"Insurance carriers have continued to increase pressure over repair shops to obtain the quickest/cheapest repairs, while interjecting themselves further into the oversight and management of repair businesses," said Aaron Schulenburg, executive director of the SCRS. "The industry is often disadvantaged by restriction of communication from participants of these programs, and it's important for the industry to rely on factual review of documents, rather than anecdotal musings. If we wish for business conditions to improve, it's important that our industry finds the voice to express our concerns openly and honestly without fear of being transparent."

The below excerpts from the Farmers agreement is what SCRS decided repairers should be particularly aware of. However, SCRS wants the collision repair community to know that this information is "not to be construed as direction or suggestion, and is intended simply to better inform individuals acting within their own judgment, making sound business decisions, without agreement to take concerted action."

SCRS NOTE: In these excerpts, "Exchange" refers to Farmers Insurance, and "Vendor" refers to the DRP repair facility.

5.2 DISPUTED AMOUNTS. If Exchange in good faith disputes any portion of a Vender invoice ("Disputed Amount"), Exchange will timely pay Vendor for the undisputed amounts of that invoice. Unless otherwise specified by federal or state laws, statutes, codes, rules, or regulations, within thirty (30) days of receipt of an invoice from Vendor on which a Disputed Amount appears, Exchange will (i) notify Vendor in writing of the specific items in dispute; and (ii) describe in detail Exchange's reason for disputing each such item. Within thirty (30) days of Vendor's receipt of such notice, the Parties agree to negotiate in good faith to reach settlement on any items that are the subject of such dispute. Vendor will not terminate this agreement on the basis of an alleged breach involving Exchanges failure to pay a Disputed Amount unless the Disputed Amount exceeds fifteen percent (15%) of the total amount payable under this Agreement or the sum of twenty five thousand dollars ($25,000.00), whichever amount is greater.

(SCRS NOTE: Based on this language, shops that sign this agreement would appear to have agreed that the carrier can dispute their charges 30 days after they're invoiced, and the repair facility can't terminate their agreement based on a breach of contract if the carrier fails to pay unless it's a $25,000 short-pay.)

11.4 Vendor shall ensure that its General Liability, Workers' Compensation, Garage Liability, Coverage for Garage Operations, and Physical Damage insurance policies allow Vendor to waive its rights of recovery prior to a loss and that the carriers furnishing such insurance policies shall be required to waive all rights of subrogation against Exchange, its officers, agents, employees, and other vendors and subcontractors. To the extent permitted by law, Vendor shall look solely to its insurers and not to Exchange's insurers for loss or damage arising from work performed for Exchange.

(SCRS NOTE: How many business carriers will allow their clients to waive their rights in this manner through this agreement? Will a collision repair business still have coverage if they sign this? How many of the shops have taken the time to forward this provision to their carriers to ask if they approve of their unilateral waiver of rights to subrogate against the carrier in question? What if a staff re-inspector injures themselves on the shop property due to their own negligence? It appears that the liability falls on the shop for their repair approach and choices.)

12. MOST FAVORED CUSTOMER. During the term of this Agreement, if Vendor enters into a written contractual relationship with an insurance company or organization pursuant to which (a) Vendor provides services substantially similar to those provided to Exchange, and (b) Vendor provides pricing or other commercial terms that are more favorable than the pricing or commercial terms being provided to Exchange for work performed by Vendor, then Vendor shall offer to Exchange in writing, within thirty (30) days of Vendor entering into such agreement, the same or better pricing and/or commercial terms to Exchange. On a quarterly basis, Vendor shall provide a written certification executed by an officer of Vendor of Vendor's compliance with this Most Favored Customer provision.

(SCRS NOTE: "Most Favored" pricing language is currently being challenged in the healthcare industry. It's interesting that the repair industry is constantly asked to be "competitive," and those same parties now want the industry to guarantee pricing given to another party, which by virtue is not competition.)

16. SUBCONTRACTING

16.1 (ii) Sublet repairs reflecting a retail price within the local market should be written without a mark-up. Sublet items reflecting a wholesale price may be considered for a mark-up not to exceed 25% of the sublet charge. All invoice mark-ups combined may not exceed $200 for the entire repair.

17. INSPECTION OF BOOKS AND RECORDS. Vendor agrees to maintain and preserve its books and records in accordance with generally accepted accounting procedures ("GAAP") for a period of three (3) years or for a longer period if required by applicable law or regulation. Any time prior to the termination of this Agreement and for a period of two (2) years thereafter, Exchange shall have the right to inspect and audit such portions of the Vendor's books and records as is necessary for purposes of verifying amounts payable to Vendor or its authorized subcontractors and to verify compliance with the terms and conditions of this Agreement. Vendor agrees to make such books and records available for inspection by Exchange, its designee, or any insurance regulatory authority immediately upon request.

(SCRS NOTE: Are business owners willing to open internal accounting books to a party outside of the business? There are concerns voiced regularly throughout the industry regarding data that's shared through electronic mechanisms. Now this program appears to require businesses to open up all their books, P&L statements and proprietary business information to another party.)

27. BACKGROUND CHECKS.

27.2 In no event will Vendor in the performance of this Agreement use the services of an individual who has been convicted of a felony, including but not limited to any convictions involving dishonesty, a breach of trust or moral turpitude.

(SCRS NOTE: Language in this section is similar to requirements in other programs, requiring complete background checks, and no shop can employ individuals who have ever been convicted of a felony; in some states that may mean a DUI. How many businesses hire good, decent employees – from  detailers and technicians to office staff – who may have made mistakes in the past but have earned their employers' trust and respect for the work they do today? Is it necessary to allow another party to interject who's employed in a privately run business? Is the requirement reciprocal to the representatives who will interface with repair facilities in the field?)

The SCRS states that its decision to release a link to this document should in no way be construed as legal or ethical advice or opinion. However, it's their hope that the industry finds the information useful in making educated business decisions and discusses the material responsibly.