Friday, 28 February 2003 17:00

Texas bill to block insurers from owning shops

Two bills that prohibit automobile insurers from having an ownership interest in an auto body repair facility have been introduced in the Texas legislature and appear to enjoy considerable support. Texas Senate bill 435, introduced by State Sen. John J. Carona (R-Dallas) on February 17, has 14 co-sponsors and has been referred to the Business and Commerce Committee. 

A House of Representatives companion bill was introduced February 19. House Bill 1131, was introduced by Rep. Kino Flores (D-Hidalgo) and is identical to the Senate bill. Eight sponsors had signed on as of February 26. The bill was referred to the Committee on Licensing and Administrative Procedures.

"Check the other legislative bills pending," said lobbyist Jay Propes, who is coordinating support for the bill. "You won't find many that have the number of sponsors that this bill enjoys." Propes was hired by Consumer Choice in Autobody Repair (CCAR), a group consisting largely of auto dealers and independent body shops.

Two years to divest interests

In addition to prohibiting ownership of body shops by insurers, the legislation also requires an insurance company having an ownership interest in an auto body repair facility at the time of enactment of the bill to divest itself of its ownership interest by Sept. 1, 2005. Two such interests at present are Allstate's ownership of Sterling Collision Centers and the Interinsurance Exchange (Auto Club) minority interest in Caliber Collision.

Civil suits to enforce law

The bill as introduced differs from Carona's original draft in that enforcement would be through action in the civil courts as opposed to enforcement by the Department of Insurance. The change was made to make the bill cost neutral, thus giving it a better chance of passing, according to a spokesman in Senator Carona's office.

The bill provides that any party - an insured or an independent body shop, for example - harmed by an insurer's failure to comply with the law can bring a lawsuit to force compliance and that the plaintiff would be entitled to attorneys fees and costs if he prevails.

First hearing set for March 18

The Senate legislation was introduced by Senator Carona on Feb. 11 and as of February 26 garnered almost half of the members of the Texas Senate as co-sponsors. The Senate has 31 members. Four of the 14 co-sponsors are members of the Business and Commerce Committee. The first committee hearing is expected on March 18.

The Senate co-sponsors include Kenneth Armbrister, Gonzalo Barrientos, Bob Deuell, Craig Estes, Mario Gallegos, Jr., Chris Harris, Juan Hinojosa, Eddie Lucio, Jr., Frank Madla, Jane Nelson, Florence Shapiro, Eliot Shapleigh, Royce West, and Tommy Williams. Senators Armbrister, Estes, Lucio and Williams are members of the Business and Commerce Committee that must pass the bill in order for it to move forward to the Senate floor for consideration.

The committee chairman is Troy Fraser (R-Abilene, District 24), one of the most conservative members of the Senate on both fiscal and social issues. He has been very active on insurance issues, particularly workers compensation and currently homeowners' insurance. While not a co-sponsor of the legislation, sources close to the committee indicated that they did not foresee Fraser blocking the bill and in fact looked for his support.

ASA asks members for support

Texas does not have a state-wide collision industry association and so the Texas-based Automotive Services Association (ASA), a national organization, has taken the lead in rallying shop owners. ASA urged its members in Texas to write their state senator and representative, requesting that they actively support the legislation. ASA posted a sample letter on its website, www.asashop.org (click on "Legislation").

Two more suggested letters, written by the Autobody News staff, one for a senator and one for a state representative, will be found at the end of this article.

Calls and letters needed now

Alan Walne, co-owner of Herb's Paint & Body in Dallas, is a member of the Consumer Choice in Autobody Repair, the group that is funding the legislative lobbying effort. "Every shop owner in Texas needs to make a phone call to both their state rep and state senator in Austin. Then follow up each call with a letter," said Walne, who as a four-term Dallas City Councilman is no stranger to getting things done politically.

Walne, whose five body shops employ 120 people, has been an Allstate Pro DRP for many years. He has seen the changes since Allstate bought Sterling. "The consumer is not well served when there is no third party - us, the body shops - to represent their interest in getting their car fixed right. It's managed care for automobiles.

"We need to stop this, and we need to get it done this (legislative) session before a lot more divestiture becomes necessary and while the climate is right in Austin. We need everybody to help. Today!"

You can find out who represents you both in the House and the Senate by going on-line at www.capitol.state.tx.us. Click on "Who Represents Me?" and fill in your address.

You can follow the progress of this bill on-line at: www.capitol.state.tx.us/tlo/legislation/legislation.htm. Select "Bill Status" and then enter the bill number: SB435.

Text of bill

The text of the bill is excerpted below:

"An insurer may not hold or acquire any ownership interest in a repair facility. Sec. 2306.003. Action to Compel Compliance. (a) An individual aggrieved by a violation of this chapter by an insurer may bring an action for injunctive or other appropriate relief to compel the insurer to comply with the requirements adopted under this chapter. (b) A plaintiff who prevails in an action under this section is entitled to recover reasonable attorney's fees and court costs. Sec. 2306.004. Divestiture Requirements; Disclosure. (a) An insurer that, on September 1, 2003, has an ownership interest in a repair facility must divest itself of any interest in the facility not later than September 1, 2005. (b) During the period in which the insurer maintains its interest in the repair facility before the divestiture required under this section, the insurer shall disclose to each insured that the insured has the right to use any repair facility selected by the insured. The insurer shall make the disclosure in writing in the manner prescribed by the commissioner of insurance and shall provide the disclosure: (1) at the time the policy is delivered, issued for delivery, or renewed; and (2) when a claim covered by the policy is reported to the insurer by the insured. (c) This section expires December 1, 2005."