Wednesday, 08 September 2021 16:37

Consultant Says CA Auto Body Shops Need to Know the Laws that Affect Them

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Juan Martinez leverages two decades in the collision repair industry to help auto body shops as a consultant through JM Business Solutions, Inc. Juan Martinez leverages two decades in the collision repair industry to help auto body shops as a consultant through JM Business Solutions, Inc.


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It all began with a poorly-painted Camaro, which led to a career as an industry consultant whose services are coveted by auto body shops primarily in California.

When things go sideways and a shop owner or manager has more questions than answers, they don’t call the Ghostbusters---they call Juan Martinez.


He learned the industry by working for top shops on primarily luxury brands in southern California over two decades. But the way he entered the collision repair industry happened literally by chance when Martinez was 12.


“My sister had a 1970 Camaro and she wanted to sell it,” Martinez said. “I told her don’t do it, I’ll figure out some way to pay for it eventually. I painted it in forest green and showed it to my father and he told me it was mine. I didn’t have to pay a dime.


"There was a mom-and-pop paint store in our town, and they helped me through the process. It cost me $500 to paint that car, and I started driving it before I was 16. The cops would spot me and pull me over, but they never gave me a ticket. They would say, keep the vehicle parked right where it is, and then I would walk home. But they always gave it back.”


The experience led to a job at an auto body shop in San Diego, CA, as a prepper, and for the next 20 years, he worked as a painter, estimator, shop manager and regional manager.


When he realized collision repair was in his blood, Martinez dropped out of college and went all in. He landed a job as an estimator at a prestigious shop in Beverly Hills, learning from great mentors and accumulating knowledge he could call upon throughout his career.


Some years ago, Martinez started JM Business Solutions, Inc., in West Covina, CA, which helps body shops with fixed operations, business tactics, insurance relationships and customer service. Martinez trains how to write cleaner sheets, navigate through DRPs and make more money on parts and repairs, for example. He’s all about first-person, one-on-one training, visiting 20 to 30 shops almost every week.


As a body shop industry consultant, what are your top concerns?


First, I would say safety and then insurance abuse are two issues that immediately come to mind. I encounter them literally every day.


Some body shops are doing things right now that are not safe. They just don’t know when to say...

..."I shouldn’t take this car in." These shops are more concerned about making money. But if you’re not a Porsche-certified shop, don’t try to work on one. Their attitude is that they’ll figure it out, but in the end it’s unsafe for the owner of the vehicle. Not to mention that it’s also a bad business decision for the shop.


In many cases, they’re not going to make money on the repair. It’s likely that they will also make mistakes, which is a liability issue. I can safely say that 80% of all the shops out there right now have at least one vehicle they should not be repairing. It’s no sin to admit you don’t have the training or equipment to work on a certain vehicle, so find a shop that can do it and give them a referral.


I get calls all the time from shops who say we don’t know how to write an estimate on a higher-end vehicle, can you help us? Ninety-nine percent of the time they shouldn’t have taken the car in at all. I tell them to refer it, get your teardown money and a couple days of storage, and then move on.


The insurance companies abuse body shops by operating with impunity and violating legislation that was created to protect consumers. Most shops don’t know the law. So, they can’t usually catch things, like paint caps that are illegal. But no one addresses them, so guess who pays for it?


If you don’t have well-trained estimators, they won’t catch things and the insurance companies love it. They prey on the fact that most shops don’t know the regulations, so it’s to their advantage. I see so many poorly written estimates, it’s crazy. To make money, they must be cutting corners, because otherwise they would be out of business by now.


What’s your opinion about DRPs? Should shops pursue them or reject them?


There’s a market for DRPs, but the problem is they’re not the same. The DRP game has changed so much in the last 10 to 15 years, and more and more shops are gravitating away from it. Unless you have other sources of revenue, DRPs aren’t profitable enough to keep the doors open.


They used to be the main source of revenue for many shops, but now they’re...

...looking for other venues, usually from dealerships or fleet work, for example. If you are a new shop and you don’t have a book of business, a DRP might be good for the short-term, but it won’t likely be sustainable.


