Options When An Insurer Denies A Body Shop Supplement
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What Are My Options When an Insurer Denies a Supplement?

When a customer returned a vehicle after complaining about a noise, we contacted the insurer and got a verbal “OK” to fix. But then the insurer denied it a week later, saying that it was prior damage. What are my options now that the vehicle is gone and I cannot charge the customer?

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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.

We received a car that had been hit hard in the rear end, so we replaced the rear crossmember, installed a quarter panel and completed other repairs. The customer returned the vehicle a week later after complaining about a wheel bearing noise, which was obviously from the accident, so we contacted the insurer and got a verbal “OK” to fix. We replaced the wheel bearing and sent in for the supplement, only to watch the insurer deny it a week later saying that it was prior damage. What are my options now that the vehicle is gone and I cannot charge the customer?

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Question asked by: Zach Ferguson, Ferguson Auto Body, Jerseyville, Ill.

Thanks for the question, Zach. However, there is some applicable information you left out, such as whether the claim was a first-party (the insured making the claim against their own insurer) or a third-party claim (a victim making a claim against the at-fault party’s insurer) and the regulations in your state that you, the insurer and your company must abide by. Regardless, here are my observations and recommendations on what I do know that is consistent with most state laws and regulations.

First of all, you must understand who it is you work for. In most states, the “customer” is defined as those who signed the repair authorization. Unfortunately, many repairers see the insurer as the one paying and therefore the insurer is the one calling the shots. But this is not so!

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In first-party claims, the insurer owes the vehicle owner under the terms of their policy contract. In third-party claims, the insurer owes to defend/protect their policyholder (up to the limits of their coverage) and owes nothing to the victim. Their insured (the at-fault party) owes the victim, and the insurer’s role is to protect their insured and their assets.

Understand that in third-party claims, the insurer didn’t cause the damages, so they really don’t ‘owe’ the victim anything. Their insured – the at-fault party – owes the victim for the damages they caused, but they’ll rely upon their insurer to step in and protect them by paying for the damages sustained.

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You as the repairer should always obtain a signed authorization from your customer before performing any repairs on their vehicle. The authorization should address all anticipated charges as well as expectations. Your repair authorization should be developed, employed and considered as your repair contract between you and your customer.

On a major repair such as this, you should have listed ‘Road Test’ on your initial estimate to ensure such mechanical issues were addressed during the initial repair. This would have likely helped you avoid this situation while providing optimum service to your customer. Road testing should also be done to ensure no wind, water and dust leaks or the intrusion of exhaust and other potentially harmful issues exist after the repair. This not only augments your profitability but also limits you and your company’s liabilities, either by performing the important safety function and/or, if they’re denied, placing the associated liabilities back onto the insurer or the customer.

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Upon diagnosing the supplemental issues, you should have discussed the needed procedures and the costs with your customer and received their written authorization to proceed. Should they have had concerns over the insurer paying, they, your customer, should have contacted the insurer to verify acceptance and payment. While you can and should interact with the insurer on behalf of your customer, you should only take direction from the ‘customer’ to proceed…or not proceed accordingly!

Also, you should not have released the vehicle until your billing was paid in full or, if you have a healthy relationship with the insurer, until you had something in writing from the insurer that payment would be forthcoming. (Note: I don’t recommend my shop clients to release a vehicle without full payment.)

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And finally, get all approvals, including supplements, in writing and encourage your customers to do the same. Edifying your customer and properly managing their expectations in such issues will garner their trust, loyalty and – most of all – their ongoing referrals in the years to come. It will also send a strong message to claims people that your customers are informed and they must treat them with respect…or else.

These simple rules will prevent similar issues from occurring in the future, help to develop and protect a proper and healthy relationship between you and your customers, and garner the respect you deserve from insurance claims people.

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If I was in your situation, as distasteful as it may seem, I would contact your customer and let them know what has transpired and, as such, you only have them to look to for full payment. Offer your limited assistance in helping them to collect what is owed to them from the insurer or at-fault party. After all, your customer received your goods and services, and it will be up to them to pay you and resolve the issues regarding whether the supplemental damage was due to prior wear or a result of the covered loss. You don’t share the liability for their damages, and you nor your company owe nothing. Thus, you shouldn’t suffer a loss.

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Take the position as the humble service provider who merely provided the services requested and who now must receive payment. The more persistent you are, the more it will encourage your customer to seek recovery from the insurer. They will then seek recovery from the insurer and/or the at-fault party direct and, in doing so, they will become part of the solution and hopefully dissuade the insurer and others from this type of unethical behavior.

Note: If you have anything in writing, such as an e-mail from the claims rep authorizing you to make the wheel bearing repair, then you have something your customer can use to recover payment for same. If so, let me know and I’ll share my thoughts on ‘estoppel’ and/or ‘detrimental reliance’ to help your customer get reimbursed for your charges.

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Please note that I am not an attorney and no longer a claims person, and my thoughts and recommendations are not intended to be nor should be considered as legal advice. For more information on this matter or collision repair consulting/coaching services, contact me at [email protected].

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