Shop Operations: Setting Up a P&L Statement for Your Auto Body Shop
Historically, our industry’s associations have been about as highly regarded as government employees and thought to work just as hard. But during the past few years, some associations especially on the state level have become much more active, vocal and unified, making it possible for them to actually accomplish something.
But with this newfound activism comes responsibility. Part of an association’s role is to educate its membership, but to do that properly, the association itself needs to be informed. I say this because I recently received a flyer that went to member shops from a body shop association that’s really trying to do the right things. Member shops were supposed to pass this flyer on to vehicle owners, to help educate them about their rights. The flyer bulleted six points, and as I read the fourth, I got concerned. (I’ve bolded the information below that struck me as inaccurate):
Some insurers will actually tell you that if you take your vehicle to “that shop,” you’ll have to pay extra, out-of-pocket expenses. What they’re really telling you is, “This is all we’re willing to pay.” They already have a direct-repair program arrangement with another shop in the area. What a DRP arrangement for most insurers is: The shop and insurer have entered into an agreement in which the shop agrees to repair that insurance company’s claims business the way the insurer wants the repairs made, which might not be in your best interest. Of course this type of decision is for cost savings only. If the repair facility repairs the vehicle the way the insurance company demands, then the insurer is 100% liable for that entire repair. Again, you the consumer are stuck in the middle. What is the correct and safe way to repair my vehicle?
Because this information just didn’t sound right to me, I consulted Massachusetts collision repair attorney James Castleman to set the record straight …
GKC: If the repair facility repairs the vehicle the way the insurance company specifies, is the insurer 100% liable for that repair?
Castleman: “It depends on the particular state’s law and whether you’re talking about a DRP shop or an independent shop (it’s not clear to me which they’re talking about in the flyer). As an example, in Massachusetts, if you take your car to an insurer’s referral shop, then, by statute and regulation, the insurer has to guarantee the repairs; if you take your car to your own independent shop, then the insurer has no liability, even if the shop does the repairs the way that the insurer says to (although the Wreck Check people might claim otherwise). Generally, the insurer is never liable for work done by an independent shop. Whether the insurer is liable for work done by a DRP or “referral” shop depends on the state.”
GKC: But is a shop ever really off the hook even if they are a DRP? Aren’t they liable for the repair, too? This makes it sound like the shop has no liability if it repairs the vehicle as per the insurance estimate. But isn’t the shop always responsible for its work? The insurer may also be responsible, but that doesn’t make the shop liability free, does it?
Castleman: “You’re right. Generally, the shop is always responsible for its repairs, whether it’s an independent or DRP shop, and whether or not the shop does the work the way the insurer specifies it wants the work done. In Massachusetts (and some other states), the shop is on the hook even if it does the work the way the customer wants it done, even if against the shop’s advice. Although it might fly in some states, in Massachusetts and some other states, a repair shop cannot disclaim liability under any circumstances and cannot effectively have a customer waive warranty claims against the shop.”
So what does all this mean to you? Bottom line: “The insurer made me do it” excuse doesn’t relieve you of liability. You, as the repair expert, are always responsible for the work coming out of your shop. And you should be.
Georgina K. Carson, editor