Legislative Lowdown - BodyShop Business

Legislative Lowdown

California – The California Autobody Association (CAA) announced that it supports the Bureau of Automotive Repair (BAR) performing a survey of the automotive repair industry that would include labor rates. The Collision Repair Association of California (CRA), however, opposes the BAR’s inclusion of labor rates in its survey.

The CRA opposes the survey because of pending changes in regulations that would ensure labor rate surveys aren’t used to set prevailing rates paid by insurers, CRA Director Allen Wood said in a letter to BAR Chief Sherry Mehl. What sparked the CRA’s concern was an additional suggested question to include in the survey that would ask repairers for retail rates for collision and mechanical work.

The CAA dismissed the CRA’s concern, saying the survey would be purely informational.

“This is a ridiculous and unsubstantiated concern,” CAA President Ted Stein said. “This would be a voluntary survey for auto repair dealers, and its intent is to only gather industry information. This has nothing to do with the Department of Insurance’s ongoing revision of the labor rate survey guidelines. Shops provide their retail rates publicly every day, and they have a right to provide this to the BAR if they so choose. No one should be intimidated to not provide their retail rates to the BAR or anyone else.”

However, the CRA contends that the timing of the survey is inappropriate given the possible changes to survey regulations.

“Our objection is not because it is BAR that is doing the survey,” Wood said in his letter to Mehl. “In fact, we would welcome such assistance at a more appropriate time. We however recognize that to do so now will create a survey that just starts another controversy. The CRA believes it’s critical to adopt specific rules needed to accompany any survey process, as the outcome will have severe ramifications to the industry. The mere collection of reported rates without rules will not advance the cause of fair claims adjustment in collision repair.”

CAA representatives recently met with Mehl to discuss the industry survey and also the possibility of assisting in the creation of an updated industry survey

Both the CAA and CRA were involved in a working group of insurers and repairers that advised the Department of Insurance on changes to labor rate survey regulations.

Massachusetts – A Massachusetts Auto Body Association (MABA) representative testified at a Massachusetts Division of Insurance hearing in support of the proposed repeal of the state’s auto insurance cost containment regulation.

MABA spokesman Steve Regan said that the regulation’s original intent to control insurance costs has evolved into a tool used by some insurers to pay less than fair market value for labor and services, among other things.

“This regulation was designed to rein in rising insurance premiums through efficiencies and controlling fraud,” Regan said. “Unfortunately, many insurers have used the regulation as justification for mandating certain repair procedures and dictating what a repairer will be paid. It has also been used successfully as a legal defense by insurers against lawsuits by consumers and repairers seeking to be paid what they contend were fair and reasonable charges. This wasn’t the intent, and the repeal will remove a great barrier to repairers and consumers who are trying to regain control of their businesses and be paid appropriately for their claims.”

Although the regulation is only a requirement for insurers to submit a report on the efforts they have undertaken to control costs and fraud, in practice, some insurers and appraisers have often used it as a stated authorization for mandating the use of aftermarket parts and dictating labor and storage payments, according to MABA.

MABA has been seeking the repeal of this regulation for many years without success. However, with a new governor and insurance commissioner and the advent of deregulation in Massachusetts, the associatin is hopeful that more actions like this will be taken soon.

The regulation, part of the 1988 Automobile Insurance Reform Act, required the Automobile Insurers Bureau (AIB) to file an annual report with the Division of Insurance that documented efforts to help reduce insurance costs in the state. The Division believes the regulation is outdated due to recent changes to laws and regulations assisting with the transition toward managed competition in the Massachusetts automobile insurance market.

“Massachusetts has begun to disassemble a process that had the state set rates for insurance premiums and mandate certain discounts for policyholders by insurers in order to promote competition,” said Regan. “It’s good to know that the state is also seeking to remove the barriers that repairers have faced, which allowed insurers to control their businesses and their customers. With the repeal of ‘cost containment,’ repairers are now also free to compete for customers and be paid rates and fees that reflect their cost of doing business.”

New Jersey – The New Jersey Assembly passed the Motor Vehicle Owners’ Right to Repair Act (A.B. 803) by a vote of 49 in favor, 22 against and 8 abstaining. The bill now moves to the Senate for

Introduced by Assemblyman Reid Gusciora (D-Mercer), the legislation is designed to ensure that New Jersey independent repair shops have the same access to service information, tools and software that vehicle manufacturers make available to their new car dealers.

Automotive Service Association (ASA) President Ron Pyle warned that the legislation could do more harm than good for consumers.

“Already facing a high cost of living, New Jersey vehicle owners would see an increase in vehicle repair costs with the passage of the ‘Right to Repair’ legislation,” Pyle said. “The bill will drive up costs with the addition of a state regulatory agency in the service information marketplace and the fact that the bill also encourages litigation.”

Passage by the Assembly came a few days after the Assembly Consumer Affairs Committee approved the bill by a 3-2 vote. During the hearing, independent repairers testified about problems they’ve experienced in obtaining access to information and tools needed to repair their customers’ vehicles. Shop owners claimed that they often are forced to tell their customers that the dealer is the only place to go for certain repairs or, in some cases, they will take the vehicle back to the dealer themselves rather than tell the customer they cannot complete the repair.

Aaron Lowe, vice president of government affairs for the Automotive Aftermarket Industry Association (AAIA), testified that the service and parts business is becoming a growing percentage of car companies’ profits and therefore, independent repair shops are becoming more dependent on car companies and their dealers for tools and information.

“The commercial interests at stake in the vehicle repair market demand that right to repair legislation be enacted to ensure a level playing field where consumers continue to have a choice of where they have their vehicle serviced,” Lowe stated.

ASA, the Alliance of Automobile Manufacturers and the National Automobile Dealers Association (NADA) oppose Right to Repair legislation. The groups maintain that independent repairers do have equal access to vehicle information.

“Unfortunately, this legislation is a solution looking for a problem,” said Charles Territo of the Alliance of Automobile Manufacturers said. “The U.S. Congress, the Federal Trade Commission and every other state legislature that has considered this legislation has rejected it. Its passage will discourage research and development and encourage counterfeiting. At a time when the industry can least afford it, this bill puts auto industry jobs and customer service at risk.”

Groups in favor of the bill included the Alliance of Aftermarket Service Providers of New Jersey (AASP-NJ), New Jersey Gasoline-Convenience-Automotive Association (NJGCA), Citizen’s Action, National Federal of Independent Business (NFIB) and AAA.

For more information, visit www.righttorepairnj.org.

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