On Oct. 8, Kenneth Schnoll, general counsel and deputy commissioner of the California Department of Insurance (DOI), sent a letter to the California Autobody Association (CAA) to issue a legal opinion pursuant to California Insurance Code Section 12921.9 based on a complaint filed by the trade organization.
After receiving information from CAA, the DOI issued a legal opinion clarifying terms such as "Opt-OE" and outlining unfair insurance settlement practices involving insurer designations. In addition, Schnoll issued opinions on situations in which insurance companies engage in price discrimination by forcing collision repair shops to purchase parts from suppliers they specify.
Schnoll addressed CAA's original complaint, submitted by David McClune before he retired as CAA executive director, concerning the ambiguity of how parts are categorized.
“You informed us that certain insurers use non-standard replacement crash part terminology and descriptions such as ‘Alt-OEM’, ‘Opt-OEM,’ and ‘Surplus-OEM’ or other similar terms on their claims settlement estimates and appraisals,” Schnoll wrote. “You also informed us that these replacement crash parts may be over-production OEM parts, blemished or damaged OEM parts and that such parts may not carry the same new OEM part warranty. Additionally, we understand that different categories of crash parts are frequently combined by insurers on repair appraisals and estimates and called ‘Opt-OEM’, ‘Alt-OEM’ and other similar variations. For example, you informed us that various insurers list parts from an auto-dismantling vendor as ‘Used’ when those parts are actually new OEM parts.”
Jack Molodanof, lobbyist for CAA, said that the clarification on parts definitions will hopefully make life easier for consumers, body shops and insurance companies alike.
"The insurance companies will now have to be sure that if they're using these terms, they are going to have to be very unambiguous and exact. Since the BAR doesn't recognize terms such as 'Opt-OEM' or 'Alt-OEM,' any part description on the estimate and invoice must be clear and specific, otherwise you may be subject to violation. The shop has to describe every part to the customer so they understand what is being purchased, and now the insurers are going to have to do the same," he said.