation and development of NSF’s parts certification program, opposed the Maryland bill, saying it would “limit choice in the marketplace by eliminating a large portion of the certified parts inventory by excluding parts certified by certain testing organizations.”
CAPA came under fire from ABPA last year for its support of a parts bill in Maryland that also would have placed restrictions on what parts certifiers were recognized. Like that previous bill, the 2017 bill was withdrawn by its legislative sponsor before a scheduled hearing was held.
Potpouri of proposals
But legislation under consideration by state lawmakers this year isn’t limited to parts-related bills.
A bill in Massachusetts (H 479), for example, would allow shops to demand arbitration in the event an agreement cannot be reached as to the amount of a loss; current law requires that such a request come from the insured.
Other proposed legislation in Massachusetts, similar to bills introduced in previous years, would require that a minimum labor rate be established by the Massachusetts Insurance Commissioner based on the average rates paid by insurers in surrounding states (Connecticut, New York, New Hampshire, Rhode Island and Vermont).
Another Massachusetts bill (S 157) would require any licensed appraiser writing an estimate to notify the owner if the damaged vehicle may no longer meet state vehicle safety or emissions standards.
Current law in Oklahoma allows insurers to determine prevailing labor rates either through market surveys or through competitive bids; the Oklahoma House is considering a bill (HB 1521) that would require insurers using market surveys to provide survey information (including the date of the survey, methodology used, number of respondents, questions asked and resulting data distribution) to any party that requests it.
A bill in New York (A 1678) that would limit the sale of automotive refinish materials labeled “for professional use only” to only those with a valid state tax and federal EPA identification number, and who meet all local ordinances for the application of such materials.
And a bill (SF 74) in Minnesota would clarify the state’s list of unfair claims settlement practices to include failure of an insurer to assume all costs for loss of use of a vehicle, including rental car reimbursement.
Regulators take action as well
But lawmakers aren’t the only ones in government that can influence the operations of collision repair businesses. State regulators can have a significant impact as well.
Because insured vehicles are more likely to be repaired after an accident, Tennessee’s recent launch of a new insurance verification system should be good news for shops in that state. One in every five Tennessee drivers lacks insurance, the sixth-highest percentage among all 50 states, according to 2012 numbers from the Insurance Research Council.
The new system requires auto insurers to submit policy information, which is then scrubbed against all VINs currently registered in the state. If the system cannot confirm coverage for a vehicle, a notice is sent to the owner. A vehicle owner who fails to provide proof of insurance can face fines of between $25 and $100, along with an eventual suspension of registration. Those caught driving without insurance also face fines of $100 to $300, and police have the authority to have uninsured vehicles towed. The state has a website (https://tinyurl.com/j2vlqwk) with additional information about the program.
Collision shops in Ohio are now required to include their Ohio Board of Motor Vehicle Repair registration number on all estimates and invoices. In a memo to shops last fall, Michael Greene, the executive director of the Ohio board, said the new rule is designed to raise awareness among consumers and insurers about the state’s shop registration program, and help distinguish legally registered shops from “illegitimate backyard repairers.”
The board is also supplying window decals to registered shops to similarly raise awareness.
Greene said the new rule is also designed to assist the board with prosecution of unregistered shops, and in assisting consumers with complaints. The board also raised the annual shop registration fee from $225 to $300, the first increase in 10 years.
California Insurance Commissioner Dave Jones in December finalized new regulations for how insurers conduct collision repair labor rate surveys in that state.
“Accurate and reliable labor rate surveys ensure that consumers are not left paying out-of-pocket for collision repairs that should be covered by insurance, or worse, forced to leave the vehicle in disrepair, creating a potential safety concern,” Jones said in announcing the new rules.
The new regulation does not mandate that insurers use a particular survey method, but does lay out one method that Jones’ department will consider as “fair and equitable.”
That method requires, for example, that only labor rate data collected within the past 16 months be included, although this can be extended to 28 months if the oldest data is adjusted upward based on inflation. The labor rate data must be obtained through a survey, not from estimates. All registered shops must be included in the survey, and surveys are to be based on non-discounted, posted rates.
The regulation requires that the prevailing rate for a particular shop be based on the six closest shops geographically. It gives as an example a six-shop market where the rates are $64, $65, $66, $66, $71 and $73; the prevailing rate in that example is $66, “since four of the six shops (the simple majority) charge a rate of $66 or less.”
The regulation, however, goes on to say that those six shops are considered the “core area” but that insurers can also include shops within a one-mile radius around that core area when determining what rate it will pay a shop.
Jones also in December finalized new rules designed to combat steering by insurers. Under the regulation, insurers cannot suggest or recommend a shop once a consumer has selected a shop, though they can provide “specific truthful and non-deceptive information regarding the services and benefits available to the claimant during the claims process,” including information about warranties and the anticipated time to repair the vehicle.
But they cannot provide “false, deceptive or misleading information to the claimant,” including saying a shop has a record of poor service or quality if that statement is known to be (or should reasonably be known to be) untrue or misleading.
Insurers also cannot require a claimant travel more than 25 miles (15 miles in urban areas) to obtain an estimate or have the vehicle repaired. Insurers wishing to inspect a vehicle must do so within six business days of the first notice of the claim or (in first-party claims) within the first six business days of receiving a supplement.
“Consumers who suffer from collision damage should not be misled by insurance companies or forced to wait weeks for an inspection in order to steer them away from their chosen shop and into insurer-contracted repair shops just so the insurance company can save money at the expense of proper and safe repairs,” Jones said in announcing the new rules.
John Yoswick, a freelance writer based in Portland, Ore., who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network bulletin (www.CrashNetwork.com). He can be contacted by email at john@CrashNetwork.com.
