When Government and Industry Collide

How state lawmakers, regulators are tackling collision industry related issues

By John Yoswick

Those in the collision repair industry who don’t view “more government” as the best solution to issues sometimes oppose efforts by trade associations or others to press for state legislation “fixes.” But others point to enacted laws in their states that have helped their business and customers.

Matthew McDonnell of Big Sky Collision in Montana, for example, recently said a state law there helped him address some of the challenges of working on catastrophe claims after a major hail storm, including claims managed by a paintless dent repair company. Since 2011, Montana has had a law that prohibits an insurer from “unilaterally disregard(ing) a repair operation or cost identified by an estimating system,” but McDonnell said “cat team” claims handlers aren’t always aware of that.

“We had to go though that [PDR] company for a supplement,” McDonnell said. “We sent it to them and they took off a significant amount. They said, ‘We have an agreement [with the insurer involved] and you don’t get paid for those things.’ I had to call them and tell them, ‘We have a different regulation in Montana. You cannot disregard repair operations, and I just want to let you know you’re inconsistent with Montana law.’”

McDonnell said that although some states may waive their licensing requirement for adjusters who come into the states as part of a “cat claim,” they don’t waive the requirement for state laws to be followed.

“Our [insurance] commissioner’s office wants them to register with the state,” McDonnell said. “So they will now follow Montana regulations. It’s $100 [to register]. It’s not like it’s a big thing. But it’s the fact that we’re all playing by the rules. That’s a big deal to me.”

With McDonnell’s example in mind, here’s a look at recent efforts in a number of states to enact legislation impacting collision repairers.

Mandating OEM procedures

Perhaps the most anticipated legislation for 2019 was that promised last year by the automakers and the Automotive Service Association (ASA), who are working together to press for state laws calling for the use of OEM repair procedures for collision repair claims.

Wayne Weikel, senior director of state government affairs for the Alliance of Automobile Manufacturers, said collision shops are too often “caught in the middle,” understanding the need to follow OEM procedures but struggling to get paid for that work by insurers.

“There’s been this belief [by some] that somehow ‘accepted industry practices’ are good enough,” Weikel said. “The auto manufacturers we work with are here to say it’s not. It’s not good enough.”

The Alliance and ASA have said Texas, Minnesota and New Hampshire will be among the states in which they will push for legislation this year.

“We’re also picking a few more states to round that group out,” Weikel said in late 2018. “However, there’s so much positive attention around this issue right now by repairers all across this country, it may not matter which states we pick. We may see this in 20 states … just as the result of an organic, grassroots groundswell of local shop owners talking to their local officials about their problems.”

New Hampshire appeared to be first out of the gate with such proposed legislation, holding a hearing in late January on a bill (HB 664) that would require insurers there to pay “for all repairs if a repairer follows OEM recommended collision repair procedures, recommendations or service bulletins while repairing a vehicle.” The bill already has eight legislative sponsors (four Democrats and Republicans), a strong showing.

But a Montana Senate committee in February tabled a bill (SB 251) that would require shops to “conduct vehicle repairs in accordance with directives by the OEM,” including directives related to repair procedures, scanning requirements and the use of parts.

OEM procedure legislation also has been introduced in the Illinois Senate; that bill (SB 2104) prohibits repairers from using “procedures that are not in compliance with the OEM.” But while ASA and the automakers said their efforts to enact OEM procedure legislation would leave the non-OEM parts issue aside, the Illinois bill would also require written authorization by the vehicle owner for the use of non-OEM crash parts.

Similarly, a bill (AB 173) introduced in Nevada prohibits an insurer from requiring a shop “to repair a motor vehicle in a manner which is contrary to the recommendations of the manufacturer of the vehicle,” but the bill focuses largely on parts. It would require written consent from the consumer for the use of non-OEM parts on vehicles up to five years old.

Texas bill tackles a lot

Sweeping legislation introduced in February in Texas (and backed by the Auto Body Association of Texas) would prohibit insurers from requiring a particular part be used on the basis that is the least expensive part available. The bill (HB 1348) also would establish new criteria for any part seeking to be “of like kind and quality” as OEM, such as ensuring it has the “same weight and metal hardness” as the OEM part, and has been “tested using the same crash and safety test criteria” used by the automaker.

