"Why don’t body shops have any rights with their state Department of Insurance?"
— Walter Danalevich, owner, Santa Barbara Auto Refinishing, Santa Barbara, Calif.
Over the years, collision repairers across America have looked to state insurance departments for help and assistance in dealing with unprofessional and unethical insurance company practices. The results have been disappointing to say the least and devastating to shops and consumers when the total picture is viewed.
Why do states have Departments of Insurance (DOIs)? Just what is their function in the state government? In what areas can they be of assistance? Do they have a mission or purpose? Who do the DOIs serve and protect? Do they have legal powers?
These are just some of the questions to explore.
But before we get into that, let’s step back in history for a review of just where DOIs started, where the staff came from, and who and what’s perceived to be the greatest influence on the departments. Understanding these things may help us better understand why our efforts to get help from DOIs have been futile. It may also show us where we should focus to bring accountability into the auto claims and adjustment process.
On the Eighth Day, God Created Antitrust Laws
Much is made of antitrust laws, and for good reason. The foundation of federal antitrust laws is the Sherman Act of 1890, which resulted from a movement to limit the economic power of trusts when it was found that states couldn’t effectively limit the activities of the giant trusts engaged in interstate business. Antitrust simply means opposition to groups of corporations in the same industry that band together to monopolize a market. (This sounds like it should be a friend to the collision industry, not one of its greatest fears.) In 1890, public pressure prompted Congress to pass the Sherman Act, which prohibits contracts, combinations of conspiracies "in restraint of trade" or other attempts to monopolize the market.
Then, in 1945, Congress enacted the McCarran-Ferguson Act. Among other things, this act declared that regulation and taxation of insurance by the states "is in the public interest." Under this Act, actions of Congress aren’t to be construed to invalidate, impair or supersede state law regulating insurance, unless the acts of Congress relate specifically to the business of insurance. In no way was McCarran-Ferguson intended to allow insurers a free pass from antitrust laws. The federal antitrust laws always apply in cases where business isn’t regulated by the state.
Insurers were, however, given three exemptions from antitrust:
• The activity in question must fall within the business of insurance.
• The activity must be regulated by state law.
• The activity must not involve boycott, coercion or intimidation. Generally the courts have applied three types of activities to be considered boycott, coercion and intimidation: the exclusion of non-conforming competitors, tie-in sales and concerted refusal to deal.
Insurers were basically given the liberty to interact with each other as long as that interaction was intended for the common good of consumers. If, from the interaction, insurers worked out deals that were outside the charge of insurance or if they formed or tried to form businesses or practices to further their own interest at consumers’ expense, these would be regulated by state law. If insurers or an insurer set a course to boycott, intimidate or use a form of coercion, any of these practices would also be a violation.
How do DOIs fit into all this? What’s the primary function of a DOI?
The DOI is primarily an administrative agency that’s part of the executive branch of state government. State DOIs don’t make laws, but they are supposed to regulate laws passed by the legislature. They also develop rules, where necessary, to clarify the statute references. DOIs are also the licensing agency for insurance-related activity in each state.
A major problem here is that DOIs don’t know proper adjustment procedures, nor do they recognize what is, in fact, a violation. For example, there’s no definition of like kind and quality; there’s no clear-cut definition of what pre-loss condition is; there are no laws being enforced requiring insurers to indemnify consumer auto claims by utilizing repair procedures and practices approved by vehicle manufacturers. No one is talking about restoring federally mandated safety to damaged vehicles. As a repair industry, we’ve failed to communicate to the proper authorities all of the above — and much more.
DOIs across America basically work with what they’re given. And trust me. They’ve been given very little in the area of fair and reasonable auto claim adjustments. The cry of the whole collision industry relating to steering, failing to pay for needed and necessary procedures, and mandatory parts replacement have been wasted when it looked to DOIs for relief. They’re not lawmakers — but they are supposed to be assistants to consumers to assure laws are properly applied.
