Ask the Expert: What is the Proper Procedure for Submitting a Supplement?

What is the Proper Procedure for Submitting a Supplement?

When submitting a supplement to an insurance company, do we have to submit a copy of the original invoice for the parts and materials we buy from our vendors?

Q: What do other shops do when they submit a supplement to an insurance company? Do we have to submit a copy of the original invoice for the parts and materials we buy from our vendors?

A: First, do not consider the following to be legal advice as I am not an attorney. I recommend getting to know laws and regulations pertaining to your business in the state(s) you conduct business.

Your question brings up several issues that collision repairers are confronted with on a regular basis (and one of my pet peeves), and I’ll share with you what I tell my repairer coaching clients (and how I dealt with these issues when I owned my own shop).

My response is for those who consider themselves to be truly independent repairers, and is not for those who have entered into direct-repair programs with insurers in exchange for referrals. These DRP repairers may need to comply with the terms of their agreements in order to avoid confrontation or a termination of such relationships.

Ask Yourself

  1. First, all repairers should ask themselves:
  • Why would an insurer demand that a repairer provide them copies of their internal invoices?
  • Why shouldn’t a repairer concede to such demands?
  • What will happen if I refuse?
  1. Why would an insurer make such a demand:
  • To maintain control and dominance over repairers and the collision repair industry as a whole (“Do as we say or else!”)
  • For the repairer to prove that they bought the parts (to suggest that the repairer is a crook … until they can prove themselves otherwise!)
  • To ascertain repairer/industry discounts (which is none of their business)

There’s no legitimate reason for an insurer to demand a repairer’s invoices. And there is no worthwhile reason for the independent repairer to comply. Insurers cannot dictate what an independent repairer must provide to them. Independent repairers have no contractual or statutory obligations to provide their company’s confidential internal documentation to anyone other than perhaps departments that oversee their business in their state, the IRS, Federal Wage and Means or to comply with a subpoena in a legal action.

Let’s face it, if the insurer merely wants to verify pricing, they can contact a dealer/supplier and obtain the current published MSRP pricing. They have no need to know the repairer’s actual cost.

Note: I encourage my repairer clients to tell their suppliers/vendors not to divulge any of their business dealings with others without their specific authorization.

If the insurer wants to verify that the parts called for were actually used in the repair, they can perform a post-repair inspection and verify it themselves. Parts can be returned for a credit/refund any time, due to errors, damage or cancelled repairs. A parts invoice only suggests the part was purchased; it doesn’t provide conclusive proof that the part was installed.

Some repairers may say, “Why not just concede and provide the insurers the information they seek? I’ve got nothing to hide.” My response is, “You have nothing to prove either!” Why would anyone want to be considered a crook or accused of committing fraud until they can prove otherwise? If the insurers were merely trying to verify price and use, they could get those answers themselves. Therefore, the reason for an insurer demanding invoices is likely much more nefarious.

Most independent repairers should know that the true customer is defined in most states as the party that signed the repair authorization. Therefore, in most states, the only “invoice” that the repairer is obligated to provide is their company’s final invoice for the repair, and it is to be provided to their customer.

Consequences

So what will happen if you refuse to provide your internal and confidential information to an insurer? First of all, if you don’t work for them, the insurer has no authority or right to demand anything from an independent repairer. If they believe you or your company has done something illegal, they can always call local law enforcement and report a possible crime. Or, as some will attempt, they may have their company’s SIU (Special Investigations Unit) launch an investigation to see if a formal complaint or lawsuit is warranted, and a subpoena for records would follow.

We all know the famous quote from FDR that goes, “The only thing we have to fear is fear itself.” Insurers will often attempt to exert their control over repairers through intimidation and fear, which is only possible due to the average collision repairer’s lack of knowledge. If one doesn’t know any better than to be afraid, they’ll be fearful and will likely comply with such senseless demands. I should know; I was once one of those repairers!

I encourage all repairers to know the laws that govern them in the state(s) they conduct business as well as the regulations placed upon insurers regarding fair claims practices. Most any successful business professional, regardless of their profession, will know this information or have it on hand to review when needed. Collision repairers are no different.

McDonald’s and Wal-Mart

I’ll leave you with this: How do you think McDonald’s would respond if you asked them for their pickle invoice? What if you demanded that Wal-Mart provide you with a copy of their internal invoice for a TV they had for sale? Your request would likely be met with a blank stare … just before they started to laugh.

I’ve developed a “Response to Request for Invoices,” which I provide my repairer coaching/consulting clients. Contact me and I’ll share a copy with you, which will help you to better understand the issue and respond to such demands in a factual, effective and professional manner.

 

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