Every DRP contract I’ve seen within the last five years is so one-sided, I can’t understand why any shop would sign one. They take advantage of the less experienced shops and thrive on their lack of knowledge. I’ve convinced some of my clients not to take certain DRPs on and they end up thanking me every time.


One source of revenue for shops that’s fairly new in California involves working with attorneys, who want to represent their clients in personal injury cases. They find them on Yelp and are building business relationships with shops that are getting good reviews. It has become a viable source of business for shops because these lawyers are representing injury victims and want to make sure that their cars are being repaired properly.


In southern California, everyone owns a Porsche, a Lexus, a BMW or an Audi. This means OE certifications are more important here than in many other parts of the country. Shops have to make certain their training is up-to-date and that they have the right equipment to do the job. Because if they can’t or won’t, there are 20 other qualified shops out there that can.


What are some of the most common problems your clients have encountered while working with insurers?


The Fair Claims Settlement Act (Section 2695.8) states that insurers need to pay out in a “workmanlike manner,” but they don’t do it.


When a shop writes an estimate, there are three things the insurance companies can do. First, they can adjust the claim, which means that they will write their own estimate. That means that the car has to be fixed using nationally distributed data---ALLDATA, Mitchell, for example---or the vehicle’s repair manual.


The insurance companies don’t do any of it. In fact, they write the lowest estimate possible. They make it impossible to...

...fix the car correctly. Then, when you request a supplement, they do it again---over and over.


There are a small handful of insurance companies that don’t do it, but the majority of them do. It ends up being a complete waste of time for the shops, not to mention for the consumers.


The insurers would save a ton of money on rental cars without wrestling over every penny. They push cycle time through their DRPs, and then they choke them. Then they start calling the shop every day, asking when will the car be ready? In many cases, the vehicle is sitting there because the shop is waiting on the insurance company. It makes no sense.


If they followed the legislation, then these problems would not exist. When a shop files a complaint, they will quickly discover that the California Department of Insurance (CA-DOI) employees don’t understand the legislation. Half the time, they will bail and send a letter that the dispute is over pricing and they can’t mediate.


Most of the time, we’re not asking them to mediate, but to simply look at the legislation and the evidence provided. But, they don’t. The shop thinks the complaint didn’t go anywhere because the CA-DOI is on the insurance company’s side. But that’s not the case---they just don’t know.


Steering does exist, but the insurance companies have gotten better at it. They don’t put anything on paper. When you file a DOI complaint, the DOI requests the claim file. In that claim file, the DOI won’t find any trace of steering. All steering communication takes place over the phone, using specific language to get a vehicle pulled out of a specific shop that won’t play by their rules. 


The solution to that problem would be for the DOI to request phone recordings pertinent to that claim file to hold these insurers accountable. Maybe petitioning or amending legislation to keep up with the electronic data of today would be beneficial. 

Do your clients often encounter issues over the constant wrestling match between aftermarkets parts vs. OE parts?


The legislation states that aftermarket parts must have...

...non-removable markings. But, most of them don’t---they use stickers.


The legislation also says the parts have to be the same in fit, quality, safety and finish along with the non-removeable markings. The majority of these aftermarket parts aren’t the same because if they were they would be counterfeit parts.


Aftermarket parts have to be physically different, that’s the fact. That’s why they don’t fit and why you’ll see gaps and other irregularities.


When this happens to one of my clients, I direct them to write a new estimate to re-repair the car and submit it with their final bill. It states that the shop used aftermarket parts and they don’t fit. The insurance company will then say hey---why didn’t you tell us? They wanted the cheapest parts they could find, and now they’re shocked. But they know they’re on the hook, so they have no options.


Once they see you understand the legislation, they will never try that again.


You are an active member and have served twice as president of California Autobody Association’s Foothill chapter. Tell us about the importance of the organization and its role in the industry in California.


The shops that join CAA are always the top shops who see the value in the organization and what they do. The CAA provides its members with a lot of valuable information through people like Jack Molodanof, their lobbyist in Sacramento, and speakers we’ve had such as Michael Anderson, BAR representatives and industry leaders.


I think the MSOs would benefit from joining CAA too. We plan on meeting again soon as opposed to Zoom calls, and we have some big plans for 2022, so now is the perfect time to join.


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