The Rhode Island Supreme Court recently reversed a Superior Court ruling that would have required that the labor rate survey be used as the sole determinant in establishing the prevailing auto body labor rate, siding with the Property Casualty Insurers Association of America (PCI) and the Rhode Island Department of Business Regulation (DBR).
The case, Auto Body Association of Rhode Island (ABARI) vs. State of Rhode Island Department of Business Regulation (DBR), stems from the DBR’s interpretation of Rhode Island law that the labor rate survey is not the sole determinant of the prevailing labor rate. ABARI took DBR’s decision to the Superior Court.
PCI intervened and asked the court to affirm the DBR’s decision. The Superior Court judge ruled in favor of ABARI, and both RIDBR and PCI filed appeals in the Supreme Court. The Supreme Court consolidated the appeals, heard oral arguments and issued the ruling establishing that labor rate surveys are not the sole determinant of rates paid to shops, and insurers still must provide an explanation of how they calculate prevailing rates paid.
Per state law, insurers must file annual labor rate survey reports with the DBR that include:
• Results of the questionnaires considered by the insurer.
• A description of the formula or manner in which the insurer has calculated or determined the prevailing labor rate which it pays to auto body repair facilities.
• The prevailing labor rate established by the insurer.
• If the calculation or formula provided by the insurer is not based on the results of the labor rate surveys, they must explain why.
ABARI originally filed a petition to make labor rate surveys the sole determinant of rates paid to shops because the group claimed “many insurers refused to set a prevailing labor rate, claiming that they ‘negotiate’ with each shop directly (while paying all the same rate), or set a prevailing labor rate basing it upon information such as insurer historical data, subrogation rates, and rates paid in other states,” the court’s decision says.
PCI says it’s pleased with the court’s decision.
“This decision restores a system of checks and balances regarding the establishment of a reasonable labor rate and protects consumers and insurers from the possibility of higher auto body repair costs,” said Frank O’Brien, vice president for PCI. “While this decision is good news for consumers, auto body repair issues remain a significant concern. Insurers remain committed to helping consumers make sound decisions about repair claims.”
More information:
Read the Rhode Island Supreme Court’s decision
Insurance Association Disappointed in Court Ruling on Labor Rate Survey
POINT-COUNTERPOINT: Should Labor Rate Surveys Be Abolished?
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