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Administration Fees and Storage

The subject of administrative fees continually comes up in our office as a fee that’s disputed by some insurance companies. How can we get them to pay?

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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.

The subject of administrative fees continually comes up in our office as a fee that’s disputed by some insurance companies. How can we get them to pay? I contacted the California Bureau of Automotive Repair, but their response only put more questions in my head.

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First of all, I am not an attorney and am no longer a licensed claims adjuster, so I cannot and do not provide legal advice or counsel.

I am also not readily familiar with the positions of the California Bureau of Automotive Repair (BAR) you referenced, nor am I familiar with the manner in which you posed your question to them which prompted their reply. What I can tell you is that I agree and disagree with the BAR’s position, and here’s why.

A collision repairer is in the business of repairing vehicles, not storing them or merely writing estimates and or just tearing vehicles down. Repairers are in business to perform all functions associated with the “repair,” which may include:

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  • Answering the customer’s initial phone call for directions or hours of operation
  • Greeting the customer upon their arrival
  • Explaining the services and features and benefits of selecting your shop (sales presentation) and answering the customer’s questions regarding the repair
  • Completing and reviewing the customer’s information form
  • Preparing the repair agreement and documentation
  • Setting up the customer’s file, pre-intake form and pre-repair photos
  • Entering the customer’s information into a management system
  • Preparing and sending follow-up and status correspondence, e-mails, etc.
  • Dismantling the vehicle
  • Ordering and receiving parts and materials, etc.

When these processes are completed, they’re done in conjunction with an authorized “repair” initiated at the customer’s request based on the insurer’s election to provide for the vehicle’s repair. These activities and more may be considered part of conducting the business of “repair,” as suggested by the BAR.

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However, when an insurer deems a vehicle under “repair” a total loss and the customer terminates the repair, the repairer will no longer receive the full benefits of the repair-related activities and the return on investment (the cost of securing and performing the repair). Therefore, many of the aforementioned activities are no longer applicable to a repair and would be able to be charged for total loss handling.

Imagine if the vehicle was brought to you as a known total loss. What activities would you perform and charge for?

When repairers find themselves dealing with a total loss billing and not a repair billing, the repairer should be compensated for their total loss-related activities such as:

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  • Administrative labor incurred due to the insurer’s error (see above tasks)
  • Administrative efforts in dealing with appraiser, parts suppliers, etc.
  • The return of acquired parts (a “parts return fee” may be considered and suppliers’ “restocking fees” if applicable)
  • Relocating the disabled vehicle
  • Covering of the vehicle or its openings and exposed components (i.e. engine bay)
  • Storage of the vehicle (inside and/or outside as applicable to properly secure and protect the vehicle)
  • Parts storage (for removed damaged parts)
  • Cleanup/handling and disposal of spilled/extracted fluids
  • Preparation of a comprehensive damage assessment and repair blueprint
  • Removal of the customer’s tag and personal items
  • Dealing with the tow company removing the vehicle

Confronted with a terminated repair, the repairer has invested time and resources in aspects of the repair prior to termination. One of the costliest things is the acquisition of parts for the insurer’s estimate. Why would the compensated efforts to attain the parts be provided in returning them without cost?

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In addition, the repairer should also be compensated for their repair-related activities performed prior to the vehicle being re-designated as a total loss, such as:

  • Acquisition of parts as listed within the insurer’s estimate (at retail)
  • The labor to access the damaged vehicle (cut openings, pre-pulls, etc.)
  • The labor incurred in dismantling the subject vehicle
  • Refinishing time and materials for the edging or cutting-in of parts
  • Reconditioning of salvaged parts and many others as deemed applicable

It’s important to keep in mind just who it is you work for. When the appraiser has incorrectly authorized the consumer to proceed with the repair, they’ve placed them in a difficult position and financially liable to the repairer.

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Repairers should seek recovery of their billings from their customer, the recipient of their services and the one who the repairer is accountable to under most state rules and regulations. Repairers should have a well-crafted and bulletproof repair agreement/contract that clearly lists such contingencies. ADE helps our coaching/consulting services clients in developing a repair agreement which meets their specific needs as well as other documents to help them get fairly compensated for their efforts.

Regarding administration fees, you said the BAR stated to you: “for writing an estimate and looking for parts that are included in what we do and offer in our business, and therefore, we should ‘not’ be putting this type of charge on our invoice at any time.” So the key question here is, are the charges relative to a repair or handling a total loss? You need to ask, if the vehicle was brought to your facility as a known total loss, what activities would you perform and charge for?

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As long as you’re a repairer (and not a tow and/or storage company), you should be able to differentiate your handling (repair or total loss) and bill accordingly for your services. If you do offer tow services, depending on local regulations and ordinances, it may be wise to separate the repair and tow businesses to avoid losses in these situations.

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