An Iowa body shop has prevailed in a small claims court case with Travelers Insurance Company. The judge in the case dismissed charges against O'Mara Auto Body of Martensdale, Iowa, and ordered the insurer to pay court costs.
Like this article? Sign up to receive our weekly news blasts here.The lawsuit turned the normal shop vs. insurer narrative on its head. While several body shops have successfully taken insurers to small claims court in pursuit of unpaid claims, in this case, Travelers actually sued O'Mara's (for an amount less than $400) after reimbursing the vehicle owner, claiming that the shop had violated its contract with the insurer.
The suit stems from repairs the shop performed on a 2009 Dodge Journey in February 2012. O'Mara's final repair bill exceeded Travelers' original estimate by $333.69. Shop owner Tom O'Mara said he does not have a direct repair agreement with Travelers.
According to O'Mara, when he informed the vehicle owner of the difference, the owner agreed to pay the entire bill, and then pursued reimbursement from Travelers. Travelers then compensated the owner, and came back to O'Mara seeking restitution for what they claimed were duplicate and unnecessary charges. The insurer also claimed O'Mara violated a contractual agreement.
"The owner brought the vehicle to me, said he wanted it fixed right, and he didn't want to cut any corners," O'Mara said. When Travelers initially refused to pay for the disputed procedures, he showed the owner what he'd done, and showed him the corresponding P-pages. "He went ahead and paid me, took the car, and contacted Travelers."
According to the notice Travelers' attorney, James W. Bryan, sent to the shop in March, the insurer claimed O'Mara double-charged for labor on a radiator support, billed the customer and insurer for work that was "not reasonable and customary" (including billing for detailing and clean up, as well as finish sand and buff procedures and materials), and violated Travelers' contract by not seeking approval for supplements.
According to the letter: "I am therefore aware you are familiar with Travelers contractual requirement that your shop contact them for approval before any supplements are performed. This direction is found right on page 1 of the estimate at the top."
Travelers claimed O'Mara should repay $394.40 in "duplicative and unnecessary" charges.
O'Mara contacted industry attorney Erica Eversman (of Vehicle Information Services) and shop owner Ray Gunder for advice, and retained his own attorney. "I knew if I paid [Travelers] back, then they were going to pull this on me every time I worked on a vehicle they insured," O'Mara said.
According to Eversman, the case hinged on whether or not the insurance company’s estimate really served as a "contract," particularly given that O'Mara had no DRP relationship with the company.
"As a general principle, it doesn't really matter, because the insurance company estimate is nothing in relation to the independent shop," she said. O'Mara had no obligation at all to contact Travelers about the difference between his bill and the estimate; the shop's obligation was exclusively to the vehicle owner.
As for the claims that some of the procedures were not "reasonable and customary," Eversman said that most insurers would have a difficult time proving that in court.
"That's not typically a phrase you see in automotive repair claims," Eversman said. "This creates trouble for insurers, because if you go into court, the obligation of the insurance company is to pay what is reasonable and necessary to restore the vehicle. For an insurance company to make its own determination about what is reasonable and necessary is more problematic for them, because they are not professional car repairers."
While small claims court decisions do not have precedential value, Eversman said the decision can lend "persuasive precedent" to similar cases in that it helps establish that the insurance company estimate is not a binding contract with the shop.
"The other thing it does is that it helps reset the idea that the insurance companies truly are overstepping their role in this entire process, and that they appear to have absolutely lost sight of the fact that they aren't in control of the repair," Eversman said. "They have lost sight of the fact that they are indemnifiers. They're job is to pay the insured for the loss."
O'Mara says he's pleased and vindicated by the court's decision. "I always knew that insurance companies cannot force you into using their estimate to repair a vehicle," he said.
