Todd Bliss, general manager for Cavin’s Auto Repair in Baton Rouge, one of the largest body shops in the state, is one of the more vocal proponents for changing the ‘prevailing’ rates as they exist in Louisiana today.
“We’re challenging these rates because they’re unfair,” Bliss said. “We had a meeting last year where Warren Bird, executive counsel for James J. Donelon, commissioner for the Louisiana Department of Insurance, said that rates should be based on what it costs to fix these cars, and that each shop should consequently charge a different rate.”
Bliss said his operation costs have gone up, while the rates paid by the insurance companies have remained the same. “They haven’t increased the rate in five years, but everything else is more expensive, including my liability insurance, our utilities and the cost of equipment.Right across the street from me, there’s a lawnmower repair shop that charges $79 per hour and I’m getting $45? How does that make sense?”
Bliss is concerned that the insurance companies are able to dictate rates to the shops and that there’s no recourse available to them right now.
“They refuse to pay our [posted] rates,” Bliss said. “They’re holding us hostage. If I try to raise my rates and play hardball, they’ll just steer customers away from me. One of the insurance companies pulled a car out of here just yesterday. It happens all the time.”
What is ‘Reasonable’?
Excutive counsel Warren Bird clarified his previous statements during an interview with Autobody News. He took issue with the term ‘prevailing rate.’
“There is no statute in the insurance code containing the words prevailing rate. It doesn’t refer to it. It doesn’t set a prevailing rate and there is no mechanism for it in the code. I expressed before that it would not be unreasonable for one shop to have a different hourly rate than another shop, based on what they need to make their operation work. The shops work with the insurance companies, who typically survey the market to determine what the various shops are charging, and then use those figures to come up with an average. The overall term being used by both the shops and the insurance companies is what’s ‘reasonable’. The shops are entitled to a reasonable rate of return and the insurance companies are entitled to pay a reasonable, not excessive, rate for work needed to repair these cars. That seems to be what this whole thing is headed toward—what is reasonable and what is excessive. Quite frankly if the shops and the insurance companies can’t agree on that, maybe it will need to go to court in one form or another.”
Where are the Shops on this?
Chris Medine, owner of Medine’s Collision, a 44-year-old body shop in Baton Rogue, is frustrated by the lack of support from other shops in Louisiana.
“I’ve been trying to get these labor rates raised for a long time running, but no one else seems to be jumping on the bandwagon,” Medine stated. “Everyone wants to sit around and let the other guy do it. We’ve tried to raise the rate for European vehicles to $60, which is more than fair, but the insurance companies don’t think we deserve it, even though they charge consumers more to insure those types of cars.”
It’s a constant battle with no end in sight, according to Medine. “These insurance companies have people’s livelihoods in their hands, and yet their main concern seems to be saving money. They’re trying to cut costs wherever they can, and we’re the first place they’re doing it. It’s a joke, really.”
Medine sees a lot of unorganized, frightened shops out there who are reluctant to stand up for themselves.
“We’re our own worst enemies most of the time, because we don’t try to protect ourselves. We need to communicate more and compare rates, but unfortunately, I don’t see that happening anytime soon.”
Bill Burnside, owner of Color Service Specialists, a PBE jobber in Minden, Louisiana, said he has seen the situation get worse throughout the years.
“The rates are being held low by insurance company labor [rate] surveys that have been manipulated and don’t represent what’s being charged by body shops in the state of Louisiana,” Burnside said. “Dealerships in this area get close to $100 an hour to fix cars, so why should shops be expected to work for less than half that? It just isn’t equitable.”
Participation among body shops is one of the main problems, Burnside said. “We’re basically still a mom and pop industry, and the insurance companies obviously have power in numbers,” Burnside said. “There’s never been a coordinated effort to align ourselves as a group against the insurance companies.”
Fear of retribution keeps body shop owners on the sidelines when it comes to going up against the insurance companies, Burnside said. “Most shops don’t want to make waves. They’re afraid that insurance companies will steer work away from them if they object too loudly about things like prevailing labor rates. There are quarterly meetings for the Automotive Task Force on Collision Repair here in Louisiana, but only a very few shops show up. So, 20 percent get involved, while the rest of the shops sit back and watch.”
What can shops do to fight what they feel are unfair prevailing wage restrictions set by the insurance companies? Stay tuned, because the issue isn’t going anywhere, Burnside warned.
“Either you file a complaint on every unpaid claim where the insurance company refuses to pay your posted rates or you eat it. You have to force these insurance companies to pay the proper rates, it’s that’s simple. Enough complaints against these companies will eventually constitute ‘market conduct’ and could lead to something bigger, but it all starts by fighting them on each and every job.”