Allstate Insurance, owner of Sterling Collision Centers, and the California Department of Insurance (DOI) have agreed upon a settlement that referenced Allstate's Auto Repair Claim Handling concerning labor rates and steering to assure compliance with S.B. 551. 

DOI Commissioner John Garamendi provided the California Autobody Association with the memo that Allstate has agreed to send to all auto adjusters and appraisers in order to clarify how claims must be handled to comply with the anti-steering law.

The agreement designates the three options for handling an estimate presented by the claimant which exceeds the insurer's estimate. Those insurers may:

1. Pay the amount of the claimant's higher estimate; or

2. Provide the claimant with the name of at least one shop that will make the repairs for the amount of your written estimate, but only if the claimant requests the name of an alternative shop; or

3. Reasonably adjust the repair facility's estimate.

In order to exercise Option 3, the adjuster must support that the amount charged by the claimant's chosen repair facility for specific items is unreasonable. If the issue only involves a difference of labor rates, proper support would be in the form of an auto body labor rate survey. In the absence of such a survey or any support that the amount charged is unreasonable, you should exercise Option 1.

According to CAA Executive Director David McClune, the DOI has not yet received a labor rate survey from Allstate.

Recommending Auto Body Repair Shops to Claimants

In addition, the memo clearly states the parameters for recommending auto body repair shops to claimants:

"California Insurance Code Section 785.5 became effective January 1, 2004. This section prohibits an insurer from making a recommendation after the claimant has chosen the shop, except where the claimant specifically requests the name of an alternative shop. Therefore, an adjuster shall not attempt to make a recommendation after the claimant has chosen the repair shop, unless the claimant specifically requests the name of an alternative shop. Further, an adjuster shall not advise the claimant that he or she will be responsible for the additional labor rate being charged by the claimant's chosen shop, unless the labor rate set by Allstate has been supported by a survey."

McClune explained that CAA is working closely with the DOI on trying to improve the way the insurance companies do labor rate surveys in California.