Lacking Knowledge
There are many departments within the DOIs. From my inside observation –– having worked for three months as an inside consultant for a DOI –– there’s a great need for meaningful education, origination and accountability. The fact is that DOIs are more the result of reactive evolution than carefully planned development. They keep very busy, yet most of the activity that relates to auto claims is dysfunctional. A two-page department letter that says nothing in response to three or four clear questions isn’t uncommon.
Granted, most DOIs know something about auto insurance, but they know very little about the actual application of auto insurance claims and the process required for consumer indemnification. The effectiveness of most DOIs to address serious inter-industry auto claims problems has never been demonstrated.
This could be due, in part, to the fact that the majority of DOI employees come from insurance companies or agencies. We used to joke that DOIs get all the insurance company rejects. However, having worked as a consultant and dealt one-on-one with those working auto complaints, this joke is unfounded. While it’s true their knowledge is often limited, many of them are good people stuck working in a system that’s never had strong auto-claims training programs and guidelines.
These employees are charged with assisting consumers by informing them of their rights and responsibilities regarding auto insurance. Yet DOI personnel handling auto claims have been assigned duties where credible reference material and supervision isn’t available. Oftentimes, DOI material relating to auto claims and adjustments is outdated, inaccurate or incomplete. DOIs need technical training in auto-loss claims handling and adjustments.
Having an untrained staff allows insurers to continue to get away with abuses. For example, a supervisor from a major insurance company called the Florida DOI in response to a consumer’s complaint that all of the damages weren’t being paid. I was at the DOI at the time and took the call. I listened and then asked the supervisor: "What portion of the P pages does your company not want to allow?" There was a silence and without really considering what he was saying (I think), he said, "I didn’t know the DOI knew about P pages." The resolution? The insurer paid the additional repair costs.
What Master Do They Serve?
The Florida DOI’s mission is "to make Florida the strongest, most competitive insurance market for consumers to purchase quality insurance at fair and reasonable prices." While I applaud this mission, controlling the cost of insurance is just half of the responsibility in an insurance contract. We can only wish an additional mission statement could be adopted by all DOIs. Perhaps, "To ensure that fair and honest dealings, prompt service and indemnification without intimidation are delivered to all claimants and insureds."
The Florida DOI states it serves and protects both consumers and insurers. Most states would readily make the same statement. Unfortunately, lack of knowledge and experience in auto claims keeps DOIs from giving consumers the assistance they so desperately need.
It’s also safe to say that major insurers have tremendous influence in DOI matters, and the accountability of DOIs relating to auto claims has yet to be challenged. Many cases are on record where DOIs have supported insurance company claim denials where the decision was reversed and consumers paid. Dennis Jay, executive director of the Coalition Against Insurance Fraud, told me of an audit that was made at an insurance company some time ago. The audit reviewed all claims from the prior year where the files were closed with no payment. More than 75 percent of the files had to be re-opened — and payments had to be made to consumers. What’s the message here? That DOIs need training and backbone to support consumers. The greatest number of consumer complaint calls going to DOIs are auto-claims related. Yet far too many valid consumer complaints aren’t properly resolved.
There are two reasons why DOIs can’t effectively address auto claim problems. One is that they’ve never been trained to understand indemnification in auto losses, and two, they’ve been led to believe insurers, even when the insurer is giving them bad information. Few DOIs can effectively challenge insurers one on one.
DOIs mildly treat symptoms, but specific causes need to be addressed and dealt with. Like what? Many complaint calls consumers made to DOIs concern unqualified and untrained auto damage appraisers and adjusters, yet no action is being taken to address this issue. Why? It’s sad but true that insurers with lobbyists and key people in high places in DOIs are extremely influential. Contributions to commissioners and legislators have far more influence on how departments respond than what’s right. And who you are does effect how your claim will be handled. Florida’s Agriculture Commissioner had a claim a while back and received an insurance estimate for far less than proper repairs would cost. When he asked his aid to call the insurance company, the aid was told: "Tell Mr. Crawford he’ll have to pay the difference." That was until the insurer found out Crawford was the commissioner. The insurer went back to the shop and wrote an estimate that exceeded the shop estimate! Is there a message in this true story? Absolutely. I know of numerous cases like this one in which the DOI would have supported the insurer and, in fact, has.
