Wednesday, 25 July 2012 18:51

Rhode Island Gov. Chafee Vetoes Auto Body Bill for Insurers

Rhode Island Governor Lincoln Chafee vetoed a bill that would have allowed auto body shops to sue insurers, citing the bill would have sent car insurance rates soaring in Rhode Island.

The legislation called for setting standards for declaring a vehicle a total loss if the cost to repair the vehicle is less than 75 percent of the value of the vehicle; require an insurer to negotiate payment for auto body repairs in good faith; and allow private rights of action by auto body shops against insurance companies.

Gov. Lincoln Chafee said in a news release, “No other state in the nation allows auto body shops to set repair prices outside of the marketplace, determine whether a vehicle should be totaled without the input of the consumer and the insurance company, or to be an outside third party now authorized to effect an existing insurance policy between a consumer and an insurance company.”

He continued, “I believe this bill would hurt Rhode Island consumers by raising their auto insurance rates and impairing their existing contract agreements with their insurance companies.”

Earlier in June, the proposal to allow auto body shops to sue insurance companies that do not pay them what they believe they should be compensated for repairs generated a fiery, hour-long debate on the floor of the state House of Representatives. The bill ultimately passed the 75-member chamber on a vote of 38 in favor and 20 against. However, Governor Chafee vetoed the controversial bill approved by lawmakers that would have given auto body shops the right to sue auto insurance companies if negotiations do not lead to an “agreed price.”

Supporters, including Rep. Stephen Ucci, a Johnston Democrat and the bill’s sponsor, repeated the mantra that the bill would “level the playing field” between local auto body shops and auto insurance companies and ultimately be good for Rhode Island drivers.

But other lawmakers voiced concern that the proposal would only lead to higher auto insurance rates in Rhode Island, which already has among the highest rates in the nation.

Rep. Robert Watson, R-East Greenwich, called the proposal “special interest legislation” put together “on the fly.”

“This is why we deserve criticism,” he said. “Nonsense like this plays out in the final days of the session. This is wrong.”

A statement released by the Auto Body Association of Rhode Island (ABARI) said, “Though [Chafee’s] veto message states that he is concerned about the consumer, he clearly put the consumer and small business’s interests aside and bowed to the pressure of the real ‘special interest group’ —the billion-dollar insurance companies. Over 200 auto body repair shops have gone out of business in the State of Rhode Island in just the last decade. We’re in a crisis that hurts the consumer. This veto is just another example of why Rhode Island is considered one of the least friendly to small businesses in the nation.

“ABARI has fought to pass laws that protect consumers and small business from insurers who care only about their bottom line. H-7782A was no different. Insurers always claim that rates will go up, regardless of the legislation’s substance, because it’s the last scare tactic they have left. The truth is collision premiums have been declining in Rhode Island, the opposite of their certain predictions.

“As we have for almost two decades, ABARI will be back next year to continue to expose the lies, reveal the truth, and fight to ensure that consumers receive a safe and quality repair, and that small businesses can thrive in the State of Rhode Island. We will continue to educate the consumer, the legislature and the Governor’s office on the unfair and deceptive practices used by insurers on a daily basis —practices that benefit only the insurers.”

The Property Casualty Insurers Association of America (PCIAA) applauded the Governor’s decision, calling it a victory for consumers.

“Governor Chafee’s veto of H-7782A represents the triumph of everyday Rhode Island consumers over well-connected political insiders,” the PCIAA stated. “The governor carefully considered the legislation and rejected this latest attempt by a group of body shops to further increase their revenues at the expense of Rhode Island drivers. We applaud the governor for taking this important stand against special interest legislation and the politics-as-usual approach which fails to protect the people’s interests.

“Residents in Rhode Island already pay among the highest auto repair bills in the nation, and H-7782A could have driven costs even higher and possibly jeopardized driver safety by forcing vehicles that should have been totaled to be repaired. The bill would have ultimately provided a body shop a blank check to charge whatever it wanted and deprived insurers of the ability to negotiate a fair price by threat of litigation. No other state in America requires such a one-sided arrangement, and in the end, the consumers would be the ones to lose out.

“This legislation was a dramatic overreach by the body shops. We hope this veto sends a strong message that enough is enough. It is time to put an end to the body shops’ legislative agenda which has caused the average repair cost to accelerate at a rate more than twice the national average.”

The American Insurance Association praised Gov. Chafee for vetoing “reckless auto body legislation.” Gary Henning, Northeast region vice president for the American Insurance Association (AIA), said: “AIA commends Gov. Chafee for vetoing H. 7782A, legislation which represented poor public policy that would have led to an explosion of litigation. No other state in the nation allows auto body shops to set non-negotiable rates and attempt to force them on third party payers under threat of litigation. Rhode Island is already one of the most expensive states in the nation for auto body repair and this bill would have made the problem even worse.

“Governor Chafee stood with consumers by taking a stand against this bill. The governor’s veto protects policyholders from increased repair costs and increased litigation.”

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