BodyShop Business
Stop! In the Name of Estoppel
2/1/2001

The collision industry's history is a sad commentary. When cutting a person's hair requires more governmental testing and regulatory interaction than repairing a crashed $40,000 vehicle, it's obvious we've missed the boat. How have we allowed our industry to get to this point? Insurers will pay $45 per hour to repair a lawn mower, but refuse to pay collision repair technicians comparable rates they pay for the dealer service departments. Marinas regularly get paid for masking tape, sandpaper, thinners, rags and a host of other materials also used -- but never specifically allowed for -- in collision centers.

Is there a message here?
Has the collision industry been a victim of deception and manipulation, or are we experiencing the old bank slogan, "No investment, no return"? Most collision centers have been running their businesses based on self-taught or incorrect information regarding auto insurance claims, and this lack of understanding of acceptable claims practices, terms and procedures continues to keep most repair operations from achieving their full potential. Chopping wood with a dull ax can make for a very hard day's work - with little to show for all the labor. This analogy is far too accurate as we look at the efforts of many collision shops. The needed educational and informational material hasn't been provided by national associations and most consultants across America. If it's any consolation, most insurers also lag far behind when it comes to what indemnification really is and how they should respond to auto claims. Insurers' definition of pre-loss condition has been the product of their own thinking and continually fails when placed before the courts. One has to wonder if this is insurer ignorance or a cunningly devised plan to increase profits at expense of consumers and repairers? Either way, insurers have been allowed to continue their wrongful acts.

One word the majority of shop owners across the country don't know - but should - is estoppel. Do you know the word? Have you ever applied the powerful principal of the word to your business? Have you been damaged because you didn't know or understand how important estoppel is for repairers?

Insurers Stop for Estoppel
Estoppel is a legal word that in layman's terms means: When you have an agreement to perform a function or job and you act, starting the job or beginning to do what was agreed on with the insurer's representative, the rules cannot be changed. In the cases collision centers most often deal with, it'll be an agreement on price for a given repair. The customer has already signed the necessary repair order, and the shop gets started. When the job has been started, the insurer can't come back and say, "We made a mistake. There's no coverage, and we'll stop payment on the check."

Sound familiar? This situation has happened to most shops over the years. Did you realize it's not your problem? Were you aware this was an insurer problem with their policyholder? Only because of shop owner ignorance have insurers been able to dump their problem on you. Remember, ignorance isn't stupidity; however, setting a course to remain uneducated does qualify as stupid.

Would an insurer tell you about estoppel? Obviously, they won't. Yet it's a word every adjuster must learn when getting licensed.

Shop A: The Uninformed Shop
A collision center in Central Florida had a customer's car towed in. It was about a $7,500 job. A good neighbor adjuster came, wrote the estimate and left a check - less the deductible. Mr. Shop Owner ordered all the parts, tore down the car and was in the process of pulling the structure. This was a week or so after the estimate and check were written. In comes the good neighbor adjuster with bad news: They'd made a mistake, and there was no coverage.

Parts were on the floor, work had been started and the car was on the rack. Regardless, the shop owner was told the check was void because an order had been made to stop payment.

This wasn't a large shop, and the news was devastating. Not only had he invested labor, but he'd have to pay a re-stocking fee for the parts. If only he'd known. If only he'd invested in some inter-industry education. If only ...

Shops B & C: The Informed Shops
At collision center in Northwest Florida, a former student of mine went over a job with an adjuster and arrived at an agreed price of $8,000. The adjuster said he'd mail a copy of the estimate and a check to the shop. Repairs were started as previously agreed upon. Within a few days, an envelope with a check for $6,500 arrived from the adjuster. The shop manager immediately called the adjuster and said, "We had an agreement for $8,000, yet you sent only $6,500."

The adjuster said, "$6,500 is all I'm paying for that job," and hung up. The shop manager immediately wrote a letter to the company and advised them of what had happened, stating the insurer "has been estopped from changing the agreement we made."

Several days later, a check for $1,500 came, and word was the adjuster had been fired. How about that? Want to hear another?

A shop in Central Florida encountered a different problem. They agreed to install an LKQ three-quarter front on a late-model Caravan. Damages were getting close to the 80 percent factor, but repairable. The job was more than halfway done when the adjuster came back to the shop, saying there was some rear damage he didn't know about when he was out the first time. The adjuster was told the car was in the shop and to do whatever he needed to do. A short time later, the adjuster said there was a problem: The front damage plus the rear now exceeded 80 percent of the vehicle value. He then indicated he'd have to handle it as a total loss.

What did the shop manager do? He said, "Oh no you don't. Don't you know the magic word?"

The adjuster said, "What magic word?"

And the manager proceeded to educate the adjuster (or rather, inform the adjuster that he, the shop manager, had also been educated regarding estoppel). The adjuster then went into the shop's office, called his supervisor and wrote a check for the additional damages.

These actual cases prove the power of education. They also demonstrate that the least informed are the most abused.

Estoppel It
Shop owners, managers and everyone else working in the collision repair industry must seek out information and education. Even attorneys across the country are beginning to learn. One collision shop owner went to an attorney working on a case and asked why the attorney hadn't told the insurer that they've been estopped by their prior actions. Here a collision shop owner had to point an attorney in the right direction.

How many hours had been billed on that case when it was a clear incident of estoppel? Even many self-proclaimed experts don't have the right answers. The advancement in education will have a direct effect on the profitability and growth of your business. And as we network and interact, the collision industry is - and will continue - becoming stronger and more powerful.


Writer Pete Bartlett has worked as a collision repair technician, claims supervisor, I-CAR instructor, consultant, trainer and author during the last 40 years and is a supporter of the Coalition for Collision Repair Equality (CCRE).
Author's note: Autobodyforum.com is a Web site focusing on education for all. No one can make you learn more and earn more, but education is where a successful future will be found.

Estoppel: in legal terms, is an impediment that prevents a person from asserting or doing something contrary to his own previous assertion or act. In layman's terms, if you're led to believe by an insurance carrier or their agent that they'll pay for a loss and you act on that belief (by scheduling work, purchasing materials, renting a car or some other action), then the insurance carrier must follow through with payment. In other words, they must keep their word. (Every adjuster must learn about estoppel when studying for an adjuster's license.)


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