Thursday, 23 February 2012 09:04

Separate Arizona Bills: HB 2394 “Strikes Everything” on Unlawful Practices Language for Repair Shops; SB 1134 Requires Changes to Handling of Unearned Premiums by Insurers

A proposed bill that would have changed the way collision repair shops in Arizona do business has been held over to the next legislative session. House Bill 2394, introduced by state Rep. Nancy McLain (R-3) in the Arizona House of Representatives, would have had a negative impact on auto body shops throughout the state with the original text. The bill used to read (key language in bold):

It is an unlawful practice for a person who repairs motor vehicles to knowingly: Submit a false claim to an insurer for motor vehicle repair.

Submit a claim to an insurer for fees not directly related to the repair of the motor vehicle unless required by law. All fees not required by law must be posted by the motor vehicle repair facility. The motor vehicle owner or lessee must acknowledge in writing that any fees that are not directly related to the repair of the motor vehicle or required by law may be the owner’s or lessee’s responsibility.

Submit a claim to an insurer for storage fees incurred up to the time the motor vehicle was determined to be a total loss if the motor vehicle repair facility was paid by the insurer for tear down or repair services. Storage fees may accrue from the date the insurer determined the motor vehicle to be a total loss.

Supporters of the language sought to stop shops from charging storage fees at the same time collision shops were being paid for teardown to complete an estimate. This bill would have forced shops, in many situations, to absorb the costs associated with vehicle storage or bill it to the vehicle owner. The harmful language is not included in the current bill being considered.

ASA-Arizona opposed the bill with the unlawful practices language. ASA alerted member shops about the proposed language and worked with the legislature to ensure the bill did not move through the legislative process as introduced. H.B. 2394 passed the House Committee on Banking and Insurance as a “Strike Everything” amended bill.

A “strike everything” amendment (also called a “striker”) proposes to delete the entire text of the existing bill and substitute new language, essentially making it a completely different bill.

ASA supports legislation that protects the consumer’s right to be fully indemnified under the terms of their insurance policy and is opposed to any type of fraud whether it is initiated by a repair shop or an insurer. The vehicle owner has a right to know all charges that he or she may be responsible for in the repair process.

ASA believed the proposed legislation overreached, harming both consumers and repairers.

Arizona repairers are encouraged to join ASA’s effort to ensure their voice is heard at the state capital and in Washington, D.C.

Unearned Premiums Language
When insurance policies are cancelled before the end of the policy period, several types of premiums are calculated. An earned premium is that portion of the policy period that the insurance has been in effect, and during which the insurer has been exposed to liability or loss. An unearned premium is the portion of the overall premium which is no longer due to the insurer. It is the written premium minus the earned premium. The unearned premium is to be returned to the insured, if the policy is canceled, using a pro rata cancellation method when the policy is cancelled with no penalty.

Arizona’s SB 1134 has amended the unearned premium language in the statute to specify terms of refunds of unearned premiums: “the insurer shall either mail the notice and refund of unearned premium together at least ten days before the effective date or mail the notice before the refund of unearned premium if both the notice and the refund of unearned premium are mailed separately to the insured at least ten days before the effective date.”