In this issue...
Rulemaking for Steering Law on Horizon: Insurance Commissioner to Consider New Steering Rules
On December 11, 2007 Department of Insurance counsel Bill Gausewitz stated that if representatives for collision repairers and insurers can’t resolve their conflicts over steering practices, regulations may be in order. In fact, he’s asked both sides to draft their versions of how the rules should read.
The purpose of any regulation is to provide a clearer understanding of a state law passed by the legislature and signed by the governor. Gausewitz cautioned that any rule change might have unintended consequences, that is, it could lead to new forms of steering not currently anticipated. The CRA took this warning to mean that the department believes it will be difficult to fashion clarifying steering language.
Gausewitz prefaced his remarks at the third (12/11/07) in a series of meetings between representatives of collision repairers and insurer by warning that the Insurance Commissioner will do something if the two industries fail to come up with a plan to address the prevalence of steering disputes. In the opinion of CRA, the commissioner’s willingness to act signifies his belief that steering is wrong, both for the consumer and the repairer. However, the CRA notes that understanding a problem means little if there is no enforcement of the law.
Department officials are clear that current law prohibits insurers from directing a policyholder to shop it prefers if the policyholder has already selected a shop. But insurers contend that they have a fiduciary responsibility to inform the policyholder about the benefits of their DRPs even if the policyholder has selected a shop. Apparently this belief justifies the practices of some insurers who equate fiduciary responsibility with scaring policyholders. The CRA points out that DRPs can be explained to policyholders when they are considering buying an insurance policy, or through advertising, something the insurance industry likes to spend money on. But using scare tactics such as “we may not get an adjuster out to see your car for two weeks if you go to that shop” are illegal. At the meeting Deputy Commissioner Tony Cignarale pointed out that it may not be reasonable for an insurer to take ten days or two weeks to initiate the claims process. The bottom line is that California’s anti-steering law protects consumer choice by stating that once the consumer has chosen a shop, the insurer may not recommend or suggest another shop (a DRP shop).
The department is asking for each industry to write clarifying rules on two aspects of the anti-steering law: (1) establish a bright-line rule that determines the point at which a policyholder has “chosen” a shop; and (2) define what is meant by “suggest or recommend.” The fourth meeting of the working group is set for January 11, 2008. Industry input is due about one week prior to the meeting.
Please send your thoughts on this issue to the newsletter so that the CRA representatives working on steering disputes can have the benefit of your hands on experience. It is clear that insurer lobbyists have limited first-hand exposure to some of the steering tactics prevalent in California.
Finally, now is the time to send your steering complaints to the Department of Insurance. Please send a copy of your documents to the CRA’s lobbyist Richard Steffen who will hand-deliver them to Department Counsel Bill Gausewitz. Steffen’s address: 3174 16th Street, Sacramento, CA 95818; or e-mail at
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B.A.R. Reminder:
The following is intended as a reminder to changes that were made to Section 9884.9 of the Business and Professions Code and the California Code of Regulations.
In May of last year B.A.R. sent a memorandum to all Automotive Repair Dealers regarding the format for the designation of a person to authorize repairs in the absence of the customer. The designation is as follows:
DESIGNATION OF PERSON TO AUTHORIZE ADDITIONAL WORK OR PARTS
I hereby designate the individual named below to authorize any additional work not specified or parts not included in the original written estimate price for parts and labor:
Name of Designee______________ Phone Number___________
Fax Number_________________ E-Mail Address _________________
Name of Customer_____________________ Work Order No.:_________
Date_______________ Customer Signature__________________________
This format must be used as noted and completed any time a customer chooses to designate someone to authorize repairs in their absence. This format should appear in BAR’S Laws and Regulations within Sec. 9884.9 of the Business and Professions Code at its next printing.
California Code of Regulations Sec. 3356 was amended effective March 4, 2007, to require that the invoice shall separately list, describe and identify all the following: all service and repair work performed, including all diagnostic and warranty work, and the price for each described service and repair.
