The Minnesota Department of Commerce fined GEICO $30,000 for violating a state law by paying an alleged “prevailing rate” to Minnesota body shops that was less than the total charged by the shops for certain repairs. This practice resulted in policyholders paying claim amounts that should have been paid by the insurer, according to Glenn Wilson, Minnesota commissioner of commerce.
GEICO was ordered to pay the civil penalty of $30,000 and to cease and desist from any further violations of the law.
The order cited a Minnesota law that requires insurers “…to pay all costs for the satisfactory repair to the insured’s or claimant’s vehicles.” The commissioner also ordered GEICO to contact insureds or claimants referenced in the order and provide reimbursement for the amount they were required to pay out-of-pocket to body shops. GEICO agreed to informal disposition of the matter without a hearing and accepted the terms of the consent order.
The department took similar action against AIG in December of 2007. In both cases, the investigations were advanced by unfair claims practice reports submitted by the Alliance of Automotive Service Providers, Minnesota (AASP-MN). The association encourages its members to document cases of improper insurance company practices on an ongoing basis and, in the case of short pays, urges its members to stop absorbing these costs and to inform their customers that they will be responsible for their insurance company’s failure to pay reasonable costs.
“We are very pleased by the department’s action,” says Judell Anderson, AASP-MN executive director. “This sends a strong message to all insurers that they must play by the rules or be held accountable. It should also motivate repairers to be more proactive in their reporting and documentation of unfair insurer practices. It’s not enough to just complain, shops have to take action.”
AASP-MN is an association of independently owned automotive service businesses and industry suppliers dedicated to improving Minnesota’s automotive service industry and the success of its 630-plus members. For more information, visit www.aaspmn.org or call 612-623-1110.
