The Fox and The Hens - BodyShop Business

The Fox and The Hens

Systems that have checks and balances.

I believe in systems that have checks and balances. It’s a fundamental concept of democracy, and there’s no better example of democracy in action than the current wave of legislation prohibiting insurer-owned shops. Well, maybe it’s not a wave, but it’s at least a good ripple. This year alone, Arizona, Florida, Hawaii, Iowa, Maryland, Michigan, Minnesota and Missouri have all introduced legislation to ban or limit insurer-owned shops. With the exception of Michigan, all the bills have died due to the end of each state’s legislative session.

The state to keep an eye on, however, is Texas, where events have proven that it pays for collision repairers to join forces and speak up. When Texas’s House and Senate versions of bills prohibiting insurance company ownership of collision shops (specifically Allstate and its Sterling shops) were introduced in February last year, the Automotive Service Association (ASA) asked the 4,600 collision shops in Texas to contact their senators and representatives.

They did.

By the time the House bill was introduced, it had gained 67 new sponsors and the Senate bill had gained 14 new co-sponsors. Both bills passed and, in June, Texas Gov. Rick Perry signed House Bill 1131 into law.

“You have a conservative legislature in Texas,” says Bob Redding, ASA Washington D.C. Representative. “They are a pro-property-rights government, period. They saw the need to protect the vehicle owner and a large sector of the small-business community … . And it wasn’t a close vote – it was overwhelming.”

Allstate, however, wasn’t about to pick up its toys and go home. In August of last year, the insurance company filed a lawsuit against the Texas Attorney General challenging the new law, claiming it violates Allstate’s First Amendment rights to free speech.

Allstate maintains that Sterling is engaging in legitimate commercial speech when explaining to customers the problems associated with other local non-Sterling body shops, problems they claim include inflating repair appraisals (in some cases, by purposely inflicting damage to cars) and charging for new parts but using used parts.

In December 2003, the U.S. Federal District Court for the Northern District of Texas granted Allstate’s request for a preliminary injunction against enforcement of several provisions of Texas House Bill 1131, allowing Allstate to resume joint marketing with Sterling and to recommend Sterling as an option to Allstate customers and claimants in Texas.

“Having one company outlawed because its innovations or ideas provide a superior customer option compared to the rest of the industry is contrary to the essence of free enterprise,” says Allstate Vice President for Property and Casualty Claims Cathy Lazaroff. “Our economy needs laws that welcome and encourage businesses to invest and expand in the state, not laws that place unfair and onerous restrictions on growth.”

But is Sterling offering a superior customer option compared to the rest of the industry? And, in fact, is that even the issue? Isn’t the point of contention here that we have a “fox guarding the hen house” situation? When insurers own shops, consumers lose their sole advocate – the independent repairer.

But is legislation banning insurer-owned shops the answer? That remains to be seen. Allstate’s appeal is currently scheduled for September. Until then, it’s all speculation.

“The key issue for us in Texas will be the language regarding the prohibition of insurer-owned shops, not just the temporary injunction,” says ASA’s Redding. What he’s saying is, let Allstate enjoy its First Amendment rights to free speech during the phaseout period of Sterling. The real issue is whether the bill itself will hold up in court – no doubt, setting a precedent regardless of which way the gavel falls.

But no matter what the outcome, the collision repair industry has taken a step forward: It’s recognizing the benefits of unification. In March, ASA announced ASA-Texas as its 15th affiliate, and that’s due in no small part to shop owners joining forces last year with ASA to promote insurer-owned shop legislation.

And it’s this “joining of forces” that’s a huge step for collision repairers. Says one Florida shop owner: “Historically, trying to organize a bunch of collision repairers has been like trying to organize a bunch of Siamese cats.”

There’s power in numbers and power in having a cohesive voice speaking on behalf of the industry. As the collision repair industry realizes this, it’ll reap more benefits from the power it wields.

Bob Bissler, Senior Editor
[email protected]

To read Texas House Bill 1131, go to www.capitol.state.tx.us/capitol.htm.
To get involved in legislation prohibiting insurer-owned shops in your state, go to www.takingthehill.com.

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