By John Yoswick
It’s that time of year again when state lawmakers around the country draft or review legislation to address issues related to auto insurance, collision repair and small business in general.
Here’s our scorecard of what’s happening in state capitols and how it might impact day-to-day life in the industry.
The latest on parts
As in most years, non-OEM parts use is at the center of legislation introduced in a number of states.
The Michigan House voted 84-22 earlier this year to pass legislation (HB 4344) supported by the Automotive Service Association (ASA) of Michigan that would prohibit a shop from installing a part “that does not meet or exceed standards recognized as OEM comparable quality as verified by a nationally recognized automotive parts testing agency.” The Auto Care Association, whose members include parts suppliers, has voiced opposition to the bill, saying it would “restrict the auto repair community’s access to the broad range of non-OEM parts.”
A bill (HB 1258) introduced in Maryland would require insurers to pay for OEM parts for vehicles two-years-old or newer unless the insured authorizes in writing at the time of repair the use of non-OEM parts; any non-OEM parts used on vehicles older than that would be required to be certified (again, unless the insured authorizes the use of non-certified parts).
The Washington Metropolitan Auto Body Association is backing the Maryland bill, after an unsuccessful attempt two years ago to get legislation passed that would have required the use of OEM parts on vehicles up to five years old.
Meanwhile, New Hampshire Senate Bill 436, introduced by Republican State Sen. Nancy Stiles, requires an insurer to disclose whether or not an estimate has been prepared based on the use of non-OEM parts. Any insurer who fails to provide the disclosure would be prohibited from requesting or requiring the use of aftermarket parts. The New Hampshire Senate passed the bill in early March, moving it to the House for consideration.
The New Hampshire bill also would prohibit an insurer from requiring or specifying the use of non-OEM parts on certain leased vehicles, vehicles less than two years old or vehicles with fewer than 30,000 miles.
In a letter to New Hampshire lawmakers, the Automotive Service Association (ASA) voiced support for the legislation, saying it is, “good for consumers, good for shops and consistent with trends in other jurisdictions.”
ASA said the New Hampshire bill supports ASA’s position that insurers and collision repair shops should provide disclosure of part type, description and warranty information to the consumer for all part types.
“This fosters a competitive parts marketplace of tested and verified quality parts and is in the best interests of the motoring public,” ASA said.
Labor rate proposals
Mississippi law gives insurers there more control over what they pay for repairs than in most other states, and there was a flurry of legislative activity early this year to change that. No less than four pieces of legislation, from four different lawmakers, were introduced in Mississippi in February proposing conflicting changes to the current state law, which says insurers need not pay any more than “the lowest amount that [the vehicle] could be properly and fairly repaired [by a] shop within a reasonable geographical [area].”
Two of the proposed bills this year, including one introduced by Republican Sen. Videt Carmichael, would have added a provision to state law also preventing repair shops from charging a labor rate “above the average national rate charged for like kind work.”
ASA’s Dan Risley of the Automotive Service Association called Carmichael’s bill “an obvious attempt by the insurance industry to suppress labor rates and reduce their average severity.”
Other legislation introduced in the Mississippi House, however, would have completely rewritten the current law capping insurers’ payment responsibility, removing the “lowest amount” requirement, instead requiring insurers to pay the “prevailing market rate that [a vehicle could be repaired for] in accordance with the manufacturer’s suggested repair standards.”
(Still another bill would have codified a consumer’s “absolute right” to choose their own repair facility.)
Yet all of these bills died in committee after Sen. Carmichael, hearing opposition to his proposal from collision repairs, instead proposed organizing a meeting of collision repairers and insurance company representatives to discuss a number of issues.
Minimum wage changes can impact higher-paid employees
A number of cities and states around the country are considering or enacting hikes to minimum wage, changes that shops need to pay attention to even if they pay their employees more than the minimum.
Oregon Gov. Kate Brown, for example, has signed into law legislation that sets that state apart both in the dollar amount it sets as a minimum (the highest in the nation) but also because it distinguishes different minimums for urban versus rural parts of the state. The new law raises the minimum wage in much of the state to $9.75 as of July 1, although a lower minimum ($9.50) would apply in 18 rural counties. The law includes annual increases that will bring minimum wage by mid-2022 to $14.75 per hour in Portland, $12.50 in the 18 rural counties, and $13.50 in the rest of the state.
So why are such change laws important even to those paying workers well above minimum wage? Business attorney Cory King says businesses with employees for which they claim white-collar exemptions from overtime must remember that one of the qualifications for that exemption in many states is that the employee earns at least twice the minimum wage. A commission or flat-rate employee may qualify for exemption from overtime regulations in some states if he or she makes half their income from commissions, and makes at least 1.5 times minimum wage for all hours worked.
