As part of a flurry of legislative activity taken in California recently, S.B. 1371, which outlaws the capping of material prices by insurers in California, was signed into law and A.B. 2825, which would have forced repairers to share wholesale crash parts invoices, was vetoed.
S.B. 1371 (Sen. Lou Correa, D-Santa Ana) was designed to limit the insurance company practice of placing “caps” or arbitrary limits on reimbursements for collision repairs. The bill, which was backed by the California Autobody Association (CAA), will become law on Jan. 1, 2009.
Introduced in February, S.B. 1371 was revised several times this year as legislators attempted to define capping. In June, after revisions by both the state’s Senate and Assembly, the Assembly finally defined capping as “offering or paying an amount that is unrelated to a methodology used in determining paint and materials charges that is accepted by automobile repair shops and insurers.”
The bill states that if pricing agreements involving discounts are reached voluntarily between auto repair shops and insurers, capping rules don’t apply. Otherwise, the methodologies for calculating the paint and materials charge, which must be accepted by both shops and insurers, is determined by multiplying refinish unit by the refinish rate. Other price-determining factors include manuals and estimating systems that estimate how much refinish will be required to repair a certain part of the automobile, and software programs that automatically do the calculations.
The CAA credited Correa with bringing the repair and insurance industries together to hash out the details of the legislation.
“On behalf of the CAA, we would like to thank the Governor, Sen. Correa, the insurance industry and our members on getting this law passed,” CAA President Ted Stein said.
A.B. 2825 (Assemblywoman Wilma Carter, D-62) would have required repairers to give customers wholesale invoices for crash parts that cost $50 or more and would have mandated that estimates and final invoices contain a disclosure that parts switching is illegal.
The Center for Auto Safety, Consumer Action and Consumers Union urged Gov. Schwarzenegger to sign the bill, while the Collision Repair Association of California (CRA), CAA and California Motor Car Dealer Association opposed it.
"This is a huge victory for repairers," said Stein.
Consumer groups argued that the bill would protect motorists from potential auto body repair fraud and save California consumers hundreds of millions of dollars annually by eliminating parts switching by “dishonest body shops.”
Current law requires that consumers be provided an itemized written estimate prior to work commencing, as well as a final invoice listing work completed and parts provided.
Dubbed the "Paperwork Act of 2008" by the CRA, the bill, which passed the State Assembly Aug. 18, would have made California the first state in the nation to require businesses to turn over wholesale records to customers. The CRA believed the purpose of A.B. 2825 was unclear, given that the state Bureau of Automotive Repair updated invoice requirements through rulemaking last year. Gov. Schwarzenegger also noted when he vetoed the bill that it was similar to legislation he rejected last year.
