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Know the Laws that Govern Your Auto Body Business

As a business owner or manager in any industry, the first thing you should be aware of are the laws that govern your company and the possible penalties for violating those laws.

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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.

Speaking with collision repairers across the country, I’ve found that many are not familiar with the laws, regulations and codes that govern their business in their state.

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As a business owner or manager in any industry, the first thing you should be aware of are the laws that govern your company and the possible penalties for violating those laws.  

The laws governing businesses that provide services to others are designed to protect the consumer’s interests as well as the business from liabilities and related costs.

Liability

Today more than ever before, collision repair poses many potential liabilities that could not only destroy a business but hold an owner, manager and its employees personally liable for their actions.

Consider that a repairer’s failure to use “due care” and failure to perform work in a “workmanlike manner” is generally perceived to be willful, whether intentional or not. In such situations, the old adage, “Ignorance of the law is no excuse,” applies. Business owners and managers have a professional responsibility to know the mandates their businesses must abide by.

This was clearly evidenced in the John Eagle Collision Center case in Dallas, Texas, where the repairer (having glued on a Honda Fit roof instead of welding it) was found to be responsible for trapping the owners (Matthew Siachen and his wife) in the burning car after a significant frontal impact. The jury awarded the couple $31.5 million dollars in damages. It’s important to understand that this vehicle had been repaired and re-sold, and the repairer’s liability followed the repaired vehicle to the end.

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In some instances, a repair shop could be accused of deceptive business practices, which could be viewed as fraud and/or intentional misrepresentation. In such situations, the burden of proof may fall on the business owner or manager to prove otherwise. When understanding the negative reputation the collective “automotive repair industry” has earned in the past, and the average perception by consumers across the country, a repairer trying to prove themselves innocent of such conduct in front of a judge and jury could prove difficult.

One should keep in mind that most garagekeeper’s liability insurance does not include defending a repairer from claims of fraud or poor or defective/faulty workmanship. To protect themselves from such claims, repairers should discuss their coverage options with their insurance agent.

Florida Laws

Having owned and managed several body shops in Florida and consulted for other Florida shops, I’m familiar with Florida’s statutes and regulations governing automotive repair. This knowledge has enabled me to not only remain compliant but also protect myself and my companies from those who may make claims and accusations that have no merit.

One example that I experienced years ago was when I billed our standard storage rates in a total loss billing. The insurer’s legal counsel stated that, under Florida law, the most I was able to charge for storage was $15 per day. I ask the attorney for a copy of the regulations he was referring to, and he faxed me a copy of the specific paragraph, which read just as he had stated. I wanted to look it up and see it for myself, but the fax he sent me had no regulation or statute number or its source. I began doing some research, and lo and behold, I found the statute he referenced. I discovered it was under state statutes specific to towing/recovery operators and pertained to law enforcement towing and impound calls. Because we did not own or operate a towing company, such rules, regulations and limitations did not apply to us or other automotive repairers. I sent a copy of the entire statute to him and never heard from him again. And we received complete payment for our entire bill the very next day.

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If I had merely taken the word of the attorney, I would have not only shorted my company but likely changed my billing practices, resulting in under-billing for years. I can see how other repairers might have the same thing happen to them if they fail to do their own research.

Insurance Laws

It’s equally important for repairers to understand the laws, regulations and codes that govern the business of insurance in their state, and the guidelines by which insurers are to act in “good faith.” Rest assured that insurers know the laws that govern their industry as well as yours!

Here’s an example of a law that pertains to insurance:

“No insurer shall require the use of replacement parts in the repair of an automobile unless the parts are at least equal in kind and quality to the original parts in terms of fit, quality and performance.”

Another example I found for New Jersey is: “at least equal in like, kind and quality to replacement parts available from the original manufacturer of the part in terms of fit, quality and performance.”

The key word in these two paragraphs is “performance.” Because alternative parts (i.e. aftermarket, reconditioned, etc.) are not crash tested, there are no published independent laboratory testing results to substantiate that such parts indeed can perform in
a manner consistent with the
OEM parts.

