Saturday, 31 December 2005 09:00

Be careful what you wish for - CR legislation

Written by Dick Strom

Strom-photo-0706-2.jpg Some old state and local laws are a kick to read. Though they must have resulted from good intentions, it is hard to comprehend the reason for a California law still on the books that makes it "a misdemeanor to shoot at any kind of game from a moving vehicle, unless the target is a whale." Another states, "no vehicle without a driver may exceed 60 miles per hour." 

By Nevada law, it is still "illegal to drive a camel on the highway." And Washington state law makes it "…mandatory for a motorist with criminal intentions to stop at the city limits and telephone the chief of police as he is entering the town." The obvious purpose of some of these laws was to insulate the general public from the real and/or imagined menace of the smelly, smoke-belching, backfiring autos.

Strom disclaimer

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Please do keep in mind that nothing I have written here, or ever have written, is intended in any way to be construed as legal advice since I don't profess to practice or interpret the law, or any application of it. What I write is my personal opinion, oftentimes backed by that of others. But that being stated, it is worth noting that some within the collision industry have come to realize that creating new legislation - making new laws aimed at regulating insurer infringement on us - too often erodes, rather than enhances, our right to engage in free enterprise.

New collision industry legislation is not necessarily a bad thing. But too many in the industry have come to view the creating of new legislation as a panacea for insurer abuses against repairers through disregard of existing laws and state codes. The arduous, time-consuming process of getting new industry legislation passed seems less frustrating than attempting to have existing legislation enforced, or amended. But continuously re-drawing new lines in the sand is seldom the solution; all too often new shop-friendly legislation soon becomes a launch-pad from which insurers can better control the collision industry.

Often, a hastily or poorly written piece of legislation becomes another "tool in the devil's workshop," so to speak, or at very least a room that insurers can later decorate to serve their own purposes. Legally holding insurers' feet to the fire to obey the myriad of existing states' laws could revolutionize and revitalize the collision industry, and assist greatly to "make whole" our true customers.

New legislation is hard work

New legislation involves lost time from your shop and family, and costs hard-earned money traveling to your state capitol to give testimony. Then, assuming on the rare chance that your legislation is actually brought before committee (in my state less than 10% of proposed legislation actually comes up for consideration), and further assuming that you are able to sway enough legislators' sympathies away from the interests of insurers who have heavily financed their re-election campaigns, your legislation may have a slim chance of being effective, at least until insurer-influences later have it amended to work against your original intent.

It's not a fun or inexpensive process. Collision industry-influenced legislation, which may appear bulletproof on paper, in later sessions is not uncommonly found to be worthless, or close to it, as insurer control tightens or even changes the whole concept for why the law was enacted. Insurer-influenced additions or deletions of words, before or after the law has passed, can change the law into one that can come back to bite you - hard.

Surmising that without laws there is chaos, too many falsely believe we need more laws to ensure a more orderly society. Among those laws passed to protect us from ourselves, gun laws arguably enacted in an honest effort to protect the general public from accidents, rampages, and general lawlessness have, in the opinion of a growing number, only increased the odds that criminals will meet less resistance.

Fighting fire with fire?

Recently a well-armed, disgruntled, ex-mall employee in Tacoma, Washington, took out his rage on everyone unfortunate enough to be in his way. One man, in attempting to subdue the would-be killer, was seriously wounded while trying to get his concealed weapon out of its holster. What you likely didn't hear on national news was that the realization that there were others in the mall that day that were armed and would also be gunning for this deranged man, was what brought him to surrender. At least one other man with a concealed weapon, and well trained in its use, stood his ground in a position to take the deranged gunman out had he stepped into range. It was the realization that he was going to meet armed resistance if he continued on his rampage that helped convince him to give up. Some of the most armed areas of the world are surprisingly the safest in which to live. Laws have their limitations, and their downside.

Laws need enforcement

On the other hand, what purpose do laws serve if they aren't enforced? Laws that are backed up by law enforcement, stiff fines, and penalties, do oftentimes help to deter future violations. A current action of a very large insurer and the one other insurers often look up to, under scrutiny recently disclosed that over 30,000 cars that the insurer had declared to be total-loss somehow never got reported as such, and consequently were resold, rebuilt, and received clean titles.

This all came to light when a lawsuit was filed against them in which a court demanded that this insurer turn over its documentation with regard to total-loss vehicles. The insurer shortly thereafter walked into the office of the Attorney General of Iowa, acting as if they had discovered a bookkeeping error. Praised for their willingness to correct this "error," this insurer was rewarded, basically, by being allowed to state the reimbursement amount they would be assessed, and pony-up that amount. Their "oops, we made a mistake that our bookkeepers just discovered, and we need to correct" approach seems to have appeased the attorneys general of each state affected, many of whom have former and/or present ties with the insurance industry.


Who benefits?

Excerpts from material posted on the website of Missouri Attorney General Jay Nixon (www.ago.state.mo.us) states that he "…and 48 other state Attorneys General reached an agreement with State Farm earlier this year over the company's reported failure to make certain the (totaled) vehicles were properly titled. The agreement covers approximately 30,000 vehicles nationwide, including the 265 in Missouri, that should have been designated as salvage on their titles.

State Farm is paying $40 million to the consumers who currently own the vehicles. Those owners were recently contacted by letter with information about the settlement by a third-party administrator. The final amounts received by consumers will depend on the current value of their vehicle and how many consumers elect to participate in the payment program. Nixon said the settlement does not preclude those consumers from rejecting the insurer's offer and seeking their own legal recourse, nor does it affect the legal rights of previous owners of the vehicles."

