Wednesday, 25 January 2012 14:04

California’s DOI Calls Meeting, Drafts Reforms to Labor Rate Surveys, DRPs, and Steering

In a letter to ‘Certain Interested and Affected Parties’ the California DOI has taken a second step to address concerns of collision industry stakeholders. In November the DOI’s legal division hosted a meeting to discuss proposed revised aftermarket part regulations. The results of that discussion are under review by the department (see http://tiny.cc/ydvp6). Now the DOI, under Commissioner Dave Jones, is taking on the issue of Labor Rate Surveys, DRPs, and Steering. Departmental attorney, Teresa R. Campbell has organized a January 25th meeting (10–12:00 noon at the DOI in Sacramento, and has drafted contemplated revisions to the California Code of Regulations, impacting Direct Repair Programs and Labor Rate Surveys. Steering is also addressed in language concerning insurer recommendations of automobile repair dealers. Although welcoming input and discusssion, the ‘rulemaking file’ will not be opened until formal notice is given by DOI and that comments must be submitted during the formal public comment period.

The language (complete text follows) proposes that insurers shall report the results of any labor rate survey within 30 days to the department which will in turn make the results available. The survey information will include names and addresses of the auto body shops and the total number of shops surveyed. The 16 current unfair claims settlement practices detailed in Section 790.03(h) of the California Insurance Code will be prohibited, including ‘failing to the attempt in good faith to effectuate prompt, fair, and equitable settlements of claims’.

Following are selected quotes from the proposed language:

“A survey, conducted pursuant to Insurance Code section 758, shall not be used to cap or reduce the labor rate charged on an estimate or repair order prepared by the claimant’s chosen auto body repair shop or to support the presumption of reasonableness of an insurers’ adjustment of a written estimate provided by a claimant.

“Nothing in these regulations shall preclude an insurer from voluntarily negotiating and/or contracting with an automobile repair facility for a specific labor rate.

“Nothing in these regulations shall require an insurer to conduct an auto body labor rate survey.

“Nothing in these regulations shall require the insurer to use the posted labor rate of a shop surveyed.

“the Department may consider this survey in determining whether an insurer has offered a fair and reasonable claims settlement and/or whether the insurer has supported the reasonableness of its adjustment of a written estimate provided by a claimant.

“the Department will not consider any survey submitted to the Department more than one calendar year prior to the date of the written estimate provided by the claimant.

“the insurer must survey all known auto body repair shops licensed to perform collision repairs by the Bureau of Automotive Repair in a specific geographic area. All [qualifying] shops that respond to the survey shall be used to determine the prevailing auto body rate in that geographic area.

“The survey shall only use labor rates of auto body repair shops licensed by the Bureau of Automotive Repair

“An insurer may only use labor rates in a survey reported by shops that meet specific standards. (see full text for standards).

“the following non-public information shall be separately included in any submission to the Department:

(1) the labor rate reported by each shop that responded to the survey;

(2) the name and address of each shop sent a survey, but did not respond tothe survey, reported for each geographic area surveyed;

(3) a copy of the survey questionnaire used to survey the auto body repair shops.

(g) For purposes of a survey compliant with this section, “prevailing auto body rate” means the greater of: (1) the mean average labor rate charged by auto body repair facilities in the specific geographic area or, (2) the rate, at or below which, the majority of surveyed shops charge in a specific geographic area. Other statistical methods may be used by an insurer if they are approved by the Department.”

“If an insurer submits a survey pursuant to this section, the Department may require the insurer to submit a public version

“Insurers shall not use any discounted rate negotiated or contracted with members of its Direct Repair Program, or any other Direct Repair Program... as part of a labor rate survey”

“a geographic area used by an insurer in a survey shall be no smaller than a United States Postal Service Zip Code and shall not be larger than a thirty (30) mile radius from the center of the geographic area being surveyed.”

With regard to Steering, supplemental language is added to the Insurance Code Section 758.5, expanding the definitions  a claimant has chosen an automotive repair dealer when the claimant has specified to the insurer a specific automotive repair dealer... which he or she wishes to repair the vehicle.

“Suggest or recommend” means that the insurer has communicated the name or names of one or more automotive repair dealers, has requested that the claimant choose a shop that is different than the shop chosen by the claimant. or communicates any information to the claimant which is relevant only to the choice of the automotive repair dealer. The insurer shall not communicate false, deceptive, or misleading information to the claimant. including, but not limited to:

A. Advising the claimant that the claim payment will be reduced by a lower labor rate, when the insurer has not· conducted an Auto Body Repair Rate Survey.

B. Advising the claimant that an inspection of the vehicle will occur at a date that is later than the reasonable time necessary to inspect the damaged vehicle.

C. Advising the claimant that the automobile repair dealer chosen by the claimant has a record of poor service or poor repair quality, or of other similar allegations against the dealer, without clear documentation in the claim file supporting these statements.

D. Requesting or requiring that the claimant have the vehicle inspected at or by an automobile repair dealer where the insurer has a Direct Repair Program or by any other automobile repair dealer identified by the insurer, after the claimant has chosen an automobile repair dealer.