Is It Illegal for Insurers to Cap Paint and Materials in Ohio?
I wish I could give you the easy, "Yes, and here’s the statute/regulation that makes it so" answer.
The answer is yes, arbitrary, non-policy provision paint capping is an unfair and deceptive claims handling practice under the Ohio Administrative Code 3901-1-54. The practical problem is that when the Department of Insurance (DOI) is asked whether paint capping is illegal, the question is not typically framed correctly to elicit a real response from the DOI rep.
The question should be: If the insurance policy does NOT state that, in the event of a collision, reimbursement for paint and materials to restore the vehicle will be Capped at $___ dollars, is an insurer’s refusal to reimburse the insured beyond a "capped" amount for paint and materials an unfair / deceptive practice when the actual value of the paint and materials utilized in the repair exceeds the "capped" amount?
When stated this way, it is plain that the answer is and should be YES.
The other issue is whether a third party is owed beyond the capped amount. Again, the practical answer is yes, but Ohio’s regulations don’t provide much protection for third parties. As a result, the only way the third party can force what is owed beyond the capped amount is to sue the insured/at fault driver.
Lastly, the DOI thinks of collision repair much like health insurance – DOI reps presume that there is a contract for the provision of repair services to the insured like exists in health insurance. Therefore, the DOI says that it doesn’t regulate or get involved with business relationships or contracts between repairer and insurer. They have lost sight of the fact that independent shops only work for the consumer.
Erica Eversman is an attorney and consumer advocate with Vehicle Information Services, Inc.