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A Conversation with an Insurance Claims Manager

A real conversation with an insurance claims manager reveals the plethora of misinformation out there regarding the claims/repair process.

Barrett has authored numerous industry trade journal/magazine articles, including several cover stories for BodyShop Business. Having grown up in a family-owned collision repair business and owner/operator of two successful collision repair facilities; his ongoing efforts as industry speaker and repairer coach-consultant are geared toward educating professionals and consumers to achieve equally successful resolutions to automotive-related property damage issues. Such issues include proper and thorough repair, reasonable repair profitability for repairers as well as equitable claim settlements for both claimants and the responsible/paying parties. ADE offers numerous professional services nationwide.

In the four-plus decades I’ve spent in the collision repair industry, I’ve heard more misstatements, inaccuracies and misconceptions about collision repair and claims handling than I can count. Unfortunately, much of this misinformation is intentionally put out there by claims people who want to control the claim and provide repairers and consumers bad information in order to contain costs.

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The sad thing is that much of the misinformation is accepted due to both insurers’ and repairers’ ignorance, lack of understanding and failure to seek information to keep up with ever-advancing technologies.

An Email Conversation

As an example, I’ll share actual e-mail dialogue between myself and an insurer claims manager at a well-known national insurance carrier regarding a right to appraisal matter I was involved with.

This incident involved a consumer whose chosen repairer and their insurer had unresolved disputes regarding numerous recommended repair processes and their costs. The vehicle was under repair, and the vehicle owner had authorized the repairer to proceed with the shop’s recommended processes, parts and materials.

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The following are excerpts from this e-mail correspondence between myself
and the claims manager.

Claims Manager: “Hello Barrett, I’ve spoken to the owner of the repair facility. He advised me that the vehicle repairs are not complete but most of the way done. They need to put a couple of parts on the vehicle, send it over for an alignment and detail the vehicle. My question is concerning paying for repair operations that were not completed on the vehicle. The [repair shop’s] estimate is for $8,474.94, with 118 lines items on the estimate. The [customer’s chosen appraiser’s] estimate is for $12,220.18, with a total of 227 lines items on the estimate.

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“Given that the majority of the repairs have been completed, how do we ensure that [insurer’s name] is not paying for operations that were either not needed or not done to bring the vehicle back to pre-loss condition? [Insurer’s name] invoked the appraisal clause due to a disagreement with the owner of [repairer’s name] on what needed to be done to bring the vehicle back to pre-loss condition. Once again, my question is, how do we ensure that [insurer’s name] is not paying for procedures that were not done, or necessary, to bring the vehicle back to pre-loss condition? And that we are paying the prevailing rates for the local market as per the insured’s policy?” 

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Barrett: “Jerry, in response to your inquiry where you ask, ‘My question is concerning paying for repair operations that were not completed on the vehicle,’ based upon my knowledge, training and experience, it matters little to the insurer what the shop does or how they do it.

“The agreement between the insurer and the policyholder is the policy contract, which has nothing to do with the repairer (unless of course your company engaged them or referred them as a DRP).

“In situations like these, your concern shouldn’t be what the repairer does or charges for, nor how well they do it or if they even do it or not. An insurer’s responsibility is to their policyholder to provide them what they are entitled to, which is to be indemnified (made whole) for their loss under the terms of the policy agreement with your company in the manner in which the insurer elects to settle the claim.

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“The repairer is the repair professional; it is they who have a contracted agreement with their customer (your company’s insured or third-party claimant). If you or your claims handler have done your jobs properly, whatever issues should arise between the repairer and their customer should be of no concern to you or your company…any more than your business dealings between you and your policyholder should be of concern to the repairer.”

Paying for Unnecessary Operations

“You write: ‘Given that the majority of the repairs having been completed, how do we ensure that [insurer] is not paying for operations that were either not needed, or not done, to bring the vehicle back to pre-loss condition?’

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“Keep in mind that when an insurer chooses the payment-for-repair option (versus actually arranging or performing the repair), the insurer’s only obligation is then to provide a fair and equitable amount to repair the vehicle…not mandate repair or act as the police to make sure everything was done and done properly. Just as in a total-loss situation, the insurer’s policyholder is not under any obligation to purchase another vehicle as they had…or any replacement at all. They are entitled to be compensated for their loss under the terms of the policy…no more, no less. However, if you seek a ‘gotcha moment’, or merely wish to hassle the repairer or consumer for whatever reason, that is of course the insurer’s decision, being mindful of course that insurers are obligated to act in good faith in their claim handling. 

