Legislative Lowdown - BodyShop Business

Legislative Lowdown

Federal – The U.S. Department of Justice recently released the final rules for the National Motor Vehicle Title Information System (NMVTIS), created by a 1992 law to prevent title washing. The rules, which were effective April 1, require insurers to report vehicles that have been declared total losses under state law and by their own policies.

Under the rules, insurers will provide the system with VINs, the date vehicles are marked for salvage yards, the name of the insured from whom the vehicle was obtained and the name of the owner at the time of the filing. The system is meant to link total loss information collected by state motor vehicle departments to reduce fraud.

However, the law only requires monthly reporting, and 14 states are not yet participating in the NMVTIS, according to the National Automobile Dealers Association (NADA).

“Unfortunately, many states are reluctant to provide their total-loss information to the NMVTIS database, which is why legislation is still needed,” said Ivette Rivera, NADA executive director of legislative affairs.
To improve the NMVTIS, the U.S. House of Representatives and Senate are considering legislation (H.R. 1257 and S.B. 202) that would require insurance companies to disclose the VINs of totaled cars to vehicle history providers before the vehicle gets back into the marketplace and make the reporting requirement electronic and timelier to eliminate the window for fraud.

The bills would also allow commercial tracking of totaled vehicles so consumers and dealers could track the VINs of totaled vehicles using multiple VIN lookups and searches.

“A public-private partnership that combines NMVTIS with the technological expertise of private sector vehicle history report companies would allow anyone buying used cars – consumers, businesses, dealers, auto auctions, etc. – to more easily identify one of these totaled cars or trucks,” Rivera said.

California – The California Assembly is considering a bill that would prohibit insurers from suggesting a specific repair shop unless the claimant expressly requests a referral or the claimant has been informed in writing of the right to select a repair shop.

A.B. 802 also states that if a claimant accepts the insurer’s recommendation, the insurer must send the claimant the following written notice within five days:

“We are prohibited by law from requiring that repairs be done at a specific automotive repair dealer. You are entitled to select the auto body repair shop to repair damage covered by us. We have recommended an automotive repair dealer that will repair your damaged vehicle. If you agree to use our recommended automotive repair dealer, we will cause the damaged vehicle to be restored to its condition prior to the loss at no additional cost to you other than as stated in the insurance policy or as otherwise allowed by law. If you experience a problem with the repair of your vehicle, please contact us immediately for assistance.”

Last year, Gov. Arnold Schwarzenegger vetoed S.B. 1167, an anti-steering bill that would have required insurers to ask policyholders if they’ve chosen a repair shop prior to suggesting one. The bill also stipulated that the insurance commissioner form a task force to study issues addressed by Insurance Code Section 758.5.

Currently, the California Department of Insurance is considering proposed additions to the state’s anti-steering regulation that would prevent an insurer from discussing DRPs or an alternative facility if the claimant informs the insurer that he or she has selected a specific repair facility. The rules would also prevent an insurer from raising questions about the quality of the repair facility selected by the claimant.

Another bill, S.B. 350, which would limit insurers to using only aftermarket parts that are of like and kind quality to the parts being replaced for collision repairs, was recently introduced in the California Senate.

The bill, introduced by Sen. Leland Yee, is backed by the Certified Automotive Parts Association (CAPA). CAPA says the bill protects consumers from “poor quality aftermarket parts and overpriced repairs” and will make insurers less likely to total damaged vehicles thanks to cost savings associated with aftermarket parts.

The bill only involves the use of aftermarket parts when the repair is part of an insurance claim. All other uses of aftermarket parts would remain unregulated.

Finally, the California Senate is considering a bill (S.B. 427) that would deter “parts switching,” or quoting one part on an estimate but instead installing a cheaper or faulty part during the repair.

The bill would require repairers who include the replacement of a deployed air bag on a written estimate to repair and fully restore the airbag to original operating condition, and failure to do so would be a misdemeanor punishable by a fine of $5,000.

