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Two-Party Checks

A new customer asked me to sign over the two-party check made out to us and them so they could keep the money. But to me, this is fraud. What’s your take on this?

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Barrett has authored numerous industry trade journal/magazine articles, including several cover stories for BodyShop Business. Having grown up in a family-owned collision repair business and owner/operator of two successful collision repair facilities, his ongoing efforts as industry speaker and repairer coach-consultant are geared toward educating professionals and consumers to achieve equally successful resolutions to automotive-related property damage issues. Such issues include proper and thorough repair, reasonable repair profitability for repairers as well as equitable claim settlements for both claimants and the responsible/paying parties. ADE offers numerous professional services nationwide.

Twice in the last three months, a new customer I had never met before asked me to sign over the two-party check made out to us and them so they could just deposit it and keep the money. While I know the business tax issues with this, I told them both that it was fraud and I refused to do it. They both argued that it was legal, which I doubt it is. The insurance company is paying me to do the work; if I cash the customer out, that to me is fraud. If the customer wants the cash, they should just settle directly with the insurance company, but of course they won’t get as much as I wrote the estimate for. What’s your take on this? Is there an actual law or does it depend what state you’re in? The last thing I want to do is tarnish my reputation or get in legal trouble.

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First, I suggest you check with your corporate legal counsel regarding the laws in your particular state to avoid any and all liabilities and the appearance of any wrongdoing. The last thing you want to do, besides tarnishing your reputation or getting into legal trouble, is get into an argument with a customer as to what is or is not legal. Having a copy of a document or state statute would be beneficial to you and the consumer.
 
Second, unless you have some type of ‘agreement’ with the paying insurer…you are NOT being paid by the insurance company to do the work. You will be paid by the consumer, who has all rights to the monies either by contract or by reasons of liability.

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While it may depend upon the claim being a first party (made against the owner’s policy) or a third party (made against the at-fault party), when the insurer pays the vehicle owner, it’s the vehicle owner’s money to do with as they wish – whether getting their vehicle repaired or paying their rent (unless the consumer’s lienholder has certain rights of being listed on the draft in your particular state).
 
The current economy has led to an increase in the frequency of consumers “cashing out.” As a result, more insurers are using this trend effectively by providing extremely low initial repair estimates and retaining excessive resulting profits. I was recently told by one independent appraiser that, on low-impact claims, 75 percent of estimates provided were being cashed out and the owners were not getting their vehicles repaired.
 
When I had my shop, because we were known for providing thorough and accurate estimates of repair, we learned that our local competitors/colleagues were sending their customers to us to get our estimate/assessment of repair to submit to the insurer for payment. And once they received full payment for our estimate, that shop was offering to save their customer’s deductible to get the job!
 
We began offering our estimates/assessments at a reasonable fee, whereas if the customer had us perform the repair, we applied the “estimate/assessment fee” to the repair, rendering the estimate as “free” with repair. Note: We didn’t offer “free estimates” in our advertising…we offered a “free consultation.” During the consultation, we also provided information on the problems and concerns of dealing with a repairer who offered to save their deductible and how that could be detrimental to them, their family’s safety and their economic well-being (e.g. diminished value).

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This fee for estimating worked well for those who were either seeking a cash-out or another shop to do the repair as our estimates were indeed thorough and well worth the investment in comparison to the insurer’s initial settlement offer. Keep in mind that by offering this service, it frequently called for bringing the vehicle in and dismantling it for a complete and thorough assessment. This also provided greater exposure for our services and facility to the prospective customer, which helped us earn their trust and their business. Once the estimate was completed and the damages clearly shown to the customer, they often opted to have the vehicle repaired and chose to have us do it. This was also a great way to cull out deadwood timewasters, too!

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If it is indeed legal to endorse the draft, and you have received a fee for the assessment, you should have no compunction to sign off on the draft…after all, they are your customer! If you do, be sure to retain copies of the check and notes to ensure you and/or your company are not being assessed for taxes by the insurer or others.
 
Turn your estimating/damage assessment services from a nuisance time-robber into a profit center! 

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