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In many states such as Florida, repair companies are required to register with the state and obtain a business permit/license and/or registration number. In doing so, the repairer is further obligated to adhere to other mandates, such as this one found in Florida:  

The Florida Motor Vehicle Repair Act requires anyone who is paid to repair motor vehicles owned by other individuals to register with the Florida Department of Agriculture and Consumer Services (FDACS). The law does not apply to people or companies who repair their own vehicles or who repair only vehicles used for agricultural and/or horticultural purposes.

Registered shops must: 

• Provide the repairer’s registration certificate in a conspicuous place as to be seen by consumers along with sign advising consumers of their rights under the Motor Vehicle Repair Act.

• Show the repairer’s registration number in all advertisements, announcements or listings regarding automotive repair in newspaper, magazine or directory.

• Include their registration number in any advertisements, announcements or listings relating to motor vehicle repair in any newspaper, magazine or directory.

• Post in a conspicuous location in the customer service area their registration certificate and a sign advising consumers of their rights under the Motor Vehicle Repair Act. The sign must also include FDACS’s toll-free telephone number for assistance and information and a statement advising consumers that they are entitled to the return or inspection of replaced parts, if requested at the time the work order is placed.

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• The Florida Motor Vehicle Repair Act was created to assist consumers with matters relating to motor vehicle repair shops. The act applies to dealers of new and used cars, trucks and motorcycles; garages; service stations; self-employed persons; truck stops; and paint, body, brake, muffler, transmission, mobile repair and glass shops.

If a repair will cost more than $100, the law requires the repair shop to give you the option of:

• Requesting a written estimate;

• Being notified by the shop if the repair exceeds an amount you specify; or

• Not requiring a written estimate at all.

You must sign and date one of the above options. Motor vehicle repair shops cannot force you to waive your right to an estimate.

When a written estimate is required, you must be given a copy.

Ask if the prices quoted are for new, used or rebuilt parts. Make sure the written estimate clearly states which condition.

The repair shop must get your approval before exceeding the repair cost by more than $10 or 10 percent, whichever is greater, so make sure you give the shop a phone number where you can be reached.

You can cancel repairs if they exceed the estimate and the repair shop must reassemble the vehicle, unless it is unsafe to drive. The shop may charge you for teardown and reassembly only if you were given notice of that charge on the estimate.

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You are entitled by state law to get back any replaced parts if you requested them initially. However, the repair shop may charge a fee and, if the parts are under warranty agreement with the manufacturer or distributor, they may not be returned to you.

Repair Estimate

The estimate must include:

• The shop’s name, address and telephone number.

• The customer’s name, address and telephone number.

• Date and time of estimate.

• The year, make, model, odometer reading and license tag number of the vehicle.

• Proposed work completion date.

• Description of customer’s problem or request.

• Labor charges based on a flat rate, hourly rate, or both.

• Estimated cost and charges for repair.

• Charges for shop supplies or for hazardous or other waste removal.

• Charges for making an estimate and the basis for the charge.

• The customer’s intended method of payment.

• Name and telephone number of any alternate person the customer would allow to authorize repairs.

• Terms of the parts and service guarantee.

• Notation if customer wants replaced parts returned.

• Charge for daily storage. Shops notify customers after repair work is completed; customers will then have three working days to pick up the vehicle before storage fees may be charged.

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• Disclosure statement.

Summary

I cannot express strongly enough how important it is for repairers to know what responsibilities you and your customers have to one another as well as the responsibilities the insurer has to your customer. Only then can you provide optimum service to your customer and protect them and your company from avoidable issues and liabilities. Ignorance of the law may be a reason…but it’s no excuse! B

Barrett Smith, AAM, is the founder and president of Auto Damage Experts Inc., which has been providing automotive inspection and expert legal services nationwide since 1997. He can be reached at (813) 657-6705 or [email protected]

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