Q&A: Using OEM Position Statements to Your Advantage when Negotiating

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Matthew and Marcia Seebachan were trapped in a crushed, burning 2010 Honda Fit after a collision. As it was later discovered, John Eagle Collision Center (Dallas) used glue instead of welds when replacing a hail-damaged steel roof on the vehicle prior to the accident. Both John Eagle and the shop’s DRP partner, State Farm, are now being sued for failing to follow OEM procedures.

And while shop’s willingness to follow OEM procedures is an issue in and of itself, many in the collision repair industry—including Bob McSherry’s shop in FenderBender’s February 2017 issue—have pointed to the fact that insurance companies will sometimes argue against OEM-recommended procedures such as pre- and post-repair scans.

That’s where someone like Patrick McGuire comes in. As the owner of the Law Offices of Patrick J. McGuire, he regularly consults collision repair shops on issues that, ideally, prevent the sort of disaster that occurred in Texas. And one area where shops can really do themselves a favor is better understanding OEM position statements. He spoke with FenderBender to discuss how they can do just that.


Why do many shop owners have trouble using position statements to their advantage when negotiating with insurance companies?

Shop owners are definitely reading them. I just think they're struggling with translating that to getting paid for what they do, and how to put it into the proper context of consumer protection issues. And what goes hand in glove with that is what's owed under an insurance policy. It's about translating it into actionable information.


So what's being lost in translation?

They have to pay particular attention to what is said in the position statement. That sounds very basic, but what I've seen is many of the OEMs pick their wording very carefully, and most of them make a distinction between a pre-repair and post-repair scan.

I think it's critical that shops focus on what the actual wording for each one of those is. It might say "strongly recommended" for one thing, it might say "required" for another. I think those words can have significant meaning in terms of the shop's obligation to properly repair the vehicle and get paid for it. Most OEMs say a post-repair scan is necessary, so I don't think there should be much debate, if any, about shops' obligation to perform that and get paid for it.


If the position statement recommends or requires a procedure, then what is the disconnect happening between insurance companies and collision repair shops?

I'm going to speak specifically about Illinois law, which is, like many states, a negligent state, and not a no-fault state. Focus on that as a starting point for looking at these issues. If you've got a first-party vehicle in there, the analysis and what you do would potentially be different than what you'd do with a third party.

On the third-party claimant vehicle, for a pre-repair scan, you would really have no issue. If someone is not at fault for the accident, they'll want a full, complete estimate right off the bat. That goes to a consumer's mitigation of their own damages, to find out what the extent of the repairs that are needed up front will be to make the repair transaction as quick and painless as possible. And then, certainly on a post-repair scan, there'd be no question about it. A shop would be on all fours with what they're supposed to do under the law.

A first-party situation may be a little different. Depending on the wording in the position statement and the wording of the particular consumer's insurance policy, I see how there could be some debate about whether a pre-repair scan is covered. I think that would, in most instances, strongly favor the consumer in having it paid for and done. For a typical policy for automobile coverage, I have never comes across a policy that would purport to have some limitation or exclusion on that type of diagnostic scan. And I think that the consumer who purchased the policy and had reasonable expectations would trust whatever the auto manufacturer said should be done. Even assuming there's some leeway for a debate there, I think it would ultimately come down to the fact that the insurer insured the particular vehicle, and the insurer had full access to whatever these position statements are as well. And if they knew it was the position statement of one of the OEMs to do a pre-repair scan, and they accepted that and faced the premium and then tried to say it's not covered at the time of loss, then the insurance company would be on some shaky ground.

What we're talking about here is restoring the functionality of the vehicle and doing it in a way that is the most cost-effective and eliminates surprises. I think in a lot of these position statements, the OEMs have spelled out several bases for doing the rpe-repair scan. The No. 1 reason is to determine the full extent of the damage, but also to then streamline it so you don't get hit with surprises that could add significant costs. Especially in a first-party situation, where you're talking about rental coverage and potential limits on that. This all tips in favor of the consumer that it should be covered under the first party policy of insurance.


Do shop operators need to understand the actual legal terms that apply to following OEM procedures?

Shops should certainly be aware of their state regulations and what their repair laws dictate. I also think it's in their best interest to understand some of the legal terminology and how to use it effectively. I don't think they need to become legal scholars on the subject, but I think they should have a solid working knowledge of some of these concepts.

It comes up all the time—it came up for decades before the advent of all these advanced driving systems and technology. It used to be that once the consumer made the claim that it was involved in a collision, the insurance company had that burden to prove this liability was limited, and not just surmise or assume that something wasn't covered. I think for a long time, it could have benefitted shops to understand some of those concepts.


The legal language changes by state, right?

Back in 2002, when AASPI (Alliance of Automotive Service Providers of Illinois) had people working on the Illinois Collision Repair Act, I helped them on that. And what we did is have language incorporated into the repair act that specifically dealt with OEM procedures.

One of the sections of that basically says what can shops charge for and not charge for. And one of the provisions says a shop cannot charge a consumer for unnecessary repairs. But then it goes on to define what an "unnecessary repair" means. It says that a reasonable basis for a repair includes that the repair service is consistent with specifications established by law or the manufacturer of the motor vehicle component or part.

Once you've got that in your state law or regulation, it's going to go a long way in saying, “Here's why I'm doing it. I owe this obligation to a consumer to prepare their vehicle properly, and there's a reasonable basis for rme to say why I'm doing this.” For an insurance company, the "reasonable basis," goes directly to what's covered under a typical policy of automobile insurance. Shops would be well served to understand that type of language that does exist in statues that are already on the books.


Should shop owners talk to lawyers and have this language explained to them?

Yes. Shops in each state are pretty much facing the same dilemmas and questions. So, why not collectively get somebody to go in and take a look at all of the laws that pertain to their businesses? Get an attorney or someone licensed in that state to do that and then teach everyone to bring those really pertinent provisions to their attention.

It's something they can and will use on a daily basis once they're aware of it. And it significantly reduces the chance of them being outmatched by an adjustor that thinks they know more than them.


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