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“You further ask: ‘Once again, my question is, how do we ensure that [insurer’s name] is not paying for procedures that were not done, or necessary, to bring the vehicle back to pre-loss condition? And that we are paying the prevailing rates for the local market as per the insured’s policy?’

“Asked and answered: An insurer’s responsibility is to provide sufficient compensation to enable the vehicle to be ‘repaired back to pre-loss condition’ to the best of reasonable human ability…not see to it that it is! 

“The repairer, on the other hand, has a duty to provide a repair based upon the agreement between them and their customer. It need not be a proper or thorough repair.

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“Consider if an insurer provides monies to replace the front bumper with a new OEM part, and the policyholder decides he wants a custom part instead or no part at all. The insurer has no basis to withhold payment or dictate that they buy the part as called for on the estimate – just as insurers don’t have the right to mandate that the repairer provide them with invoices for parts and/or materials, or elect to withhold payment until the repairer proves purchase (which still doesn’t prove use) or performance. This appears to be nothing more than an abusive practice without practical merit.”

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The Estimates Don’t Match

“Furthermore, you write: ‘The repair estimate from [repairer] is for $8,474.94, with 118 lines items on the estimate. [The insured’s appraiser’s name] estimate is for $12,220.18, with a total of 227 lines items on the estimate.’ I understand your concern; I too was taken aback at first that an estimated cost of repair could be increased through the involvement of an appraiser. However, those of us who offer expert consulting services to repairers and insurers on how to prepare proper and thorough damage/repair assessments are used to auditing estimates to find errors and omissions, just as desk reviewers who are hired by insurers attempt to find ways to reduce estimates and claim payouts.

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“Oftentimes, repairers unintentionally overlook and omit needed procedures, materials and items such as clips and fasteners which are performed and/or provided in most every repair. These are legitimate expenses the repairer is entitled to be paid for by their customer.

“An example is ‘pre-wash vehicle’, a necessary process to be done prior to commencing repair activities, much like pre-cleaning a vehicle’s panels that will be refinished/blended (as mandated by the paint manufacturer to warranty their products). This too is a needed process that all repairers do but leave off the estimate/billings, not because they aren’t done but because they are simply overlooked when preparing the estimate. To err is human. In this matter, these items were listed early on in the repair and open to discussion regarding their necessity and validity, not whether they would be performed or not.

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“Of course, an insurer has a duty and obligation to contain costs where and when reasonable…without shortchanging the policyholder or third-party claimant, of course.

“This is why the right to appraisal clause exists. However, every effort should be made to perform the due diligence and research needed to make a good faith effort to resolve the issues equitably and efficiently before the appraisal process is invoked. There is no viable reason for two entities to use the appraisal process as a weapon and put the consumer through unnecessary inconvenience and expense to exact a pound of flesh or prove a point.”

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Prevailing Rates

“Regarding ‘paying the prevailing rates for the local market as per the insured’s policy,’ based upon information provided to me, it would appear that issue has been tried and tested between your company and this repairer through litigation and may be a moot issue at this point in time. Repairers are not relegated to ‘one price fits all.’ A reasonable price is not necessarily one specific set price. There are many variables that may apply, including the level of quality, service, reputation, overhead, etc. Repairer rates should not be one set price, they should be a range of pricing, just as all quoted prices when shopping for auto insurance coverage from various carriers. Even though the quotes are for the exact same driver, vehicle, location, driving history, coverage, etc., how do you explain insurers charging a difference in price when all things (risks) are truly identical?

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“I hope this answers your questions and addresses your concerns. As far as my dealings as umpire, my responsibility will be to lend my knowledge, training and experience to the process to determine if a part or material is legitimate – and if the disputed price is considered to be fair and reasonable, not if it was performed or provided.”

Summary

As you can see, there is much to know about insurance-related claims and the roles of those involved. Repairers need to know such information in order to properly serve their customers and help them assert their rights.

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Imagine an electrician or plumber who doesn’t explain the local rules or pull the permits to ensure their work was done properly but instead allows the customer to direct them as to what to do. Imagine an attorney who doesn’t effectively represent the needs of their client.

Repairers have a fiduciary duty to their customers, not to mention a moral, ethical, professional and – in most states – legal obligation. This simply means that they have a responsibility to act in the best interest of another party who has engaged their services. Repairers have an obligation to safeguard their customer’s safety and economic well-being. To do this effectively, the repairer must know what many currently don’t know – which is why the industry is in the position it is across the country.

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Barrett Smith, AAM, is the founder and president of Auto Damage Experts Inc., which has been providing automotive inspection and expert legal services nationwide since 1997. He can be reached at (813) 657-6705 or [email protected].

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