Saturday, 31 August 2002 17:00

California Assembly axes insurer owned shop bill

The California State Assembly on August 29 turned down State Senate 1648, a bill that would have prohibited insurance companies from owning bodyshops and forced the Automobile Club to divest its interest in Caliber Collision Centers. This opens the door for more insurance companies to buy or take a financial position in collision repair facilities. Allstate has already announced that it intends to open 17 - 20 Sterling shops in California beginning next year. 

Collision repair groups in several other states, most notably Texas, have said they will bring similar legislation to their legislatures in 2003 and were looking for a win in California to build support among their members.

The consumer protection measure, introduced in the Senate by Sen. Jackie Speier (Democrat - San Francisco) where it passed easily, needed 41 "yes" votes in the Assembly to pass, and the tally on August 29 was 34 yes and 17 no. Thirty Assembly members were either absent or abstained from voting, but observers noted that because of the on-going State budget debate most members were in fact present for the vote and chose to abstain, which then became the de facto equivalent of a no vote.

The measure first met defeat two days earlier, but was brought back to the floor for reconsideration. "We contacted every Assembly member possible after that first vote," said California Autobody Association Exectutive VP David McClune. "They definitely knew what the bill was about when it came up for a second vote." McClune said he would not speculate about the motivation of all those who abstained from voting. He also indicated that while the issue was dead for now, CAA may very well push for similar legislation in the 2003 legislative session.
CAA President Yumi Vaught was unavailable for comment but First VP Rick Johnson (Rancho Cordova) said, "I think our grassroots effort was outstanding, but we couldn't match their resources." Johnson said he was most disappointed in those who abstained from voting. "The people of the State elected them, every one of them got calls about the bill so they knew about it, but in the end they took no position. It seems to me like a lack of backbone."

Johnson said that those legislators who took a position against the bill relied largely on the position that government shouldn't be regulating investment in private industry. "Philosophically, I agree with them, but that's if there is equal competition. There isn't. This is why we have antitrust laws. Look at the problems we've had in oil, telephones and software industries where the playing field isn't level. It's the same thing here. Suddenly, I'm looking for my money (an insurance check) to come from a company that owns my direct competitor."

Summary of bill

The Assembly analyst's summary of the bill, which is all many of the Assembly members read before voting on a measure, read as follows: "Prohibits an insurer from acquiring any ownership interest in an auto body repair shop. Specifically, this bill :

1)Requires an insurer that has an ownership interest in an auto body repair shop to divest itself of its ownership interest within eight years of this bill's effective date.

2) Requires an insurer that has an ownership interest in an auto body repair shop to do the following: a) Inform policyholders that they have a right to select an auto body repair shop of their choice at the time the policy is issued and following an accident that is reported to the insurer; and, b) Disclose the insurer's financial interest in an auto body repair shop to the policyholder or claimant if the policyholder or claimant selects that auto body repair shop.

3) Provides that it is unlawful for an insurer to offer an incentive or provide compensation to any person for the purpose of rewarding that person for referring an insured to an auto body repair shop in which the insurer has an ownership interest."

Allstate hired lobbyist, publishes survey

After its passage in the Senate, the bill became subject to an intense lobbying effort by Allstate to defeat it in the Assembly. "They hired a top lobbying firm and are throwing everything they have at defeating this bill," said CAA's lobbyist Jack Molodanof, prior to the vote.

The national industry group SCRS, which had earlier been criticized for being slow to support SB 1648, criticized Allstate's efforts to defeat the bill by distorting the results of a California survey critical of auto repair. "Their survey and subsequent results are disparaging to the collision repair industry including their own PRO Shops," said Dan Risley, SCRS Executive Director. "SCRS stands behind the quality and ethical collision repairers in this industry and a survey where less than half of the people were not drivers in an auto accident does not support their press release headlined, 'Survey Shows Californians Fed Up With Auto Repair Fraud.'

"There is a large disparity between fact and perception. In fact, the Customer Satisfaction Index in this industry for both repairers and insurers consistently indicates that well over 90% of the people actually involved in a repair and claims experiences are very satisfied and would refer family and friends because of the level of service and professionalism they received. If the consumer felt cheated by the repair facility, I do not think they would recommend them."

The Assembly vote:
Assembly members voting for the bill included: Aanestad, Alquist, Bogh, Canciamilla, Cardoza, Chan, Chavez, Chu, Cogdill, Corbett, Correa, Cox, Firebaugh, Florez, Havice, Jackson, Keeley, Kehoe, Koretz, La Suer, Leslie, Liu, Longville, Mountjoy, Nakano, Negrete, McLeod, Rod, Pacheco, Pescetti, Salinas, Simitian, Strom-Martin, Vargas, Wayne, and Wiggins.

Those voting against the bill included Bates, Briggs, Calderon, Bill, Campbell, Daucher, Dickerson, Frommer, Harman, Hollingsworth, Kelley, Leach, Leonard, Robert, Pacheco, Papan, Richman, Strickland and Zettel.

If not listed above, the member abstained or was absent.