The California Senate Judiciary Committee approved the Collision Repair Association of California (CRA)-sponsored Senate Bill 1059 by a 3-2 vote and agreed to add the following provision to the bill: “At the time of sale, the insurer shall specifically notify the insured whether the insurance contract allows for the use of aftermarket parts, and that such use may affect the insured’s vehicle manufacturer’s warranty. The required use of aftermarket parts must also be clearly and conspicuously disclosed in bold type in the front declaration page of the policy."
Lee Amaradio, CRA board member and owner of Faith Quality Auto Body in Murrieta, Calif., testified that consumers are often unaware of how their insurance policy limits repairs on a new car. He also said that a factory warranty would be honored across America while an aftermarket warranty would force the consumer to return to the body shop where the part was installed. The shop, he then said, would have to hunt down the aftermarket producer of the part.
"Is this the kind of protection that you want for your new car? ” Amaradio asked.
Senator Carole Migden, author of SB 1059, stated that insurers are “snookering” consumers by hiding coverage provisions for factory and aftermarket parts. She and Amaradio pointed to a Mercury Insurance policy disclosure in eight-point type in a terms and conditions pamphlet where the insurer said the decision on whether or not to use factory or aftermarket parts would be based on which cost less. The policyholder who provided the pamphlet to the CRA said he was unhappy to learn that his new $45,000 car would be fixed with non-factory parts.
The CRA’s bill was also supported by the consumer group, Consumers For Auto Reliability and Safety, the California New Motor Car Dealers Association and the California Autobody Association.
In addition to the new insurance policy disclosure mandate, SB 1059 would make it unlawful for an insurer to require the installation of an aftermarket part affecting the engine, the heating and cooling system, the air condition system and corrosion protection if the part to be replaced is under a manufacturer’s original warranty and the replacement occurs within three years from the date from which the vehicle was first sold as new. The bill would allow use of aftermarket parts if the claimant’s insurance policy required the use of aftermarket parts, or if the repairer and the consumer agreed to use aftermarket parts. Insurers would be barred from paying aftermarket prices for the installation of OEM parts under the bill’s mandates.
“With the leadership of Senator Ellen Corbett, the committee chair, SB 1059 has become a very serious piece of legislation,” said CRA lobbyist Richard Steffen. “I find it troubling that insurers would oppose a bill to increase a consumer’s understanding of collision coverage for a new car. This issue isn’t going away.”
Allen Wood, CRA Executive Director, noted that during the weekend prior to the hearing, the CRA ran 30-second television ads supporting S.B. 1059 on selected Northern California cable channels.
"The CRA wants consumers to read their insurance policies," Wood said. "We don’t want them to be surprised that their new car may be outfitted with non-factory parts after an accident. Consumers have a right to make informed choices about the most appropriate insurance product to protect their transportation investments.”
The bill now goes to the Senate Appropriations Committee, which will assess its fiscal impact on the state. The next hurdle will be a vote by the full Senate on the bill sometime in May.