Making Things Better
Where do we turn, where do we start and how do we begin to address this very serious problem within the DOIs?
The main cause for shop and consumer abuse in the auto insurance arena is lack of knowledge. Who are the most abused people in America? The least informed.
How can we compete on a level playing field when we cannot even speak the same language? If insurers wanted consumers to know what indemnification really means, they could inform them. If they wanted them to know how the principal of estoppel applies to auto claims and how the rules of an adjustment cannot be changed when you proceed as agreed upon, they could. Even students in our autobody courses aren’t taught such things. They also aren’t taught that if you get paid for a new part and repair it, you’ve just committed a felony.
DOIs across the nation are engaged in many forms of consumer education, yet the subject of auto damages and claims is seldom, if ever, addressed. This area has been avoided. Why? For years, DOIs have gotten their "factual" information from insurers. But in this day and age of accountability, educated consumers are speaking up and courts are continually validating consumer complaints with judgments in their favor.
Still, many insurers operate like Al Capone: "Do it the way we say or else." Across America, many of the shops that refuse to violate honest and ethical business practices are paying a dear price — and DOIs have failed to recognize this. Consumers and shops are led by fear, intimidation and coercion every day. Under the pretense of holding down insurance costs, a wholesale operation of shortchanging consumers and repairers has been allowed to exist. And DOIs either don’t recognize it or simply don’t want to address the very tactics listed in the Sherman Act and the McCarran Ferguson Act.
State and federal departments and agencies obviously haven’t gotten the message that consumers and repairers are being forced into repairs and claim adjustments that don’t indemnify them. They don’t seem to recognize that insurance auto claims "experts" aren’t experts in auto damage assessments and repair determinations. Many of the auto pros running around the country can easily be proven to be imposters. In fact, some have been hired from newspaper ads that state: "Wanted: claims adjusters, no experience necessary." In a short period of time, these "adjusters" supposedly know more than we do about a career that requires continual education. In the process, they often force repair procedures on repairers that violate federally mandated safety requirements. These tactics are accepted by DOIs, yet they compromise both safety and value and in no way indemnify the vehicle owner.
How can you, as a repairer, combat this? Create an awareness of the problems, possibly through groups like the Insurance Consumer Advocate Network (I-CAN) or the Coalition for Collision Repair Equality (CCRE). When I worked at the Florida DOI, I knew of at least four cases where insurers were forced to take back repaired vehicles from consumers because they were, according to Florida law, total losses. The cost to repair the vehicles exceeded 80 percent of their value. I, in fact, drafted the letter used to inform insurers that they’d done a great disservice to the consumer by forcing repairs on totaled vehicles. I helped to create an awareness.
Poor claims adjustments, improper insurance involvement, and steering consumers toward ill-equipped and untrained shops are blatant acts that hurt the collision repair industry and American consumers. Unfortunately, many of our industry organizations have sold out to the big-money people. Others, in an attempt to be politically correct, have condoned the very acts that continue to destroy the free enterprise efforts of honest collision repairers. Very few groups have taken a firm stand to expose wrongdoing and help bring fairness to the industry.
What can you do? You can help the collision repair industry by getting educated and sharing what you learn. Write to state and national government leaders. Share what continues to happen to consumers and repairers.
I recall a case I dealt with where a major insurer wouldn’t allow the replacement of a filter dryer in a new Honda where the A/C system had been damaged in an accident. When I spoke with the DOI, I suggested they call the vehicle manufacturer and get its recommendation. The end result: The insurer said it made a mistake and allowed the filter dryer to be replaced. We stood our ground and they paid for the proper repairs.
You must believe you can help make a difference because you really can! But the answer to making the auto repair industry all it can be won’t be found in a DOI. It’ll be found in you and your willingness to get involved!
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).