This requires that each labor operation price be listed on the INVOICE (not the estimate) and not just shown as a subtotal as was previously allowed. There is no requirement to show labor times; this requirement would support and provide a good opportunity to remove the labor times from the invoice, which we would recommend be done regardless. If you have any questions contact
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at
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CRA Leads Charge on Stopping Paint Capping
Minnesota’s decision to penalize an insurer $20,000 for capping paint and materials was hand-delivered by the Collision Repair Association of California to Insurance Commissioner Steve Poizner along with a December 11, 2007 letter asking for similar action be taken in California. The CRA is asking the commissioner to inform all insurers of their obligation to pay the itemized cost of paint and materials and to penalize those insurers who arbitrarily cap payments. The CRA noted that the department held a workshop in August 2007 where insurer representatives were clearly told that they may not arbitrarily cap the repairer’s cost of paint and materials.
Department Counsel Bill Gausewitz said he believe paint capping is the easiest matter to resolve among disputes between repairers and insurers.
The CRA requests that when you to send the department a complaint regarding paint capping by an insurer, please cite the CRA’s December 11, 2007 letter to the commissioner. Here is the suggested statement for your letter:
As a follow-up to the Collision Repair Association’s December 11, 2007 letter to the Insurance Commissioner on paint capping, I am asking you to enforce the law prohibiting arbitrary paint capping by insurers. Specifically, (fill in name of insurer and the complaint)…
Please email a copy of your letter to the Collision Repair Association of California so that we can monitor how the department reacts to CRA-driven complaints. Please send to the CRA’s lobbyist,
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.
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Progressive Update: CRA vs. BAR
The Collision Repair Association of California (CRA) is a non-profit, mutual benefit corporation consisting of auto repair professionals (members) committed to improving the industry.
In May 2006 investigators William Neu and Eugene Kendall of the Bureau of Automotive Repair (BAR) conducted an inspection of the Progressive Insurance Concierge Service Center, 4141 Ruffin Road, San Diego, California. Prior to the inspection, both Kendall and Neu had followed Progressive’s progress in opening centers in other states. As a result of the inspection, Kendall and Neu determined that the Concierge Center was operating as an automotive repair dealer. Apparently, there was some concern within BAR about the significance of this decision and ultimately it was decided that Wayne Ramos, Program Manager II, would sign a cease and desist order delivered to Progressive on August 1, 2006. The order directed Progressive to stop its Concierge program until it registered with the BAR.
Despite the BAR order, the Progressive Concierge Service Center continued to operate without registering with the BAR. The CRA filed a petition for writ of mandate in October 2006 in Sacramento Superior Court seeking an order that BAR enforce the automotive repair act. Because a party cannot force a governmental entity to take a particular action, CRA sought an order that BAR take some action which was not specified.
The writ allowed the CRA to depose Mr. Kendall as well as obtain documents that showed that Progressive immediately challenged the BAR’s cease and desist order. Interestingly, Mr. Kendall was directed by higher-ups at the BAR to cease any further investigation of Progressive and on December 6, 2006, by way of a memorandum signed by Dennis Kenneally, Assistant Chief of BAR, the cease and desist was rescinded. It was not until 2007 that CRA learned that the cease and desist letter had been rescinded.
Over the course of the spring and summer of 2007 discovery was conducted including the production of hundreds of documents by BAR. The deposition of Kendall began at the end of May 2007. Mr. Kendall testified to a number of things which CRA found newsworthy. Therefore, a transcript of Mr. Kendall’s testimony was provided to a Los Angeles Times reporter who wrote an article citing Mr. Kendall’s testimony. The attorneys for Progressive thereafter sought a “protective order” whereby certain documents and testimony during the course of the litigation could be designated “confidential.” An agreement was reached concerning confidentiality, and almost simultaneously counsel for BAR filed a motion for judgment on the pleadings. In the motion for judgment on the pleadings BAR made two arguments. First, it asserted that the petition was seeking an order requiring BAR to make a discretionary act. A petition such as ours cannot seek to compel a discretionary act. Secondly, BAR asserted that CRA lacked standing to bring the writ as (a) it had no special interest in the outcome of the petition and (b) the writ could not be pursued on the basis of the public interest exception because CRA’s primary concern was its own economic and competitive interests.
