Bills address labor rates, steering concerns

Jan. 1, 2020
Two proposed laws now winding their way through the state legislatures in California and Arizona hope to address two issues that continue to put insurance companies, collision repair shops and consumers at odds: claim disputes and alleged steering by

Two proposed laws now winding their way through the state legislatures in California and Arizona hope to address two issues that continue to put insurance companies, collision repair shops and consumers at odds: claim disputes and alleged steering by insurance companies.

In California, Senate Bill 1492 would establish a Rapid Dispute Resolution program to resolve disputes over physical damage coverage between insurers and policyholders. The bill was passed by the California Senate Judiciary Committee on May 9, and now awaits action by the Appropriations Committee before going to the floor for a vote.

In Arizona, lawmakers have proposed new legislation, House Bill 2063, that would prevent insurers from making knowingly false statements to claimants about auto and glass repair facilities.

The two bills are part of a growing body of legislation and litigation that have pitted insurance companies, consumer groups and collision repair associations against each other over such issues as insurer-owned repair shops, direct repair programs, insurer concierge programs and insurance company word tracks.

Under California SB 1492, which has been substantially altered since its introduction earlier this year, the Department of Insurance would establish a voluntary Rapid Dispute Resolution program to mediate disputed amounts between $500 and $7,500. Disputes would be settled within five calendar days. Insurers are not required to participate, but those who do are bound by any determination of the mediator. Consumers are not bound by the decision, however, and would be free to pursue action in small claims court if they were not satisfied with the decision of the mediator. Insurance companies would also be expected to fund the program by paying a $300 fee for each dispute settled through the program.

Under current law, the Department of Insurance is required to mediate disputes for claims exceeding $7,500 when the amount in dispute exceeds $2,000.

According to Brian Perkins, chief of staff for the Banking, Finance and Insurance Committee, either the California Bureau of Automotive Repair (BAR) or a private vendor retained by the Department of Insurance would assist the department in defining the scope of the repair.

The bill has a sunset date of July 2012, unless a later statute extends or deletes that date.

The Association of California Insurance Companies (ACIC) has filed a letter of opposition, stating that the bill would not resolve any demonstrable problem. ACIC also objected to insurers bearing the cost of the arbitration, and to the five calendar day requirement (which could conceivably include weekends). ACIC was also concerned that claimants could prolong the process by seeking redress in small claims court after the five-day period, and characterized the program as "one-side-binding arbitration."

"SB 1492 would accomplish nothing of benefit for consumers," says the ACIC letter. "Indeed, the bill would involve more hassle for them, for insurers and for the Department of Insurance."

According to Perkins, however, several hundred of these disputes wind up in small claims court, which costs the insurance companies legal fees, and under the existing mediation program, insurers can be charged up to $700 for each case. "We're starting to see more of these that just don't get resolved," Perkins says. "This may actually help the insurance companies if they participate."

He also emphasized that the program would be completely voluntary for the insurance companies.

The bill was scheduled to go before the Senate Appropriations Committee this week. A final evaluation is expected sometime in May or June. If it passes in the Senate, it then moves to the Assembly Insurance Committee.

The Arizona bill, in contrast, was designed to combat what its backers characterize as steering by the insurance companies during phone calls with customers.

The bill would prohibit an insurer or insurer's agent from making "any statement regarding the insured's or claimant's choice of repair facility that the insurer or the insurer's agent does not know to be true in order to change the insured or claimant's choice of repair facility" if the policyholder chooses a repair shop that wasn't recommended by the insurance company, and from creating "any delays in the progress of the repair or processing of the claim that the insurer or the insurer's agent would not have made had the insured chosen a repair facility recommended by the insurer or the insurer's agent."

The Arizona Collision Craftsman's Association (ACCA) and the Arizona Auto Glass Association (AAGA) have both endorsed the bill.

The legislation originally started out as an eminent domain bill. Under Arizona law, the legislature can strike the original language of the bill and change its content in what is known as a "strike everything" amendment. The new version of HB 2063 now mirrors language from a previously introduced piece of legislation that was not passed.

"It's clear to us that the insurance companies want to steer, and they're going to try to stop every effort to limit steering in our state," says Barry M. Aarons, a lobbyist representing the ACCA and AAGA.

The current legislation addresses the issue of insurance company "word tracks," which have come under fire from several collision industry groups across the country because of questionable language that critics say is another form of steering. "Despite the fact that the law says they can't do it, insurance companies have found ways around it," Aarons says. "We want a provision in the law that says you can't say something that you know not to be true."

The Property Casualty Insurers Association of America (PCI) has come out against the bill, pointing out that Arizona already has existing laws that require insurers to inform the consumer of their right to choose a repair facility, and prohibiting them from making untrue statements or delaying claims processing.

"We believe there are already good laws on the books that allow for consumer choice," says Kelly Campbell, PCI regional manager. "They also have remedies if a consumer is concerned about the handling of a claim. We think it's important to just let those statutes stand as they are."

The Arizona bill is currently awaiting action by the Senate Rules Committee.

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