The California Department of Insurance and the Attorney General's Office held joint meetings on June  24th and 25th with insurers, suppliers, manufacturers and trade associations that are a part of the supply chain for aftermarket parts specified during  the settlement of insurance claims.

CRA has challenged the insurance industry's compliance with regulations that call for aftermarket parts specified in the claims process to be at least equal to the original equipment manufacturer  parts in terms of kind, quality, safety, fit and performance.

California Repair Association President Lee Amaradio stated, "It is encouraging to see the  Department of Insurance and the Attorney General's office showing interest in the is important consumer issue, though the outcome is uncertain . We hope their involvement will result in permanent change and a fair and compliant claims  process. All most all insurers have recognized the issue and stopped specifying non-compliant parts and they should be commended for that. We now need a permanent solution."

Amaradio added "this all started when Toby Chess demonstrated differences between OEM and non-original equipment manufacturer aftermarket  crash parts.  CRA recognized the importance of his demonstration and moved the issue forward putting pressure on CDI to fulfill its regulatory mandate. It appears they may now  be doing so."

CRA Executive Director Allen Wood  added, "vehicles should not be reengineered as part of the claims process.  The regulations governing these issues deal with insurance not auto repair. We want to insure that consumers (claimants)  receive high quality, competent,  safe repairs. The evolution of this issue is a graphic example of how a trade association that is responsive to the issues and is willing to step up can promote change. This is not over.  However, with the Attorney General involved, we are extremely encouraged."

The California Assembly Business and Professions Committee, chaired by Assembly member Mary Hayashi (D-Hayward), will hold a hearing Tuesday, June 22, on two measures dealing with collision repair parts after our press time.
Senate Bill 350, the original version of which was sponsored by the Certified Automotive Parts Association (CAPA), would add a new section to the California Business and Professions Code that currently requires consumer disclosure in order to use aftermarket crash parts on a repair.

In addition to the current consumer disclosure requirement, SB 350 would add an additional list of requirements that must be met in order for an insurer to specify the use of aftermarket crash parts. Among them, the bill would require any insurer specifying the use of aftermarket parts to warrant that those parts are “of like kind, quality, safety, fit, and performance as original equipment manufacturer aftermarket crash parts.”

This requirement is already contained under Section 2695.8 (g) of the California Code of Regulations. The bill serves to codify existing law.

The bill, originally introduced by Senator Leland Yee (D-San Francisco), passed the Senate last year and is now awaiting approval by Hayashi’s committee. Hayashi is the Assembly member who in 2008 sponsored and passed Assembly Bill 1200, the measure that changed California’s anti-steering laws effective January 1, 2010.

The hearing is also scheduled to consider Senate Bill 427, introduced by Senator Gloria Negrete McLeod. SB 427 would require repairers to provide, on a signature page of the final invoice, a statement that installing parts other than those described on the estimate without prior approval from the customer is unlawful.

Both bills have already been approved by the Senate. Readers can go to www.autobodynews.com for an update on the results of the meeting.

The California Autobody Association (CAA) was invited to participate in a meeting on June 24 with both the California Department of Insurance (DOI) and the California Department of Justice to discuss the issues surrounding aftermarket replacement crash parts and provide recommendations in developing “policy and legal issues relating to the use of replacement crash parts.”

According to the CAA, this meeting is a culmination of a series of discussions and meetings CAA has been having with the DOI and the Attorney General’s office for the last several months which recently resulted in the DOI issuing a notice to all insurers specifying non-OEM replacement crash parts for the repair of an automobile. The memo stated that all non-OEM parts specified must be at least equal to the OEM parts in terms of kind, quality, safety, fit and performance, specifically noting aftermarket bumper reinforcement bars, and that the parts must have must have permanent, non-removable identification of the part manufacturer.

The CAA noted that California regulations Section 2695.8(g)(4) requires that “all original and non-original manufacture replacement crash pads, manufactured after the effective date of this subchapter, when supplied by repair shops shall carry sufficient permanent, non-removable identification so as to identify the manufacturer.”

As discussed with the DOI, the issuance of this notice to insurers is the first step in establishing a traceability system for parts in the state of California that will allow manufacturers to identify and track their parts in the event of a recall concerning safety, fit, and quality.

The CAA conducted a very successful stakeholder meeting in March of this year to begin addressing the need of tracking aftermarket crash parts. Many of those that were at that meeting will be in attendance at the June 24 meeting in Sacramento with the Department of Insurance.

The CAA’s position is that the issue of being able to have a uniform system to track aftermarket crash parts for the industry is a priority project that needs to happen now. Consumers should have the confidence that if a part fails or has been identified for possible failure there is a process in place to rectify it.

Peter Conlin, Counsel to the Commissioner, said in a letter to the CAA, “Commissioner Poizner places his highest regulatory priority on promoting consumer safety and I believe the CAA could play a significant role in developing a new policy consensus in the area.”

California Insurance Commissioner Steve Poizner today filed a cease and desist order against two California men and several corporations for allegedly operating unlicensed insurance companies and using deceptive and illegal telemarketing. Robert Lewis Chapman, James C. Sletner and several corporations they own and manage, including SafeData Management Services, Inc., d.b.a. Consumer Direct Warranty Services, Warranty Administration Services, Inc., and Warranty Administration Solutions, Inc., face substantial fines. 

“If you want to sell insurance in California, you must obtain a license, have adequate financial reserves and you must not deceive consumers,” said Commissioner Poizner. “In order to protect California consumers, there are specific requirements for insurance companies seeking to do business in California. If companies do not abide by these requirements, they will not be permitted to sell insurance in our state.”

The Department of Insurance alleges that Consumer Direct sold insurance policies and vehicle service contracts without a license and in blatant disregard of numerous, longstanding legal requirements designed to protect California consumers. The unlawful insurance policies, which promise to repair breakdowns to engines, transmissions and other parts, typically sell for $1,500 - $2,500. Chapman, Sletner and Consumer Direct each face a fine of $5,000 for every day they conducted business in California, or five times the revenue received from California consumers, whichever is greater.