Month: June 2014

Auto Body Association of Connecticut Legal Counselor Objects to Use of Camera Phone Photos for Estimates

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A growing concern in Connecticut is insurers’ use of camera-phone photos for writing estimates. Rather than having licensed physical property damage appraisers physically inspect a vehicle after a collision, many insurance companies are asking their customers to submit camera phone pictures of the damage, and they are using these photos to write their estimates. Attorney John Parese, who acts as legal counsel for the Auto Body Association of Connecticut (ABAC), believes “the growing trend of using camera phone pictures prior to getting a repair professional involved is illegal, unethical, and most importantly, harmful to consumers.”

Furthermore, Parese notes that this practice violates the Connecticut Unfair Insurance Practices Act (CUIPA) and potentially other consumer protection laws. As such, Parese has written to the Connecticut Insurance Department outlining his concerns on behalf of the ABAC, in addition to writing an article for the ABAC member newsletter that emphasizes the possible dangers of this new habit and why he believes it should be declared unlawful.

In his letter to the Connecticut Insurance Department, Parese highlights portions of CUIPA that define unfair insurer practices as misrepresentations of facts and compelling insureds to settle a claim for less than the value of the repair. Though the benefits for insurers to write estimates based on camera phone photos are obvious, it creates the hazard of such estimates only capturing a fraction of the actual damage and thus encompassing only a portion of the cost to restore the vehicle to its pre-loss condition, and this is especially dangerous when claimants pocket the check instead of paying for the repairs, a common practice that is certain to increase when consumers believe the damage is purely cosmetic. Parese’s concern is that “many of these vehicles are not safe to be put back on the road, and the safety of a vehicle often cannot be assessed from a camera phone picture.”

Because claims are being paid based on claimant-taken photos that cannot possibly depict the full extent of damages, Parese sees this practice as “a fundamental misrepresentation of policy or third-party rights and benefits…Insurers have a legal and often fiduciary responsibility to make fair and complete payments for covered losses. This system is plainly designed to save insurers money on its own labor costs (i.e., less paid appraisers) and on the amount it ultimately pays on claims (i.e., calculated underpayment of claims). These savings come at the expense of consumer safety and complete reimbursement.”

In his article for the ABAC newsletter, Parese argues that using camera phone pictures to write an estimate before involving a repair professional in the process appears unethical and illegal based on the Connecticut unfair insurance practices law. In addition to safety and legal concerns, Parese also acknowledges that collision repair facilities suffer from this practice because they are losing work on these needed repairs that insurers are arbitrarily dismissing through the practice of writing estimates based on photos that can only capture cosmetic damages.

Parese hopes that the issues he has raised will convince the Connecticut Insurance Department to prohibit insurers from engaging in this unethical practice in his state. Unfortunately, his battle only encompasses the state of Connecticut, and though he is unfamiliar with the laws in other states, he encourages trade associations across the country to investigate how this trend violates their state laws and to join the battle to protect consumers and the integrity of the collision repair industry.

Mike Anderson Visits Washington Metropolitan Auto Body Association to Discuss Estimating Practices, Parts Procurement, and More!

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On May 1, 2014, the Washington Metropolitan Auto Body Association (WMABA) hosted industry speaker Mike Anderson for a full-day educational seminar on “The Encyclopedia of Estimating Practices” at the LKQ Training Center in Linthicum Heights, MD. In addition to providing a State of the Industry update, Anderson’s seminar also touched on parts procurement, the future of DRPs, cycle time, and many other topics. Jordan Hendler, Executive Director of WMABA, describes the seminar: “With his usual boisterous and ‘take-me-as-I-come-or-leave-me’ personality, Mike gave attendees more than they bargained for. Safety is his number one priority, and he wants every pair of ears to hear how vehicle technology is changing everything we know about collision repair processes.”

Through his passionate approach, Anderson’s goal was to stress that, despite the importance of focusing on cycle time, safety is an even more pressing concern for collision repairers because the consumer is trusting their repair facility to look out for their best interests and ensure that their car is restored to its pre-loss condition properly. “A lot of people aren’t aware of what it takes to fix a car properly. I don’t mean that disrespectfully; it’s just that the industry is changing so fast that it takes a lot to keep up on things today. You really have to spend time on training,” Anderson emphasizes.

In discussing the impact that a proper repair estimate has on cycle time, Anderson explained, “when you pass on an estimate that’s really incomplete, and another technician finds more damage, you’re just creating inefficiency in your process…Speed is the name of the game. It’s not just about writing an accurate blueprint to fix the car right…Even if you’re not a DRP, you have to get [better] at turning cars quicker just because there is less profit on a job, and you have to turn more cars just to get to the break-even point quicker. We really tried to focus [in the class] on just how the estimate is really the basis for getting the right part the first time and the basis for communicating properly with a customer.”

Anderson discussed everything from receiving proper reimbursement from insurers, to lean processes, reducing stress in the shop environment, and the demands that new technology places on repairers. “We really have to understand that with all this new technology with accident avoidance systems, lane departure systems, and autonomous braking that you can’t  just go through [the vehicle] like in the old days and say, ‘I’m just going to check out all the lights and door locks.’ You have to have a scan tool to actually take and check a lot of these things during an output test and [make] sure they’re working properly.”