Further, S.B. 427 would require a notification to the consumer at the time of estimate and final invoice that parts switching is unlawful. It also creates a new consumer right to obtain copies of parts invoices that show new parts were installed.

The bill, introduced by Sen. Gloria Negrete McLeod, is meant to enhance California’s Automotive Repair Act, which regulates automotive repair dealers and requires an itemized written estimate prior to commencing work, as well as a final invoice listing all work done and parts provided.

Negrete McLeod estimates that 40 percent of the more than 1 million Californians involved in accidents each year could be victims of repair fraud and that parts switching costs California consumers millions of dollars each year.

“A particularly disturbing form of ‘parts-switching’ involves air bags, where the repair shop stuffs foreign materials in the airbag space instead of a new airbag,” she said. “The consumer never knows until he is in an accident and the air bag does not deploy.”

Kentucky – The Kentucky Senate is considering a bill that would exclude the cost of airbag replacement from the 75 percent total loss calculation.

Pat J. Gisler, executive director of the Automotive Service Council of Kentucky (ASC-KY) said the bill would help save cars that may have been totaled otherwise and provide more work for shops.

“We’re totaling cars that there actually isn’t that much wrong with because they’re older and airbags are so expensive to replace,” she said. “We’re thinking that this will put some money back into the pockets of shops and consumers.”

The bill also stipulates that insurers would still be bound by terms and conditions of individual policies relating to airbag reinstallation.

The  Senate has referred the bill, which the House of Representatives already passed, to the Transportation Committee.

Missouri – The Missouri Legislature is considering a bill that would create a state board of auto body repair that would license auto body repair facilities and physical damage appraisers.

Under the bill’s licensing requirements, repair facilities would be required to: pay a licensing fee of $250 annually; have all required state and federal licenses, permits and registrations; provide proof of insurance and compliance with EPA and OSHA training requirements; provide proof that employees have ASE certification; and have access to proper equipment, a spray booth and an up-to-date estimating system. To renew licenses, facilities would have to prove completion of continuing education.

The bill would also require shops to post their license and retail labor rates. Transient paintless dent repair businesses would also have to pay licensing fees.

Damage appraisers would be required to have ASE certification in damage analysis and estimating, comply with continuing education requirements and pay a licensing fee, among other requirements.

Oregon – The Oregon Senate is considering a bill that would lessen insurer influence on repair costs through several provisions designed to distance insurers – both figuratively and literally – from the repair process. The bill, S.B. 617, is backed by Oregonians for Safe Auto Repair (OSAR).

The bill has three components stating that insurers and other third parties financially responsible for paying for repairs to a consumer’s vehicle would not be allowed to: enter into a contract, either verbal or written, with a repair shop; influence, direct or suggest how the shop repairs a vehicle, including the cost of repairs; or maintain an office, desk, cubicle or space within 100 feet of the premises where the consumer’s vehicle is being repaired.

The new law would be placed under the jurisdiction of the Oregon Department of Justice’s Unfair Trade Practices Act. OSAR hopes this would “level the playing field” for shops and consumers by allowing shops to lodge complaints against insurers for violation of the law. Currently, the Oregon Insurance Department only accepts complaints filed by consumers.

South Dakota – The South Dakota House of Representatives is considering a bill (S.B. 98) that would increase the damage disclosure threshold for the sale of motor vehicles and boats. The minimum would change from $5,000 to 40 percent of the vehicle’s value or $8,000, whichever value is lower.

The bill’s proponents, including representatives from the insurance industry and the South Dakota Auto Body Association (SDABA), believe that increased prices for new cars, parts and labor warrant the increase.

“It doesn’t take a whole lot to get to $5,000,” Peter Stemper of the SDABA said.

However, the bill’s opponents say that $8,000 is too high of a value and that the 40 percent provision could complicate matters, as it may be difficult to find a vehicle’s value if damage occurred several years ago.

