The California Department of Insurance has released its proposed regulations on "standards for repair and use of aftermarket parts." The proposed changes to the Fair Claims Settlement Practices Regulations largely pertain to the specification and use of aftermarket parts, but also include new requirements for adjusting estimates as well as new consumer disclosures and increased insurer responsibilities in the event a defective part is used for a repair.

The first change adds more specific requirements for estimates written by insurers. Current law simply requires insurers to write an estimate that will allow the repairs to be made in "a workmanlike manner."

The newly proposed sections of law would require insurer-written repair estimates to be in accordance with "accepted trade standards for good and workmanlike automotive repairs by an auto body repair shop," and require that "An insurer shall not prepare an estimate that is less favorable to the claimant than the standards, costs, and guidelines provided by the estimating software."

In addition, the changes would mandate that insurers disclose in writing, on any insurer-prepared estimate that specifies aftermarket parts, that they warrant those parts as "like kind, quality, safety, fit, and performance" as OEM parts.

Another new requirement would provide that should an insurer have "implied, actual, or constructive knowledge" that a specified aftermarket parts is not equal to the OEM parts in terms of quality, safety, fit, and performance, the insurer shall immediately cease specifying the use of these parts and shall notify the estimating software provider and request this part be removed from the estimating software.

The insurer would likewise be required to notify the distributor, manufacturer, and, if applicable, any certifying entity.

In addition, the insurer specifying a part later found to be defective would be responsible for any costs associated with removing and replacing the part with either a compliant non-OEM part or an OEM part.

The Department of Insurance held stakeholder meetings to review the proposal in November and January. Additional changes to state regulations regarding labor rate surveys and prevailing rates are also being considered by the department. Revisions to those regulations have not yet been released by the Department.

The Amador County District Attorneys Office, in conjunction with the Calaveras County District Attorneys Office,  obtained a “no contest” plea to a single count of insurance fraud from a body shop owner in Valley Springs, CA, as a result of an investigation.

Larry Robbins, owner of Franks Frame and Body Shop, was sentenced to 36 months felony probation, 60 hours of community service, ordered to surrender his Bureau of Automotive Repair (BAR) license and pay approximately $28,000 in restitution.

The investigation involved post repair inspections of vehicles repaired by Robbin’s shop, Franks Frame and Body Shop, 127 Main Street, Valley Springs, California. Farmers Insurance, SIU Major Operations Unit, conducted post repair inspections on Farmers insured vehicles and supplied the inspection documentation to the Amador County District Attorneys Office and California Bureau of Automotive Repair for investigation. In 2011, The California Attorney General, on behalf of the Bureau of Automotive Repair, filed formal accusations, alleging; fraud, misleading statements and departure from accepted trade standards.

“This case illustrates the cost of fraud for Auto Repair shops and owners. The shop owner has been ordered to surrender his BAR license and pay significant restitution,” stated Sean Zavala, Farmers Director of Special Investigations. “We will assist law enforcement on criminal matters and file our own civil actions when appropriate to deter anyone who submits false insurance claim.  It is our commitment to our policyholders to protect their premium dollars,” Zavala added.

In a separate case, Santa Clara County District Attorney’s Office, in conjunction with the California Highway Patrol Insurance Fraud Task Force served Santa Clara shop owner Dong Suk Choi with an arrest warrant on one felony count of Insurance Fraud.

The investigation involved the re-inspection of one vehicle previously repaired by Choi’s repair shop, Choice Auto Body at 1975 Lafayette Street in Santa Clara, California. The re-inspection was conducted by Farmers Insurance, Major Operations Unit in cooperation with an Investigator from the California Highway Patrol Insurance Fraud Task Force, Golden Gate Division ISU. The Investigators found that Choi had not completed the repairs according to the agreed upon estimates including the repair of items that were written to be replaced in the insurance estimates.

Farmers says it applauds the efforts of the Santa Clara District Attorney’s Offices and  the Amador and Calaveras County District Attorneys Offices and the California, Bureau of Automotive Repair for their ongoing efforts in the fight against insurance fraud.