Monday, 24 August 2009 16:46

AB 1200 (Hayashi) Loses Close Senate Vote - Bill Granted Reconsideration

Bill Status: AB 1200 (Hayashi) was narrowly defeated on the Senate floor on August 24th. But, the bill was granted reconsideration, so victory is not yet assured. The legislation passed the Senate Banking, Finance, and Insurance Committee by a vote of 8 to 1, with 3 abstentions on July 9th.

Senator Maldanado a Republican, voted NO the only Republican to do so.  Senator Wright from the Ingelwood-Long Beach area abstained.  Sen. Correa, who CAA backs, voted YES, as did Yee, Calderon, and Kehoe from San Diego.

CAA, CRA, and the CFC (the Consumer Federation of California) all oppose the bill, as does Consumer Watchdog.

CFC opposes AB 1200 (Hayashi) because, as amended, it weakens important consumer protections for automobile policy holders.

California’s anti-steering law grants policyholders the right to have auto body repairs done at a repair shop of the policyholder’s choosing. Insurers are prohibited from recommending repair shops unless the consumer has requested recommendations, or the insurer has informed the consumer in writing that the consumer has the right to choose a repair shop.

AB 1200 would allow the insurer to make this disclosure verbally. It allows an insurer to attempt to persuade a consumer to replace his or her chosen auto body shop with a shop that has a contractual relationship with the insurer, after the policyholder has made his or her selection, and even if the policyholder has not asked to receive any further information about other repair facilities.

Although the language in this bill states that the information provided must be “truthful and non-deceptive,” no duty is placed on the insurer to notify the policy holder if a contractual relationship exists between the insurer and its recommended repair shop.

California law protects policy holders from receiving what appears to be impartial advice, when they are actually being steered to insurer-preferred auto repair shops. Body shops in the insurer’s preferred network may be contractually obligated to perform an inferior scope of repair services to save the insurer money.

This can lead to costly re-repairs, and even to the voiding of factory warrantees. AB 1200 also contains legislative intent language that would apply the weak consumer protection standards of the bill to cases after January 1, 2010, regardless of the date of the violation of anti-steering law.

Far from providing consumers with more information in order to make better informed choices, AB 1200 opens the door for unscrupulous insurers to provide one-sided and manipulative information, even after a policyholder has selected a repair shop, for the purpose of unduly influencing the policyholder to act in the insurer’s financial interest at the policyholder’s expense.


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