Nearly four years after filing two separate "assignment of proceeds" cases against Nationwide on behalf of two customers, Joe Pastorek of Joe Pastorek's Body Shop in Sylvania, Ohio, has emerged victorious.

The first case, filed in October 2007, involved a customer of Pastorek's who was a third-party claimant and insisted on OEM parts for his 1997 Lexus ES 300. According to Pastorek, Nationwide refused to pay for the OEM parts, insisting on using "NWCPP" certified aftermarket parts. Pastorek also says they refused to pay his labor rate (which was $42 per hour at the time) and paint and materials rate ($25 per hour). Pastorek's final bill was $424.64 higher than Nationwide's, and the insurer refused to pay the difference.

According to Pastorek, who has three employees and $300,000 in annual gross sales, Nationwide argued that his charges were unreasonable and unnecessary. Nationwide also said their aftermarket parts had a lifetime guarantee, versus the OEM parts, which were guaranteed for only one year or 12,000 miles.

"Our argument was, 'Have [the aftermarket parts] ever been crash tested?' and 'Are they guaranteed for crashworthiness?' I based the answer to those questions on a previous deposition by an aftermarket executive who said, 'No, they're not,'" said Pastorek. "My argument is, 'If you want to test them for material composition, tensile strength and crashworthiness just like the OEs do, and you can guarantee them like the OEs do, then I'll be more than happy to use them.' I prefer to use only OE parts, unless my customer specifically requests something else."

Pastorek said that Technical Service Bulletins (TSBs), warranties and service manuals he wanted to use to support his case were thrown out because the court called them "hearsay." Still, Pastorek argued for repairing vehicles per OEM recommendations.

"In the Lexus TSB, it tells you to use only OE bumper reinforcements because they can't guarantee, if you use any other part, that the vehicle will maintain the same NHTSA crash rating," he said. "That's a pretty strong argument.

"When I fix a vehicle, I don't just guess. I look things up. If there are any concerns, if I can find them in TSBs or repair manuals, then I have something to go on and build my estimate based on those TSBs or manuals."

A dealership body shop manager whose shop was on a DRP with Nationwide was called in to testify against Pastorek. Pastorek claims the DRP shop manager admitted that he works for the insurance company, not the vehicle owner.

The jury voted 6-2 in favor of Pastorek. They also wanted to add to the suit monies to cover Pastorek's lawyer's fees, court costs and expenses, but Pastorek said Ohio law doesn't allow for that. All told, he spent $10,000 of his own money on both cases.

Case No. 2

The second case was filed in April 2008. Pastorek says that it was similar to the first case, except that he had begun invoicing for paint and materials, creating an itemized bill for all materials used. There was also a disagreement between Pastorek and Nationwide over a wheel that was replaced. Pastorek claims that Nationwide believed the wheel had not been damaged in the wreck, and even if it had, a reconditioned wheel should have been used.

"I couldn't use the GM bulletin in court, but you know as well as I that an OE wheel can't be repaired if any of the materials have to be removed or replaced," says Pastorek. "That's why GM recommends replacing it with an OE wheel, which is what we did."

According to Pastorek, Nationwide brought in another DRP shop to testify against him and say that his labor rate was unreasonable. The DRP shop also addressed color, sand and buff.

"They said it was necessary but we can't charge for it because the insurer won't pay for it," says Pastorek. "They said it was part of the refinish process, so they don't charge it as a separate line item because it's already included in the refinish time. If they had read the P-pages in any of the three estimating systems they used, they would have seen that every one has a page that says it's a separate item and needs to be charged separately."

The jury once again sided with Pastorek, only giving one day of car rental back to the insurer because the customer picked up the vehicle the day after it was done. According to Pastorek, the jury made their decision because he came across as working for the customer, not the insurer.

"The jury foreman said he asked the jury if they had an accident, would they take it to Pastorek's, and everyone raised their hand," Pastorek says. "DRP shops' whole way of doing business is to do what insurers say and hope they send them business."