“You need to do that calculation every pay period.” King said, although he also noted that wage and overtime laws vary by state.
Estimates-by-photo
Companies such as Snapsheet that offer apps to help consumers get estimates simply by uploading photos of the damage via their smartphone are pushing for changes to regulations in some states that require a physical inspection of the vehicle for appraisals.
Virginia Gov. Terry McAuliffe has signed SB 193 into law, for example, allowing an initial appraisal of vehicle damage to be made based on photos or video rather than a personal inspection. Similar legislation is still pending in Pennsylvania, and the Delaware Department of Insurance has proposed an amendment to regulations there to allow estimates based on photos, video or digital images.
A Pennsylvania Senate Committee held a hearing on the bill there (already passed by the House last December) that would overturn that state’s 43-year-old requirement that auto insurance appraisals involve an in-person physical inspection of the vehicle. Representatives of the insurance industry and AudaExplore (which offers a mobile app that assists consumers in getting an initial appraisal from insurers without an in-person inspection of the vehicle) voiced support for the bill. They argued the process is convenient for consumers, and is legal in more than 40 states without resulting in insurers short-changing policyholders or increased numbers of unsafe cars on the road.
“If any of those concerns were remotely valid, some enterprising lawyer would have filed a bad faith claim, or some insurance regulator would have brought an unfair practice charge,” Samuel Marshall of the Insurance Federation of Pennsylvania testified. “That hasn’t happened.”
Two Pennsylvania shop owners were among those testifying against the bill, citing instances of what they said were estimates-by-photo that covered just a fraction of the needed repairs once the vehicles were brought to a shop. Mark Vettori, owner of Hunt Auto Body in Fairless Hills, Pa., said the state requires an in-person review for its mandated vehicle safety inspections, and he can’t imagine lawmakers would feel comfortable allowing those inspections to be done via photos.
Independent appraiser Charlie Barone also testified against the bill, saying hidden damage would be missed without an in-person appraisal, and that customers who then opt not to have the repair work done would be short-changed on their settlement.
“They still need to be made whole in these claims,” Barone said.
But Republican Senator Don White, who chaired the Pennsylvania committee that held the hearing, said it is the customer’s responsibility to not just accept an initial appraisal amount.
“You can’t fix stupid,” he said.
Other legislative impacts
Six other states have recently proposed or made other regulatory changes impacting collision repairers.
A North Carolina budget signed into law last fall required body shops (among many other types of service providers in the state) as of March of this year to begin collecting sales tax on repair or installation labor associated with items (such as parts) already subject to sales tax.
A hearing was held in March on a Utah bill (HB 319) introduced by Republican Norman Thurston that would repeal the state’s current requirement that vehicles 10 years or older pass an annual safety inspection. Another Utah bill (SB 174) would allow the sale of salvage vehicles to unlicensed buyers; registered but unlicensed buyers could acquire up to five salvage vehicles within a 12-month period, a change expected to increase competition (and thus sale prices) on salvage. Insurers have backed similar legislation elsewhere, most recently in Ohio.
The Auto Care Association is backing a bill (AB 2837) introduced this month in California that would require dealerships to give car-buyers at the time of the sale written notice about the federal Magnuson-Moss Warranty Act; that federal law prohibits requiring the use of OEM parts as a condition of the vehicle warranty.
In Idaho, Senate lawmakers are considering a bill (SB 1313) that would make it an unfair trade practice for auto insurers to “modify any published manual [or estimating system]” without prior written agreement between the parties. The measure, assigned to the Idaho Commerce and Human Resources Committee, also requires insurers to use the estimating system in its entirety, and compensate shops for all documented charges identified within the system, including systems for calculating refinishing materials and shop supplies. In addition, the proposal specifies that an insurer may not “limit or discount repair costs” at a non-DRP facility based on charges that would have been incurred had the vehicle been repaired by a DRP shop.
The Washington Senate unanimously passed SB 6160, which makes it a crime to install counterfeit, non-functioning or damaged airbags, punishable by up to 5 years in prison and up to $10,000 in fines; the bill makes an exception for non-deployed salvage airbags.
And auto insurers in Oklahoma would be required to conduct an annual labor rate survey, submitting the results to the state’s insurance commissioner, under proposed legislation (HB 3132) introduced there. The survey would have to gather information on average labor (including frame and mechanical) and materials costs, and the results would be published on the Oklahoma Department of Insurance website. •
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 (for a free 4-week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at jyoswick@SpiritOne.com.
