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A Fight to the Finish

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It was 1995, and business was humming at Stroud’s Auto Rebuild in Tacoma, Wash.

Owner Mike Harber was the biggest shop in his local market and employed 45 workers. About 30 percent of his business came from a direct repair relationship with a major insurance company.

One day he was doing a repair job that required a new frame rail. The repair would have made the car a total loss, so the insurance company said they wouldn’t pay for it. Harber pushed back. Then, he says, men in suits walked into his shop to put him on restriction because they said he wasn’t being a good partner. Their relationship was on shaky ground, even though before this it had been fine, he says. “Restriction” meant they would send him no business for 30 days.

“I said, ‘What? What do I do with all the employees?’” Harber recalls.

After that he ended the relationship, and began his vocal opposition of the insurance industry.

The question was, how long could he keep up the fight and stay in business?

THE BACKSTORY

Harber had never planned on entering the collisionrepair industry.

He had served in the military, and in 1972 he became a businessman. He bought a real estate business, and grew it to 20 agents. He had his own office. He also had a construction business and a syndication company. His business partner was the financial planner of Harold Stroud, who owned Stroud’s.

Stroud had been looking to retire. In 1987 he sold the shop to Harber and his partner for $1.2 million.

“It looked like a very lucrative business,” Harber says. “My partner’s favorite saying is that it’s recession proof because it’s funded by the insurance industry. It looked pretty bulletproof.”

About a year later, his business partner went bankrupt and left Harber to run the shop. Harber sold his other businesses to keep Stroud’s afloat, and has been there ever since.

THE PROBLEM

It didn’t take Harber long to figure out he couldn’t work with the insurance business in the way he wanted to. In the mid-1990s, Harber had had three major DRPs, and two smaller ones. He says he had noticed more and more insurers starting to manipulate repairs to save money, even if it meant diminishing quality and safety. He talked to other people in the industry who noticed the same thing.

“What started happening is they all started having us compromise the repairs,” Harber says. “It’s very subtle.”

The day that the men in suits came to his shop and threatened him was when he drew the line. One of Harber’s vendors recommended he talk to an attorney before he cut his DRPs, though. He set up a meeting with a lawyer, who suggested he make sure he’s in compliance with the Automobile Repair Act, a Washington law that protects consumers in collision repairs. Harber didn’t want the insurance industry to find a way to put him out of business.

With the help of his attorney, he put standard operating procedures in place, created proper payment for service agreements, and developed a strong understanding of the law for the repair authorization process.

“I recognized that it was going to probably be a significant battle,” he says.

THE DECISION

Harber says his decision to push back against the insurance industry was clear. Within a year of his meeting with the lawyer, he dropped his DRP relationships and decided to not only go-it alone, but also make a point of speaking out against the insurance industry.

“It’s just not right. What you are doing is you are deceiving a consumer to benefit your insurance partner. It’s about money, it’s not about doing the right thing,” Harber says. “It’s the mafia, it’s organized crime. It’s all about money, and greed. Corporate greed.”

He says with DRPs, he couldn’t serve two masters—consumers and insurance companies.

“You can have the best of intentions. The ultimate motives—and you read any of the agreements—they’re all about cost savings, efficiency, cycle time and throughput. All these words, and none of them have to do with quality. And safety,” he says. “It’s all about time and money.”

He took these observations and his passion for consumer advocacy and pushed ahead. He decided to go on-air with his viewpoints and started a talk-radio show called Crash Talk, which airs in the Northwest U.S. and in Amarillo, Texas. The show explores the intricacies of the collision repair business, including issues with insurers. It’s a controversial show, and he says the insurance industry noticed. But he felt there was an important, if complex, story to tell.

Harber also clearly stated his opposition to insurance companies on his website, stroudsauto.com:

“When most people have an accident, they have their second within 24 hours ... when they call the insurance company. Prevent your second accident and call Stroud’s first for free advice and assistance on how to protect yourself and your investment. Why would an insurance company recommend a specific shop? Could it be they cut corners, use inferior parts and shoddy repair techniques to save the insurance company money? And why would a shop do that? Maybe to get more referrals from the insurance company? There’s a reason why insurance companies don’t like Stroud’s—because WE WORK FOR YOU!”

Harber’s efforts ultimately led to a lawsuit against an insurance company of one of his customers. Safeco Insurance Company completed an estimate on a vehicle that had been T-boned by a drunk driver. By Harber’s estimates, the car needed a new floor, and so the entire repair would have cost about $20,000. Safeco revised their repair plan to about $10,000, and drove business away from Stroud’s.

“This type of thing has happened over the years,” he says. “But this one was so egregious.”

Stroud’s was awarded $9,462.23 for the amount of profit lost. Safeco appealed the decision, and that led to arbitration. In spring 2011, Stroud’s retained the arbitration award and won payment of attorney’s fees.

Harber says it takes an incredible amount of documentation to sue. Shop leaders also take a risk in creating a reputation among consumers who don’t want to deal with legal conflicts.

“Emotionally, it’s draining. It’s very stressful. You always have the possibility to lose,” he says. “It takes a lot of time, as well.”

THE AFTERMATH

Harber’s decision to fight the industry earned him a reputation with insurers. After he cut his DRPs, rumors began circulating in Tacoma that Stroud’s was going out of business. One investigative journalist, who interviewed Harber for a report about insurance companies and the collision industry, had warned him of financial ruin because of his stance against insurers.

Harber knew the risks involved and took them anyway. After he cut his DRPs, he began aggressively pursuing radio, TV, billboard, buses and direct-mail advertising for Stroud’s.

Despite his best efforts, revenue diminished. In the mid-1990s he was the largest shop in Tacoma with 45 employees, and made $250,000 to $300,000 in sales per month. By 2000, he was down to 20 employees and about $150,000 to $175,000 in revenue per month. Business continued to diminish over time; this spring, he had just a handful of employees.

This year marks the 50th anniversary of the shop. But all of the history came to a close in April, when the shop shut its doors for good.

Harber is 60 this year, and he says the decision to close was not made lightly.

“It’s just like, do I want to gear up, start spending more on advertising, buy necessary equipment and continue to fight? I’m sick of it,” he says.

THE TAKEAWAY

Harber says he has no regrets about the way he handled everything.

“I recognize the choices I made may not be the most financially rewarding ones. But I really feel it’s the right thing to do,” he says.

Harber owns the real estate, and the equity he has built up is his saving grace. The building is at a controlled intersection near a mall and new development. He’s now leasing out the building to another business owner.

His advice to other shops? Find a great location where you can build equity, and own the property. “It’s a Plan B,” he says.

Harber also believes that repairers don’t stand up for what’s right, and that the industry needs to stick together if they’re going to make a difference.

However, he thinks that others in this business need to be prepared for the fight if they decide to cut DRPs.

“You either get in bed with the insurance company, and you’re going to serve them, or you’re going to have to market yourself and advertise,” he says. “Be determined, or you’re not going to make it.”

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