Rod Woelfel, treasurer of the South Dakota Independent Auto Dealers Association (SDIADA), told the Argus Leader that he’s worried the increased threshold could entice people from other states to bring damaged vehicles to South Dakota to sell.

“It opens it up for unscrupulous people to come in and take advantage of the system,” he said.

Rhode Island – The Property Casualty Insurers Association of America (PCI) is opposing collision repair legislation backed by the Auto Body Association of Rhode Island (ABARI). H.B. 5891 would prohibit both insurers and repairers from authorizing repairs in place of a vehicle’s owner, and H.B. 5892 would add to the state’s unfair claims law by mandating that insurers conduct an appraisal of a vehicle whenever damage exceeds $1,500.

PCI claims these bills would increase costs and make the repair process inconvenient for consumers. The two bills are being researched by the House Corporations Committee.

“The auto body agenda hassles the consumer with the additional step of an appraisal for practically all repairs,” said Frank O’Brien, PCI vice president and regional manager. “This unnecessary extra step for most repairs adds time and cost to a repair process that is already the costliest in the country.”

O’Brien accused ABARI of “chipping away at consumer choices” through legislation.

“We are encouraging lawmakers to preserve the consumer’s ability to choose whether they want to take their car to an independent shop, a direct repair shop, or utilize an insurer’s concierge service,” he concluded.

Tennessee – The Tennessee Department of Commerce and Insurance (TDCI) is examining the need for regulations that would require aftermarket crash parts to meet crashworthiness standards met by their OEM equivalents.

Several aftermarket parts manufacturers use carbon steel in place of the high strength and ultra high strength steels used by OEMs, sparking safety and performance concerns. The Diamond Standard Brand Alternative Safety Part Division of Reflexxion Automotive and Production Bumper Stampings made a presentation on the use of safety parts that don’t meet federal standards of crashworthiness or standard of performance of the OEM part on Feb. 6 for the TDCI.

The state is considering adding safety parts to its definition of crash parts. Now, Tennessee regulations covering crash parts include a definition of crash parts, manufacturer identification of the part and disclosure. The TDCI considers the current regulations to be outdated and believes they should be modeled after those of the National Association of Insurance Commissioners (NAIC) model law’s quality and performance requirements.

“We welcome this opportunity to assist and serve the industry and state of Tennessee to create updated regulations to include safety parts and quality performance requirements of these parts to assure the part being installed will indeed restore the vehicle’s collision management system to its predamaged condition and to the standard which came on the vehicle initially – the OEM part being that standard,” said Geoff Crane, business development manager for the Diamond Standard Brand Division. “If it’s a common goal within the collision repair industry that all vehicle occupants are safe, why would anyone install or be allowed to install safety parts that fail to provide the federal and OEM standards of crashworthiness in a collision management system?”

Crane said that aftermarket parts that don’t meet OEM standards for performance and crashworthiness are “a violation of use in any state with regulations calling for OEM equivalency or like kind quality and performance” for replacement parts.

Washington – On the heels of the defeat of a U.S. Congressional proposal to create a national Cash for Clunkers program, a bill has been introduced in the Washington State Legislature that would implement a vehicle scrappage program for passenger vehicles more than 15 years old that are not emissions compliant.

Under the bill, qualifying vehicles would have to be registered for a 24-month period and be in satisfactory operating condition.

Replacement vehicles purchased under the plan would be required to have an EPA highway gasoline mileage rating of at least 30 mpg. Participants in the program would be granted a sales-tax exemption for the first $2,000 of tax paid on the purchase price.

All trade-in vehicles would be destroyed, regardless of their historical value or collector interest. The Specialty Equipment Market Association (SEMA) opposes this bill and says that if it is passed, hobbyists could be denied the availability of vintage cars and parts for restoration projects.

For nationwide coverage of legislative updates as they happen, visit our Legislation section. Find it on www.bodyshopbusiness.com under the Reference Shelf.

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