Shop Operations: Expanding Your Body Shop: Planning is Key
A California body shop owner is upset by a bill in his state that passed into law last year and took effect Jan. 1, 2019 aimed at “closing loopholes in California’s towing and vehicle storage law to reduce abusive practices aimed at inflating storage fees.”
The owner of a body shop in California is upset by a bill in his state that passed into law last year and took effect Jan. 1, 2019 aimed at “closing loopholes in California’s towing and vehicle storage law to reduce abusive practices aimed at inflating storage fees.”
Assembly Bill 2392 states: (A) For purposes of this section, a towing and storage charge shall be deemed reasonable if it does not exceed those fees and rates charged for similar services provided in response to requests initiated by a public agency, including, but not limited to, the Department of the California Highway Patrol or local police department.
As a result of the law, at least one insurance company has told him they will only pay the California Highway Patrol rate of $45 for storage per day.
“We charge $120 a day for storage. And now, because of the survey of public agencies, insurance companies are only paying $45 per day,” said Paul Ekmekjian, owner of Columbia Auto Body in Los Angeles.
Ekmekjian says the law is confusing because further language leads him to believe that what he charges is okay if it’s comparable to other facilities: (B) A storage rate and fee shall also be deemed reasonable if it is comparable to storage-related rates and fees charged by other facilities in the same locale. This does not preclude a rate or fee that is higher or lower if it is otherwise reasonable.
Further confusing the issue, Ekmekjian says, is that collision repair facilities, auto body shops or auto repair shops are not specifically referenced in the bill’s language, just “tow yards” or “storage facilities.” But Jonathan Underland, communications director for Assemblymember Miguel Santiago, who introduced the bill, said it does apply to body shops.
“If that auto body shop is in the business of towing and storage vehicles, then the law does apply,” Underland said.
In a recent example, Ekmekjian says he got paid his standard storage rate from California Casualty, but Mercury Insurance referenced A.B. 2392 in opposition to his charge. The appraiser for Mercury told him in order for them to pay his $120 charge, he would have to prove that rate is the norm in his local area. The appraiser further stated that the $45 rate per the law applies to all facilities in California charging for storage and tows and any other fees.
“Which shops were surveyed?” Ekmekjian asked the appraiser. “If you can provide the survey results, that would be great. Every tow yard charges $100 and more each day.”
Since then, the California Autobody Association held a meeting on A.B. 2392 that had record attendance where an official from the Bureau of Automotive Repair (BAR) made the following points:
- Insurers can’t cap storage rates
- Insurers are trying to use California Highway Patrol rates, which are half of the normal rate
- California Highway Patrol rates aren’t meant for body shops but towing and storage facilities
- Body shop owners have the right to charge reasonable, competitive rates
- Insurers cannot cap the number of days a vehicle is held in storage