If my math isn't too rusty, it would seem this insurer has arranged a pretty lucrative deal for themselves here (an average of only $1330 reimbursement for each vehicle they failed to report as totaled), while leaving a snarled mess to unravel for state attorneys general and unaware purchasers of these vehicles. Forty million dollars is a drop in the bucket of loss for vehicles that at best are worth no more than 50% of their market value, once totaled. And is this insurer or the attorneys generalof each state going to track down each of these vehicles to reissue titles, and mark the doorjamb of each vehicle "totaled?"

Almost escaping detection, the insurer yet came away looking like a true good neighbor to citizens not directly affected, while profiting to whatever extent from reselling vehicles, many of which likely were otherwise destined for a date with the wrecking yard. With the exception of two states, all insurers and citizens are required by law to report when a vehicle is declared a total loss, some states with very strong language to this end. And since the 48 state attorneys general who agreed to the insurer's self-proclaimed innocent error and settlement almost unanimously accepted its position that it did not "knowingly" commit any illegal acts, in so doing did those attorneys general therewith also waive the right to further prosecute State Farm for criminal charges for breaking the law?

Blind acceptance?

For undisclosed reasons these attorneys general just accepted this insurer's plea of innocence. Some would say they made them look quite incompetent. But again, the point is, what good is it to have laws if they aren't enforced, or only selectively enforced? Let the common citizen or local business owner give a false statement - such as including in an estimate of repairs a dent in the panel next to the panel that was damaged in an accident - and that criminal act makes the front page of the local papers for fraud.

Exact wording in laws is critical; inexact wording leads to misinterpretation. The Massachusetts Code of regulations, 212CMR2.04(e) states, "The appraiser representing the Insurance Company and the registered shop selected by the insured to do the repair, shall attempt to agree on the estimated cost for such repairs." This regulation would seem to leave open to debate whether or not an unregistered shop in that state can be held liable. And, "…shall attempt to agree on the estimated cost for such repairs" sounds good on paper, but where is its teeth? And what constitutes an "attempt to agree" depends on which side of the negotiation fence one is on.

What recourse is there in this law if both parties do make an attempt to agree, and yet there is no agreement? What constitutes "estimated cost for such repairs" is seldom the same between shop-generated and insurer-generated estimates of repair. An estimate is exactly that… at best, an educated guess. So, would it be totally without merit for one to come to the conclusion that the abovementioned law might purposely have been left ambiguous so as to legally enable insurers to steer consumers? How has this law assisted repairers to work for a fair, equitable, and safe repair? And what recourse is there for repairers in states with loosely worded laws and statutes?

Laws damage consumers and industry

Other states have similar laws that are, arguably, equally damaging to consumers and the repair industry. Iowa law has, under its unfair methods of competition and unfair or deceptive acts or practices statutes, laws dealing with misrepresentations and false advertising of insurance policies. "Making, issuing or circulating, or causing to be made, issued or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which… misrepresents the benefits, advantages, conditions, or terms of any insurance policy."

"Misrepresentation" is sometimes hard to nail down in words (thus the long list of defining terms included in this law). Yet how seldom insurers are called on the carpet for this violation.

Another subsection of this Iowa law warns insurers to not produce "… False information and advertising generally (such as ) making, publishing, disseminating, circulating or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station, or in any other way, an advertisement, announcement or statement containing any assertion, representation, or statement with respect to the business of insurance or with respect to any person in the conduct of the person's insurance business, which is untrue, deceptive or misleading."


Who is enforcing the laws?

One has to wonder why state's DOIs don't come down on insurer advertisements that, at the very least, border on being "untrue, deceptive or misleading." Being "in good hands" and being "a good neighbor" is one thing. But insurers advertising such claims as "we put you back where you belong" is, in my opinion, a statement aimed at creating a false sense of security for those who purchase policies… a promise that is, at best, seldom attainable.

In the collision industry we all know there is no such thing as "pre-loss condition" or "pre-accident condition," and smart repairers have struck such phrases from their vocabulary and paperwork, lest they be assessed for "inherent diminished value" or more. Yet insurers' bold advertisements include classic cars leaping backward out of salt water up to the top of a cliff to where the proud owner is having his picture taken. Do ads that commonly state things like "when you're with XYZ Insurance, the damage is totally reversible" hold true when a family has lost everything they own in a fire or other disaster? The impression given is that the insurer will return everything exactly as it was, but in reality this is impossible.

Can any insurer totally reverse the ravages of destroyed family pictures, mementos collected over a lifetime, or bring back the lives of persons, pets or livestock lost in fire or accident? So why haven't state DOIs caused that insurer advertising be truthful and honestly represented? We know how insurers, generally speaking, chisel shops for bottom dollar in collision repair. Is it logical to assume they treat other areas of making the consumer "whole" differently? Why haven't state DOIs required insurers to tune their advertising to the reality of the business of insurance? Wouldn't non-delivery of a service be considered in violation of the above statute? It certainly has been considered so on the part of collision repairers.

I've been told that most if not all states already have at least the skeletons of laws sufficient to protect the collision industry and consumers. It would seem to be much more sensible to work toward having weak state laws amended to put teeth in them. Where there is need for a law that doesn't currently exist, work for that new legislation, and then guard it with your life against insurer influence to amend it. Simply drawing more lines in the sand is certainly not getting the job done.

Dick Strom, Modern Collision Rebuild, 9270 Miller Road, NE, Bainbridge Island, Washington 98110; (206) 842-3621; e- mail: moderncol@qwest.net.