Insurers are not bound by the same consumer protection laws that collision repair shops must follow, and Erica Eversman, J.D., from the Automotive Education & Policy Institute, stressed the importance of knowing how insurers try to get consumers to circumvent those laws and put repair quality at risk.
During an Alliance of Automotive Service Providers of Illinois webinar on Monday, May 19, Eversman highlighted consumer and repairer transactions. Repairers in Illinois must accurately represent the repairs the car needs and not take advantage of the consumers’ lack of knowledge about the topic. Insurer estimates do not matter. Repairers must decide what the car needs and get consent from the consumer before beginning work. Fearmongering, false promises, and demands for payment of services not expressly approved by the consumer are strictly prohibited.
“It would be a violation of consumer protection law for a repair shop to say you need an entirely new motor when that’s not the case and all you need are your brakes replaced,” she said.
Eversman explained two main tactics insurers use to interfere with the estimate process:
- They tell the consumer to give the repairer the insurer’s estimate and tell the shop to perform repairs per the estimate.
- Insurers attempt to dictate repairs without liability by trying to control costs or denying pre/post scans that would be negligent for the repairer to not perform.
“It’s illegal in Illinois for the repairer to do so. [Repairers] must prepare their own estimate. It must get the consent from the consumer,” she said. “We've had problems particularly when the insurer has agreed to an initial amount and the consumer comes back with additional damages … [the insurer] didn’t put the money aside for.”
She said insurers can dictate repairs if they accept liability for first-party repairs. The problem is insurers want to dictate without accepting the liability. Another issue Eversman warned about is insurers directing consumers to direct repair providers that offer faster repairs because there is no wait time for the adjuster to look at the vehicle. They also advertise a “guarantee” on repairs because they effectively make the repair shop fix it and make it right, which all repairers are going to do, so it's not a unique benefit to DRPs. Eversman said insurers promote DRPs as the best, top-quality participants when they often promote the lowest common denominator to save on costs.
Eversman investigated an insurer in the Columbus, Ohio, area and discovered more than 50% of the DRP shops were not legally operating shops, which is a violation of consumer protection law.
“They had not registered and done the things necessary with the collision repair board and over 50% of them were on one or more insurance companies preferred networks,” Eversman said. “So, the insurers were steering people and recommending shops as top quality who in fact were violating the law and were not permitted to accept money to do consumer repair work.”
She said there’s a big discussion among departments of insurance and legislators around possibly promoting managed repair networks, which already exists in the form of the direct repair network, because of rising cost concerns around the auto vehicles and parts tariffs. In the latest strategy to control costs, the insured agrees to use only an MRN shop in exchange for lower premiums, warranty on repairs, and free rental/replacement vehicles.
One attendee asked how a shop can inform consumers legally that insurers can’t legally tell them that a body shop will “repair according to our estimate.”
“You can do so by posting your requirement that you are statutorily required to prepare info and convey it to the consumer,” Eversman said.
Aftermarket Parts Raise Questions
Eversman discussed IL H.B. 2472, a bill that went into effect this year. It requires insurers to use OEM directives on aftermarket parts repairs and repairers to use OEM directives on repairs and AM parts.
She discussed the four different types of replacement parts:
- New OEM, also referred to as genuine parts
- Used/Salvage OEM, also referred to as like, kind, and quality or junkyard parts
- Remanufactured OEM, also referred to as refurbished or rebuilt
- Aftermarket or imitation, also referred to as replacement quality parts
“Technically, anything you’ve put on the vehicle after it has been released from the manufacturing line is an aftermarket part,” she said. “It would be very helpful if we could redefine what an aftermarket part is. It could be made better, there are opportunities here.”
Eversman said one of the problems with the aftermarket part is that certified parts are routinely decertified. Consumers are not informed and are at risk of not receiving a different, conforming part. If the repair has already taken place, the repairers are not paid to remove the noncertified part and install a new one and the consumer is driving around in a now improperly repaired car.
“Unfortunately, that includes headlamps, which are governed by a Federal Motor Vehicle Safety Standard. It is one of the few replacement safety standards that exists under federal law,” Eversman said. “It wasn’t all that long ago that 100% of the previously certified headlamps were decertified and these things have to conform. Absolutely no question, the federal law says so. No consumer was ever notified, they were never provided with an option to get those headlights replaced, so we had people driving around in defined unsafe vehicles.”
AASPI continues its education of Collision Law with a six-part webinar series this summer. Attorney Patrick J. McGuire will discuss the Illinois Collision Repair Act, first and third-party repairs, shop liability for ADAS and OEM procedures, total-loss vehicle rules, and post-repair rights. The series costs $400 for AASPI members and $600 for non-members. For more information or to register, visit the AASPI webinar page here.