The bill would prohibit insurers from “intimidating, coercing or threatening” anyone (or offering an incentive other than a warranty offered by a shop) to induce them to use a particular repair facility, and — like the law in Montana — would prohibit insurers from disregarding “a repair operation or cost identified by an estimating system,” or any process or procedure recommended by the automaker.

State could end inspections

Vehicle safety inspections are frequent targets for advocates of “smaller government,” and already this year two Missouri House committees, including the “Downsizing State Government Committee,” have given “do-pass” recommendations to a bill (HB 451) that would end that state’s vehicle safety inspection program.

Parts always an issue

Parts use is on also on the legislative agenda in a number of states this year, including in West Virginia, where a bill (SB 49) introduced in the state Senate would require body shops to use new OEM parts to repair vehicles that are up to two years past the current model year. A similar bill introduced last year failed to make it out of a legislative committee

ASA in February said opposition voiced by Wyoming shops scuttled a bill (SF 0095) there that would have eliminated any requirement that insurers pay for an OEM crash part when a non-OEM part “equal in kind and quality” is available. The bill had been quickly passed by the Wyoming Senate but did not move out of a House committee before the state’s brief legislative session ended.

A lengthy bill (AB 1201) introduced in the New York Assembly in January would add extensive standards for businesses replacing automotive glass, including requiring such companies to notify the vehicle owner if any previous “inappropriate replacement materials or methods are detected.”

And Massachusetts Governor Charlie Baker earlier this year signed into law legislation passed last year stating that anyone found guilty of selling or installing a counterfeit airbag will face a fine of up to $5,000 or imprisonment for up to 2.5 years.

Insurance regulators weigh in

While some recent work by the Society of Collision Repair Specialists (SCRS) involves state regulators rather than lawmakers, it could be of interest to shops as well. Insurance regulatory agencies in about half of all states have responded to a letter the Society of Collision Repair Specialists sent out last year asking, among other things, if anything in their state “holds insurers and insurance policies sold in your state accountable to recognize manufacturer documented procedures as a basis for settling claims.”

In one such response, Alex Avalos, senior insurance compliance officer for California’s Department of Insurance, said that state’s “insurance laws and regulations are silent on vehicle manufacturer documented procedures.”

Would the department consider it a “reasonable expectation that if an OEM repair procedure or instruction existed, that the claim should cover the associated costs,” SCRS asked in its letter.

“That one would need to be looked at on a case by case basis,” Avalos responded. “Our regulations mandate that insurance estimates allow for repairs to be made in a workmanlike manner.”

Many of the responses focused largely on state statutes related to OEM parts, or noted only that the regulatory agencies couldn’t comment on some of what they saw as hypotheticals posed in SCRS’ letter. But some more directly addressed the key question.

Ian Shapiro, insurance analyst with the Illinois Department of Insurance, wrote that his agency “would consider it a ‘reasonable’ expectation that if an OEM repair procedure or instruction existed, the claim should cover the associated costs.” But Shapiro also added that “there is nothing currently written in the statutes that requires an insurance carrier to cover those costs.”

Donald Beatty, deputy commissioner for Virginia’s Bureau of Insurance, wrote that standard policy forms insurers must use in his state would not allow an insurer to say costs associated with automaker procedures are not covered, but those forms also “do not require insurers to accept manufacturers’ procedures for repair.”

In perhaps even more troubling news for shops and their customers, Suzanne Tipton, insurance deputy commissioner of the Arkansas Insurance Department, wrote that if an insurer directs a shop not to follow OEM repair procedures, that “may be considered to be reasonable” as long as the vehicle “is shown to have been ‘restored to its condition prior to the loss.’”

Visit https://scrs.com/doi-responses/ to see all the state responses received.

SCRS Executive Director Aaron Schulenburg said that, overall, “What was evident from the responses was that there was either a lack of understanding, or there truly are gaps in statute that don’t identify this at all [other than] language that holds the carriers responsible for making parties whole.”  •

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.