Pastorek claims both DRP shops that testified against him said in court that if they ever got a customer off the street who was not insured but wanted them to fix their car, they would charge them more than if they did have insurance. If the customer had insurance and requested only OEM parts, they would have to write aftermarket parts per the DRP agreement and give the customer the choice of either arguing with the insurer or paying the difference.

Two years ago, Pastorek sued Nationwide for the third time over their insistence on aftermarket parts for a third-party claimant's leased 2007 Honda CRV. According to Pastorek, the customer's lease agreement stated that "if OEM parts were not used, the customer would be charged for the loss in value."

"She demanded OE parts and Nationwide refused," says Pastorek. "We showed them the lease agreement and they didn't care."

The case was settled for the full amount two days before being heard.

Fearing Steering

Asked if he fears being steered against by Nationwide as the result of this litigation, Pastorek said no.

"They already do, so I don't care. I've built up a pretty strong customer base over the last 41 years, and [my customers] know I'm not willing to compromise on my repairs," Pastorek says. "If they want OE parts, they're going to get them, either new or used. I strive to make the job look better than it did when it came in. But I don't charge to make it better – that's just my own personal pride when I do a job."

Assignment of Proceeds

Pastorek's advice to other shops that feel that there is no other recourse to recover funds other than to sue an insurer via assignment of proceeds is, number one, to seek legal advice. Two, choose wisely the customers you want to get involved.

"The customers I have are very loyal and outspoken when it comes to what they want on their vehicles," he says. "Some customers will succumb to insurer pressure, and those are the kinds of customers I would not take to court because they're going to get called in and that will probably only agitate them and you'll lose them."

Pastorek also recommends bundling three to five cases together to save on costs, and take them all to the same court. Once a favorable decision has been reached, the shop, Pastorek says, has something to use against the insurer.

"I really think that every shop needs to get at least one decision from an insurer so they can show that they're the one who owns the shop," he says. "I am not owned by an insurer. The name on the building is 'Joe Pastorek's Body Shop,' not 'Nationwide's Shop.' I will set the prices based on my expenses and what I think allows me to make a fair profit. I've been here for 41 years and I'm still in business, so I must be doing something right because my customers keep coming back, despite all the steering and badmouthing I get from insurers. Even as much as they steer, my customers will tell them where they want their vehicles fixed and that's why I stay busy."

Who's the Customer?

Pastorek also talked about the danger of relying on too much insurance work, citing two local shops he says were "Progressive buddies" whose work for them comprised 30 to 35 percent of their total volume.

"Progressive ended up yanking all their DRPs except for two major shops, so they lost 30 to 35 percent of their business," he says. "The problem is they thought the insurer was their customer, but they're not. If you satisfy the customer, they will come back. It seems DRP shops' idea is one-and-done, get it in and get it out and make as much money as you can because you'll never see the customer again. When I get a customer in here, I want them to come back if they ever get hit again or if their kids get in a wreck. I have customers who tell me I fixed their car 20 years ago and now their daughter is driving and she wrecked her car. If you do a good job and work for the customer, you won't have to worry about making deals with insurers.

"My business is to repair cars wrecked in collisions. The insurance company's job is to sell insurance policies and indemnify those policies when a customer makes a claim. Those are two separate businesses. I don't care what insurers think about fixing cars. They sure as heck don't care about what I think when it comes to selling insurance. I'll stay out of their business if they stay out of mine."

Nationwide has 30 days to file an appeal, but Pastorek feels confident the decision will stay.

"The judge overruled all their arguments over why 'assignment of proceeds' was invalid, so it's pretty solid," he said. "If they ever beat the assignment of proceeds, it would take away the right of a shop to sue for the customer, and that would be huge for them." 

View video of Attorney Erica Eversman and BodyShop Business Editor Jason Stahl discussing assignment of proceeds