News: DRIVE Expo 2022 — What You Have to Look Forward to
Despite what you’ve been led to believe, you can legally steer your customers away from ‘problem’ insurers and toward ones that know how to fairly settle claims.
Auto insurers have a history of trying to
steer claimants away from body shops they consider “troublesome” and toward their favored shops.
It might be through a direct-repair program or a preferred shop network. It might be through an appraiser at a drive-in asking vehicle owners where they intend to get their car fixed and then not-so-subtly hinting that his company has a history of “problems” with that shop or that the shop charges an “unreasonable” labor rate. It might be through an insurer pressuring agents to steer insureds to particular shops when a loss is reported.
It can happen any number of ways.
This steering might be legal or it might be illegal, depending upon what your particular state laws say and exactly what the insurer actually says and does.
Whatever the circumstances, most repairers resent insurer steering of potential customers. They believe insurers use steering to artificially depress claim payments by tacitly threatening shops to play ball with them or otherwise see their customers be directed to competitors who will accede to the insurer’s demands for limiting labor rates, using particular parts or absorbing the cost of necessary procedures that the insurer unfairly alleges to be “included.”
Most repairers further believe that the insurance industry’s use of steering to save claims costs ultimately hurts the quality and safety of auto body repairs because customers are apt to be steered to body shops that cut corners in order to save those claims costs.
But steering can go both ways.
Recently, some body shops have begun to fight back by doing some steering of their own. If insurers can attempt to steer claimants to preferred shops, they reason, why can’t shops attempt to steer their customers away from the “bad” insurers and to the “good” ones?
For many American consumers, a car is their most expensive and cherished piece of personal property. So if a vehicle means that much to its owner, wouldn’t that owner want to know which insurers will pay enough to have the vehicle properly repaired if it’s damaged in an accident? Wouldn’t he want to know which insurers will treat him with respect if he has a claim? Wouldn’t he want to know which insurers will give him the most for his premium dollar?
But many shop owners incorrectly believe that it’s illegal for them to steer their customers toward or away from particular insurers. Others believe that insurers will sue them for attempting to steer their insureds to another company. But the reality is that, if done correctly, steering of customers by body shops to or from particular insurers is perfectly legal and can be done with little risk of being sued. You just have to know how to do it.
Potential Pitfalls: Slander and Libel
From a legal perspective, there
are some pitfalls to watch out for if you’re going to consider developing a program for steering your customers to or from particular insurers.
Probably the single biggest potential legal impediment to steering is to make sure that you don’t commit “slander” or “libel” against an insurer. Slander is spoken defamatory communication, and libel is written defamatory communication. Defamatory communication occurs when you convey information that improperly harms a person’s or company’s reputation or improperly deters people from doing business with them. If you defame an insurer, you can be sued by the company, and
the damages awarded can be very
Other problems may arise if you “tortiously” interfere with the contract of insurance between a carrier and their customer or with the existing advantageous business relationship that an insurer has with their customer. What this means is that it’s illegal for you to improperly bad- mouth an insurer with the intent of having their insured leave them to go to another carrier.
But wait, isn’t this exactly what you’re trying to do, i.e. communicate negative information about “bad” insurers and discourage your customers from using insurers that you believe unfairly treat their insureds? The key is that to defame an insurer or to tortiously interfere with their relationship with their customer, your communication has to be “improper” to be illegal.
And the law considers a lot of communication to be quite proper.
Exception No. 1: It’s the Truth!
The biggest exception to “im-proper” communication is truthful communication. Every law student learns in his first semester of law school that “truth is an absolute defense” to a slander or libel suit. And, it’s also a defense to a tortious interference suit.
Legally, you can say or write anything you want about an insurer, no matter how negative, as long as what you say or write is the truth. If true, you could spend your entire day announcing to the world the lurid details of the bizarre sexual conduct that a particular insurer’s appraisers regularly engage in with barnyard animals although, to protect yourself, you might want to have a set of 8×10 glossy photos to prove that it genuinely happens.
In the real world, in terms of how you attempt to steer your customers, this means you can tell your customers specific facts about actual problems that you’ve had with a particular insurer. But also be aware that, in the very real world of insurers with scads of lawyers on their payrolls you should always be prepared to establish the truth of your claims, if challenged.
For example, you shouldn’t say a company steals premium dollars from their customers and then never pays claims because (no matter how much you may think this is happening), under the law, that’s probably not the truth; even if it is, it’s awfully hard to prove.
What you can say is that a particular company regularly pays only “x” dollars as a labor rate reimbursement, when most other companies regularly agree to your labor rate of “y” dollars. Or you can say that, in your experience, a particular insurer won’t pay for blend time, when that procedure is a necessary element of a repair and is paid for by most other companies. Or, that a particular insurer doesn’t regularly respond to supplement requests for at least a week, or that it doesn’t pay what other companies pay for paint and materials or that it pays only for aftermarket parts, even when you believe them to be inferior to OEM parts, etc.
And you can put a list together of every fact you can document that you believe constitutes wrongful conduct by that particular insurer.