With regard to the standing issue, we asserted that there existed a public interest in the outcome of the writ and CRA could properly pursue that interest on behalf of the public. We submitted that in the event the court was inclined to grant the motion, we be allowed to file an amended pleading to overcome any deficiencies in the pleading with regard to CRA’s standing. It is very unusual if not rare for a court to grant a motion for judgment on the pleadings without giving a party the right to amend its pleadings to resolve any deficiency.
On November 2, 2007 the motion was heard before Sacramento Judge Marlette. The afternoon prior, the court website posted a tentative ruling sustaining the motion for judgment on the pleadings without leave to amend. According to the tentative ruling, the court found that CRA lacked standing to bring the petition for a writ of mandate. Despite extensive argument before Judge Marlette, the tentative ruling was adopted including a ruling that leave to amend would not be granted.
At the CRA’s November 29th Board Meeting the Board voted to not pursue this issue any further by way of litigation. The Board has decided to attempt to move the issue by other means.
To date when BAR Chief Sherry Mehl was asked to comment on this issue, she claimed that she couldn’t discuss the issue because of the suit. Now that the court has denied our ability to litigate this issue, the Chief should be free to address the issue. Most recently the Chief is quoted as saying that Progressive is no longer tearing down cars and doesn’t need to register and that BAR is conducting announced and unannounced inspections. There appears to be a unwillingness on BAR’s part to address the other issues previously set forth in the BAR’s counsel’s letter to Progressive’s attorney dated August 31st 2006, in which listed additional concerns beyond that of doing teardowns. These concerns are as follows:
Progressive is acting as an Auto Repair Dealer by…
- Disassembling consumer’s vehicles to prepare estimates
- Conducting re-inspections of the vehicle after the repairs are completed which constitutes diagnosis and requires mechanical expertise (both are presumptions of auto repair)
- Progressive is receiving compensation for the service in the form of premiums paid. Additionally Progressive collects deductibles and monies relating to repairs not related to the claim. In fact, consumers are required to pre-authorize these charges a process that is unlawful to all shops outside the progressive program.
- Progressive fits within the presumption of an automotive repair dealer as defined in 3371.1 of the C.C.R. The customer leaves the vehicle with Progressive who performs a teardown, prepares an estimate and sublets the repair. The vehicle is returned to progressive who re-inspects the vehicle and collects charges from the customer
- The customer doesn’t receive a written estimate and is asked to pre-authorize repairs and other undisclosed costs, without the benefit of informed choice. Authorization is not provided prior to the teardown being done.
The customer is victimized in this process because the consumer isn’t informed that Progressive is directing how the car is to be repaired. The repair facility is not representing the consumer’s interest but the interests of the insurer. Progressive says it re-inspects the vehicle to insure the vehicle is repaired properly when in reality it has no incentive to find fault as Progressive writes the original estimate and directs any changes to it. Consumers are not aware of the abuses that they are being subjected to.
We are assessing the current operational strategies of the Concierge Program to determine if the issues raised by the BAR counsel still exist. If Progressive’s conduct is continuing, it would appear to create an unfair business practice in that Progressive doesn’t have to comply with estimate and invoice laws and regulations that its competitors are required to abide by. It would appear that BAR is facilitating an unequal application of the law by allowing this practice to continue while holding others to a higher standard. As we gain more information we will advise you of our findings.
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CRA Supports DOI's View on Misuse of DRP Rates
The Department of Insurance is hinting that it may consider adopting rules to bolster its finding that “it is not reasonable for an insurer to pay DRP rates for non-DRP work.” The Collision Repair Association of California’s November 30, 2007 Newsletter carried the department’s finding which serves to clarify the cornerstone issue in disputes between insurers and repairers; i.e. insurers must pay the reasonable cost of repairs.
If you are having a dispute with an insurer over rates, please remind the insurer of the Department’s statement on the illegality of paying DRP rates for non-DRP work.
While the CRA contends that it is already illegal for an insurer to underpay a claim, a regulation adopting the department’s statement will speed up the claim process and, as such, the CRA will support a ruling in this area.
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