Rather than suggesting quick fixes, Anderson provides tools and methods for learning, focusing on the long-term solution of student-initiated learning and adaptation. As part of this initiative, Anderson provided attendees with a list of websites where they can acquire this type of necessary knowledge:

Anderson was pleased with participants’ responses to his seminar: “Everybody was interactive and had lots of great questions. One of things I found really refreshing was there were a lot of young people in the class, particularly young females. It’s really nice to see more and more women represented in the industry. It’s always nice to see young people. With what we do with regards to computers and technology, young people are more open to [this industry].”

As a recurring speaker at WMABA meetings, Anderson praises the association and explains why he is always willing to visit the East Coast to teach WMABA members. “I get the privilege of working with a lot of different trade associations across the country, and I don’t think a lot of people realize what they have in Jordan Hendler as executive director. She is truly one of the most passionate people you can ever meet in the industry.”

Shop files class-action suit against insurance companies for suppressing compensation rates

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Crawford’s Auto Center has filed a class action suit against State Farm, Allstate, GEICO, Progressive, Farmers Insurance, Liberty Mutual and Nationwide insurance companies for allegedly violating the Racketeer Influenced and Corrupt Organizations Act (RICO) by dictating unfair compensation for collision repairs.

The Downington, Pa. shop’s suit alleges that because the defendants collectively hold 70 percent of the national auto insurance market, they are pivotal in establishing the prevailing rate for repairs. However, they have used “fraud, deception and artificial restraint” to drive down the compensation rates paid to their non-DRP shops for labor, paint, parts and materials.

The alleged insurance company tactics include pressuring direct-repair program shops to suppress rates, utilizing most-favored nation clauses, which ensure insurance companies are given the best rate afforded any other customer, and discussing rates among themselves to create an artificial market rate for compensation.

The independent information providers — CCC, Mitchell and Audatex — are deemed co-conspirators, according to the complaint, for their role in establishing the scope and extend of repair procedures necessary to restore vehicles to pre-loss condition.

“The information providers are simply not the independent authority of repair standards and costs. [They] furnish Defendant insurers with the framework and tools to accomplish their goal to suppress compensation to repair facilities,” the complaint states. The information providers are significantly influenced by insurers, as they earn the majority of their revenue from insurers or their direct-repair program network facilities, the suit says.

The current condition of the market is forcing shops to make a choice, the complaint alleges: “Sell their repair services into a rigged market at suppressed rates or do not sell at all — and go out of business.”

The plaintiffs are seeking compensatory and punitive damages, attorneys’ fees, suit costs and all other appropriate relief.


Wednesday, May 28, 2014

Pennsylvania Shop Files Suit Against Multiple Insurers

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May 14, 2014—Crawford’s Auto Center Inc. in Downington, Pa., has filed a lawsuit against seven major insurance carriers and their affiliates, accusing them of short pays and conspiring to establish and enforce “an artificial market value for collision repairs,” according to the complaint.

The suit was filed in an Illinois district court on April 30, and names State Farm, Allstate, GEICO, Progressive, Farmers, Liberty Mutual and Nationwide as the lead defendants, along with a slew of their respective subsidiaries.

Attorney Steven L. Bloch of Berger & Montague P.C., representing Crawford’s Auto Center, told FenderBender that the suit was filed in Illinois for strategic purposes, as “several of the defendants are based in Illinois and conduct a great deal of their business either in Illinois or emanating from Illinois.”

“I think [the suit] speaks for itself,” Bloch said Wednesday when reached by phone. It stems from “the artificial establishment and perpetuation of a so-called prevailing rate, which is used to suppress compensation to collision repair facilities.”

Filing under the Racketeer Influenced and Corrupt Organizations Act (RICO), the suit accuses the defendant insurers of “long-running unlawful conduct to suppress compensation” to shops.

The suit goes on to say that the insurers have worked to implement a “prevailing rate” for collision repair compensation that is lower than that of market value, aided by industry information providers that the suit labels as “conspirators.”

This is the latest in a recent string of lawsuits filed on behalf of the collision repair industry against insurers.

The Mississippi Collision Repair Association, along with a number of its affiliated body shops, filed last summer to block State Farm’s PartsTrader electronic parts procurement mandate for its Select Service shops; a Tennessee shop accused Progressive of steering and underpament in November; and an Ohio MSO alleged short pays from State Farm in another suit in March.

There is also a suit pending from industry advocate and shop owner Ray Gunder to block the State Farm PartsTrader initiative in Florida, and a suit recently filed on behalf of a number of Indiana shops.

Rhode Island Senate to Hear Controversial Auto Body Bills

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June 5, 2014—The Rhode Island Senate Committee on Judiciary will hear a series of controversial bills impacting the auto body and insurance industries Thursday.

Rhode Island newspaper, The Valley Breeze, reported Tuesday that there are four bills that will be heard:

  • One prohibiting insurance carriers from requiring the use of used or remanufactured airbags and/or suspension parts
  • One creating two separate  license classifications and labor rate surveys for shops facilities, allowing for differing pay for different shops
  • One not allowing insurers to increase rates without a hearing
  • And one amending the definition of  “aftermarket part” to mean all motor vehicle replacement parts.

The Auto Body Association of Rhode Island supports the legislation, The Valley Breeze reported.

The Property Casualty Insurers Association has released statements over the past several months opposing all four pieces of legislation and released a 6-page report that outlines various ways the auto body industy has seen increased costs due to legislation, including laws backed by ABARI in the past.