SCRS Releases Documents Outlining New Farmers DRP Agreement Guidelines - BodyShop Business
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SCRS Releases Documents Outlining New Farmers DRP Agreement Guidelines

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Due to collision repairers’ recent concerns about the new
Farmers Insurance COD agreement, the Society of Collision Repair Specialists
(SCRS) reviewed the content of the agreement and decided it was in the best
interest of the industry to make it available for public review. 

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"Insurance carriers have continued to increase
pressure over repair shops to obtain the quickest/cheapest repairs, while
interjecting themselves further into the oversight and management of repair
businesses," said Aaron Schulenburg, executive director of the SCRS.
"The industry is often disadvantaged by restriction of communication from
participants of these programs, and it’s important for the industry to rely on
factual review of documents, rather than anecdotal musings. If we wish for
business conditions to improve, it’s important that our industry finds the
voice to express our concerns openly and honestly without fear of being
transparent."

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The below excerpts from the Farmers agreement is what SCRS decided repairers
should be particularly aware of. However, SCRS wants the collision repair
community to know that this information is "not to be construed as
direction or suggestion, and is intended simply to better inform individuals
acting within their own judgment, making sound business decisions, without
agreement to take concerted action."

SCRS NOTE: In these excerpts, "Exchange" refers to
Farmers Insurance, and "Vendor" refers to the DRP repair facility.

5.2 DISPUTED AMOUNTS. If Exchange in good faith disputes
any portion of a Vender invoice ("Disputed Amount"), Exchange will
timely pay Vendor for the undisputed amounts of that invoice. Unless otherwise
specified by federal or state laws, statutes, codes, rules, or regulations,
within thirty (30) days of receipt of an invoice from Vendor on which a
Disputed Amount appears, Exchange will (i) notify Vendor in writing of the
specific items in dispute; and (ii) describe in detail Exchange’s reason for
disputing each such item. Within thirty (30) days of Vendor’s receipt of such
notice, the Parties agree to negotiate in good faith to reach settlement on any
items that are the subject of such dispute. Vendor will not terminate this
agreement on the basis of an alleged breach involving Exchanges failure to pay
a Disputed Amount unless the Disputed Amount exceeds fifteen percent (15%) of
the total amount payable under this Agreement or the sum of twenty five
thousand dollars ($25,000.00), whichever amount is greater.

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(SCRS NOTE: Based on this language, shops that sign this agreement would appear to have agreed that the carrier can dispute their charges 30 days after they’re invoiced, and
the repair facility can’t terminate their agreement based on a breach of
contract if the carrier fails to pay unless it’s a $25,000 short-pay.)

11.4 Vendor shall ensure that its General Liability,
Workers’ Compensation, Garage Liability, Coverage for Garage Operations, and
Physical Damage insurance policies allow Vendor to waive its rights of recovery
prior to a loss and that the carriers furnishing such insurance policies shall
be required to waive all rights of subrogation against Exchange, its officers,
agents, employees, and other vendors and subcontractors. To the extent
permitted by law, Vendor shall look solely to its insurers and not to
Exchange’s insurers for loss or damage arising from work performed for
Exchange.

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(SCRS NOTE: How many business carriers will allow their
clients to waive their rights in this manner through this agreement? Will a
collision repair business still have coverage if they sign this? How many of
the shops have taken the time to forward this provision to their carriers to
ask if they approve of their unilateral waiver of rights to subrogate against
the carrier in question? What if a staff re-inspector injures themselves on the
shop property due to their own negligence? It appears that the liability falls
on the shop for their repair approach and choices.)

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12. MOST FAVORED CUSTOMER. During the term of this
Agreement, if Vendor enters into a written contractual relationship with an
insurance company or organization pursuant to which (a) Vendor provides
services substantially similar to those provided to Exchange, and (b) Vendor
provides pricing or other commercial terms that are more favorable than the
pricing or commercial terms being provided to Exchange for work performed by
Vendor, then Vendor shall offer to Exchange in writing, within thirty (30) days
of Vendor entering into such agreement, the same or better pricing and/or
commercial terms to Exchange. On a quarterly basis, Vendor shall provide a
written certification executed by an officer of Vendor of Vendor’s compliance
with this Most Favored Customer provision.

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(SCRS NOTE: "Most Favored" pricing language is
currently being challenged in the healthcare industry. It’s interesting that
the repair industry is constantly asked to be "competitive," and
those same parties now want the industry to guarantee pricing given to another
party, which by virtue is not competition.)

16. SUBCONTRACTING

16.1 (ii) Sublet repairs reflecting a retail price within
the local market should be written without a mark-up. Sublet items reflecting a
wholesale price may be considered for a mark-up not to exceed 25% of the sublet
charge. All invoice mark-ups combined may not exceed $200 for the entire
repair.

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17. INSPECTION OF BOOKS AND RECORDS. Vendor agrees to
maintain and preserve its books and records in accordance with generally
accepted accounting procedures ("GAAP") for a period of three (3)
years or for a longer period if required by applicable law or regulation. Any
time prior to the termination of this Agreement and for a period of two (2)
years thereafter, Exchange shall have the right to inspect and audit such
portions of the Vendor’s books and records as is necessary for purposes of
verifying amounts payable to Vendor or its authorized subcontractors and to
verify compliance with the terms and conditions of this Agreement. Vendor
agrees to make such books and records available for inspection by Exchange, its
designee, or any insurance regulatory authority immediately upon request.

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(SCRS NOTE: Are business owners willing to open internal
accounting books to a party outside of the business? There are concerns voiced regularly throughout the
industry regarding data that’s shared through electronic mechanisms. Now this
program appears to require businesses to open up all their books, P&L
statements and proprietary business information to another party.)

27. BACKGROUND CHECKS.

27.2 In no event will Vendor in the performance of this
Agreement use the services of an individual who has been convicted of a felony,
including but not limited to any convictions involving dishonesty, a breach of
trust or moral turpitude.

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(SCRS NOTE: Language in this section is similar to
requirements in other programs, requiring complete background checks, and no
shop can employ individuals who have ever been convicted of a felony; in some
states that may mean a DUI. How many businesses hire good, decent employees –
from  detailers and technicians to
office staff – who may have made mistakes in the past but have earned their
employers’ trust and respect for the work they do today? Is it necessary to
allow another party to interject who’s employed in a privately run business? Is
the requirement reciprocal to the representatives who will interface with
repair facilities in the field?)

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The SCRS states that its decision to release a link to
this document should in no way be construed as legal or ethical advice or
opinion. However, it’s their hope that the industry finds the information
useful in making educated business decisions and discusses the material
responsibly. 


More information:

Download a copy of the agreement

SCRS

 

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