Monday, 30 June 2003 17:00

TX legislation bans insurers from owning any more shops

Body shops and consumers in Texas have reason to celebrate! Republican Texas Governor Rick Perry signed into law on June 20 Texas House Bill 1131, the Insurer-Owned Repair Facility Legislation. Earlier, the Texas Senate passed the legislation by a unanimous vote of 31 to 0. 

The bill prohibits insurance companies from owning auto repair facilities in Texas. The legislation passed by the Senate was amended from its original House version to allow those facilities currently owned by insurance companies to remain in business if they meet certain criteria outlined in the legislation.

For months the Automotive Service Association (ASA), with its national headquarters near Dallas, has been working closely with a coalition of automotive dealerships and collision repairers in Texas on this issue.
"We are very pleased Governor Perry signed this legislation into law. Texas collision repairers exercised their right to petition policymakers for help with a potentially devastating concern. The Texas legislature promptly responded with a solution protecting vehicle owners and small businesses throughout Texas. This landmark legislation will most likely be mirrored in states across the nation," said ASA President Ron Pyle.

"We worked together and made it a priority item this year," said Alan Walne, a former Dallas city councilman and the owner of several body shops. "It often takes two or more sessions to get legislation passed, because by the time you get their [legislators] attention, the session is over. We didn't have the luxury of time with this deal because of the divestiture issue. If we hadn't gotten it done this year, the problem [of insurers divesting shops they own] would be that many times greater two years from now when the legislature meets again."

Protection for DRP shops

It is expected that this legislation will go a long way toward leveling the playing field between shops owned by an insurer and other "favored" (DRP) shops of that insurer. The insurer-owned shops can not receive referrals from the insurer, use the insurer's name, engage in joint-marketing or enjoy other advantages that are not also available to non-owned DRP shops affiliated with the insurer such as Allstate's "PRO" shops.

The bill also prohibits the insurer from subsidizing the operations of its owned shops. It provides civil court penalties of $1,000 to $5,000 per day for violation of the law and independent shop owners could bring suit to enforce the law; if the shop bringing the suit wins, the insurer must pay attorneys' fees.

Timing was right

Sources close to the effort said it was really not difficult to get support from state representatives on the consumer issue of insurers owning repair shops. "The negative attitude by consumers towards insurance companies over homeowners insurance issues, mold claims in particular, worked to our advantage," said Walne.

The challenge was getting the representatives to listen in the first place, given the budget and other matters vying for their attention.

Initial support for the measure came not from independent collision shops, but from auto dealers. The auto dealers needed a larger coalition however, as their organization had supported losing candidates both for governor and lieutenant governor in the last election, so their political capital in Austin was not what it had been in the past.

With collision shops on board led by ASA, Texas Senator John Carona (R-Dallas) spearheaded the bill in the Senate, and Representative Kino Flores (D-Hidalgo) soon introduced the same bill in the House. Petitions signed by consumers at the request of body shops poured into Austin, demonstrating popular support.

Despite extensive sponsorship in both houses, the bill hit rough water - "many of us thought it was dead," remarked Walne - when Lt. Governor David Dewhurst told the Associated Press he wouldn't let the bill reach the Senate floor.

Lobbyists led by the Graydon Group in Austin pressed on however, and found a compromise with Dewhurst on the touchy subject of "takings," i.e., forcing companies to give up what they already own. The compromise was that insurers could keep shops they already had or were building.

"We found a way that everyone could live with. We got it done," said Walne, who pointed out that Lt. Governor Dewhurst has left the door open for the coalition to come back to him in two years "if the code of conduct [by insurers] prescribed by the bill doesn't work out."


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