Friday, 31 August 2007 17:00

DOI Holds Workshop to Evaluate Paint Capping Issues

In early August, the California Department of Insurance (DOI) convened a meeting in which nearly 100 members of the collision repair industry met with three members of the DOI to address the issue of paint and materials price capping.

    Shop owners, insurance companies, information providers, and representatives from the state associations CAA and CRA, legislature, and Bureau of Automotive Repair (BAR) joined top DOI staffers Bill Gausewitz, Tony Cignarale and Patrick Campbell in a discussion regarding an equitable approach to determining the true cost of painting a damaged vehicle. A presentation by Mitchell International demonstrated how a paint and materials calculator system relates to the estimating of paint and materials on the automobile repair

    The repair industry representatives left feeling that the DOI had a better understanding of the subject and hopefully would step forward to protect policyholders who pay insurance premiums to have their vehicles returned to pre-loss condition.

    First of all, the majority of claims involving painting a vehicle do not result in a dispute over the cost of paint and related materials. By convention, the typical paint estimate is based, in part, on a set number of hours of work generally accepted by the industry as the specific hours it takes to paint a specific vehicle (or part thereof), multiplied by a rate which may vary depending upon the vehicle and product used. The typical paint cap is $400.

    An insurer may have a threshold at which it may request the repairer to justify costs that exceed the threshold, providing insurers themselves can document the cost they believe should not be exceeded. The DOI agreed, as it has in the past, that it is illegal for an insurer to arbitrarily place a cap on the amount of money it will allow for the painting of a vehicle. (See “State of California cheated out of sales tax” at www.autobodynews.com.)

    Furthermore, an insurer may not demand that a repairer document specific costs if there is no methodology that exists to document such costs.

    Gausewitz asked the insurers to explain when price caps were justified and how that justification would be reached, but received no response. He delivered a message to insurers from Insurance Commissioner Steve Poizner to “clean this up now or face new regulations.”

    CRA president Gene Crozat told Autobody News, The DOI has finally taken a significant stand on capping. They’ve said that no external threshold for paint caps will be acceptable to DOI.”

    The Collision Repair Association of California committed to provide DOI with documentation of insurer claim adjustments in which the insurer, without justification, clearly states that it will not pay more than a set amount of money for paint and materials – live examples of blatant paint capping.

    In addition, the CAA will be pushing hard for a timely regulation, but also actively consulting on introducing legislation on this issue.


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