Minnesota DOI Fines GEICO $30,000 for Underpayment of Claims - BodyShop Business

Minnesota DOI Fines GEICO $30,000 for Underpayment of Claims

Minnesota Commissioner of Commerce Glenn Wilson has issued a consent order to GEICO alleging that the company violated a state claims practice statute that requires insurers to pay "all costs for the satisfactory repair" of a claimant’s vehicle. GEICO was ordered to pay a civil penalty of $30,000 and to cease and desist from any further violations of the statute.

The order was issued based on accusations that GEICO paid an alleged prevailing rate to Minnesota body shops that was less than the total charged by the shops for certain repair costs, and this practice resulted in claimants paying claim amounts that should have been paid by the insurer.

The order cites Minn. Stat. § 72A.201, subd. 6(2)(a) (2008), which says if a policy provides for collision repairs, insurers must "assume all costs, including reasonable towing costs, for the satisfactory repair of the motor vehicle. Satisfactory repair includes repair of both obvious and hidden damage as caused by the claim incident."

Wilson also ordered GEICO to contact insureds or claimants referenced in the order and provide reimbursement for the amount they were required to pay out-of-pocket to body shops. GEICO agreed to informal disposition of the matter without a hearing and accepted the terms of the consent order.

The Department of Commerce took similar action against AIG in December of 2007. In both cases, the investigations were advanced by unfair claims practice reports submitted by the Alliance of Automotive Service Providers, Minnesota (AASP-MN). The association says it encourages its members to document cases of improper insurance company practices on an ongoing basis and, in the case of short pays, urges its members to stop absorbing these costs and to inform their customers that they will be responsible for their insurance company’s failure to pay reasonable costs.

“We are very pleased by the department’s action,” said Judell Anderson, AASP-MN executive director. “This sends a strong message to all insurers that they must play by the rules or be held accountable. It should also motivate repairers to be more proactive in their reporting and documentation of unfair insurer practices. It’s not enough to just complain, shops have to take action.”

In May 2007, GEICO was fined $60,000 in California for underpayment of claims and steering, and a new investigation of the insurer was launched by the California Department of Insurance in December 2008.

More information:

• Alliance of Automotive Service Providers, Minnesota

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