The insurance industry has enormous economic power over several industries, including both the auto collision repair and automotive glass businesses. The in-surance industry is in the business of risk. It tries to minimize the risk; however, the damaged vehicle repair businesses are trying to make a living off of what insurers are trying to minimize.
Erica Eversman, general counsel for Vehicle Information Services in Bath, Ohio, talked about the economic imbalance and the legal ramifications for the collision repair industry during the second and final day of the Coalition for Collision Repair Excellence (CCRE) summit held in Reno, Nevada.
"This industry, like others that are involved with very powerful outside influences, has allowed your businesses and the control of your businesses to be usurped by the insurance industry," said Eversman. "The insurers have done this through their incredible economic power."
Eversman said insurers' specification of aftermarket parts or used parts for the repair is an example of insurers' imposition on the collision repair industry. Another is the supplement process, which impedes the repair process and costs the repairer time and money. As an example, Eversman cited Allstate's so-called hotline for supplements.
"No one answers. You have to leave a message," she said. "One thing insurers are masters of. Better than anybody. Better than politicians. They are the masters of propaganda and spin…Supplement hotline sounds good. It is all smoke and mirrors. It's like a Hollywood set."
Eversman said, "You've got to stop jumping through the insurance company hoops. It is the wrong way. It is your business. You are the ones with all the responsibility. You are the ones with the knowledge. You are the ones with the expertise."
Eversman encouraged the business owners at the event to reorient themselves to control as much of the repair environment as possible.
Most important document
If the operative three words in real estate are location, location, location, then the three most important words in auto collision repair are document, document, document. Eversman laid out some important documents to help collision repairers take back control of their businesses. It begins with a repair contract.
"The most important document will be a repair contract," Eversman said. "I have yet to meet a collision repair facility repairer who actually has a contract to repair the car. They will say, 'We have a signed RO. We have signed authorization.' No. You need a contract."
She said, "Insurers have stepped in and said to you, 'We have the right to tell you what we will pay for and what we won't pay for. We have the right to demand that this car is repaired with X parts. We have the right because you respond to us.' Those are all completely false statements and assumptions. Number one, they are not your customer. Number two, you are not fixing the insurance company's vehicle. You are fixing the owner's vehicle."
Insurer is not the customer
A repair contract recognizes that the insurer is not the customer; however, it must be in compliance with state consumer protection laws.
Eversman explained that consumer protection statutes generally require a written damage analysis at the outset. The damage analysis is called a variety of things, including an estimate, a damage report, or a blueprint for repair.
Nevertheless, most consumer statutes require that the repairer get the vehicle owner's approval if repairs exceed the original damage analysis. Direct repair program (DRP) repairers who don't give customers an estimate at the onset of repairs and/or don't notify and get the car owner's consent if the repairs exceed the original estimate are likely exposing themselves to legal issues.
Continued Eversman, the contract should set out the exact terms and may include such things as the authorization for repairs, the repair method, the parts specified in the repair, payment obligation including storage charges and restocking fees, and recovery in the event of non- payment, and deficiency payments. Anything can be put in the contract, as long as it is legal.
She then discussed the assignment of proceeds, which may or may not be part of the repair contract. Having a car owner sign the assignment of proceeds entitles the repairer to receive payment directly from the insurer and does not limit payments to only what the insurer decides. The document puts the insurer on notice that the customer has assigned right to receive payment covering the repair obligation to the repairer. Eversman said this is like the document that one signs in the doctor's office, which assures the doctor will get paid if the insurance carrier doesn't pay the full amount for services rendered.
In addition to the assignment of proceeds, the repairer should get an authorization for the release of information on the repair to help the vehicle owner get the money from the insurer to pay for the repair services. This will protect the repairer if any privacy issues occur.
Regain control of repair process
To help regain control of the repair process, Eversman suggests using a notice of supplement. By faxing or e-mailing a supplement notice, a repairer puts the insurance carrier on notice about the need for additional repairs or parts, a deadline on reinspection opportunities, the need for an appointment for the reinspection, and a waiver if the insurer doesn't inspect before the deadline.
If an insurance carrier representative insists on alternative parts and the vehicle owner agrees and the choice in parts doesn't compromise the safety of the vehicle, the repairer should have the vehicle owner sign an authorization of parts to be used in the repair that contains a hold harmless provision.
If an insurance carrier convinces a vehicle owner to take the car to some other repair facility, have the customer sign a termination of repair and release of motor vehicle document. Eversman said that at least that way, the car owner knows that he or she broke the contract with the repairer. The document may become useful if, subsequently, a legal issue arises.
"It is very important to educate your customers and legislators and bureaucrats that insurance companies are engaging in false and misleading statement when they say 'We guarantee the repair' to get a customer to go to a DRP facility. The insurance company does not guarantee the repair. The insurance companies make their DRPs guarantee the repairs," said Eversman. "Tell the customers to get that in writing."
As a cautionary comment, when asked about State Farm's new Select Service agreement, Eversman said, "Anybody who signs that should close up shop."
A repairer said, "State Farm gave me a week to sign it. I couldn't find any of the top 10 lawyers in the area to read it in a week. Basically, it said that State Farm will never be sued again and the liability falls on the repairer."
Eversman concluded, "The indemnity clause in the new State Farm Select Service agreement is so over broad and over reaching, it will put everyone out of business."