You could take this further by making a chart to hand out to your customers, listing each insurer that comes into your shop and checking off how each insurer regularly handles a list of issues that you identify (labor rate, paint and materials, etc.). This chart could help your customers make an informed choice about which insurer to choose, based upon your list, as well as upon the customer’s individual experiences with the insurer and the premiums charged by the insurer.
When you hand it out, you could also verbally point out to your customers what the chart says and why you prefer to deal with particular insurers, and not with others. You could even take out full-page ads in your local newspaper that carry the same information in giant, bold-faced, multi-colored print.
All of this is protected communication as long as it’s truthful.
Exception No. 2: It’s Your Opinion
The second major exception to “improper” communication is expression of opinion. This exception is based on the United States Constitution’s guaranteed protection of freedom of speech. You can tell your customers whatever your opinion is of a particular insurer, as long as that opinion doesn’t imply untrue facts about the company and as long you make it clear that it’s a statement of opinion and not of fact.
It’s OK to tell your customers that, in your opinion, a particular company is difficult to deal with, or that you believe it doesn’t have the best appraisers or even that it’s your opinion that an insurer is just plain “terrible.” Be careful, though. You might be in trouble if you say something like: “The appraisers for XYZ Insurance Co. are a bunch of thieves” because that implies the possibly untrue fact that the appraisers actually steal.
Group Action: Use It Wisely
It’s one thing for an individual shop to try to steer their customers to or from particular insurers. It’s another for a group of shops or a trade association to try it collaboratively. In most cases, this type of group action is prohibited under antitrust laws. It’s illegal to attempt a group boycott of a particular insurer. It’s illegal to try to get a price concession from an insurer by acting as a group putting pressure on the carrier. And it’s illegal for a group of shops to try to get their customers either to avoid or to use a particular insurer.
On the other hand, there’s nothing preventing a group of shops from acting together to gather facts or opinions that individual shops choose to use in their own way, as long as there’s no ulterior motive to agree upon prices to be charged or to agree to take concerted action with regard to a particular insurer. An auto body trade association could conduct a survey of their shops, asking members to rate the insurers in their state from one to five on a number of factors. Or, the association could survey its members’ customers, asking about speed of response of insurers, customer satisfaction, knowledge level of appraisers, courtesy of claims handlers, promptness of payment, etc.
The results of an association survey could be published, and individual shops could then use the results as they saw fit. If one shop had an “insurer steering” program or a list of preferred carriers that it handed out to its customers, that shop could use the survey results as part of its own insurer evaluation and customer education. If another shop had no such program, it could still hand out the results of the association survey to its customers, to do with it as they pleased. Still another shop could use the information solely for its own internal purposes, to decide what administrative actions it would take when dealing with individual carriers, based on the information collected by the association.
It would probably be best for a group survey not to ask what particular insurers pay for a labor rate, what particular procedures they pay for or how much they pay for storage. These are all factors that really go to the amounts charged by individual shops, i.e. the parts and service prices that individual shops are supposed to decide on their own. More appropriate general questions in this vein would be whether particular insurers agree to the surveyed shops’ labor rates (whatever each individual shop’s rate might be), whether they agree to pay for the procedures that particular shop charges for or whether they agree to the particular shop’s storage rate.
The difference between the disfavored questions and the appropriate questions may seem subtle, but legally they’re a world apart.
Turning the Tables
Perhaps steering has taken a bum rap in the collision repair industry. Perhaps it’s time for body shops to seriously start considering steering their customers away from problem insurers and toward ones that know how to fairly settle claims.
An interesting question that arises is whether or not you can request concessions from insurers in exchange for placing them on your preferred carrier list. That may depend on your particular state’s laws. But, as long as the concessions you’re looking for are legal, you probably can at least ask.
Would an insurer guarantee in writing to pay your labor rate in exchange for being listed by you as a good company to deal with? Would they agree to expedite your customers’ claims by, for example, agreeing to send an appraiser within 24 hours of a supplement request? Would they agree to pay for a specified minimum number of days of storage for a total loss left at your shop?
Could the whole insurer/body shop/referral dynamic be turned on its head? I’d certainly be interested in hearing the results from any shop that tries these tactics.
James A. Castleman is a partner in the law firm Paster, Rice & Castleman in Quincy, Massachusetts. He’s represented various auto body trade associations and individual body shops for more than 25 years.
At a Glance: What to Avoid When Steering
The key here is the word “improper.” Your communication has to be improper to be illegal. Luckily, the law considers a lot of communication to be PROPER, such as:
1. Truthful communication. Truth is an absolute defense. Legally, you can say or write anything you want about an insurer provided it’s the truth. Just keep in mind that when you do this, you should be prepared to establish the truth of your claims, if challenged.
2. Expression of opinion. The U.S. Constitution guarantees us freedom of speech. This means that you can tell whoever you want your opinion of a particular insurer, as long as that opinion doesn’t imply untrue facts about the company and as long as you make it clear that it’s your opinion.