The National Conference of Insurance Legislators (NCOIL) approved an amended version of its airbag fraud model law at its meeting in New Orleans in November. A separate piece of model legislation dealing with aftermarket crash parts was tabled for further discussion until the group's March meeting in Charleston, S.C.
The airbag fraud model, which would make it a felony to possess or sell a stolen airbag or to fraudulently install an airbag, passed the group's Property-Casualty Insurance Committee by a 20 to 5 vote, followed by a unanimous vote in the executive committee.
NCOIL's model laws are frequently used as the basis of legislation in individual states. If a state were to pass a bill based on the anti-fraud model, repair facilities would face more stringent record-keeping requirements, and would have to submit an affidavit to a vehicle owner indicating that an airbag was installed properly.
The Automotive Service Association (ASA), Society of Collision Repair Specialists (SCRS), Alliance of Automobile Manufacturers (AAM) and Association of International Automobile Manufactures (AAIAM) testified in opposition to the airbag model because of a section of the legislation they felt would encourage the use of salvaged airbags. Representatives from LKQ Corp., the Automotive Recyclers Association (ARA), the Coalition Against Insurance Fraud and the American Insurance Association testified in favor of the model law.
Although the measure passed, Aaron Schulenburg of the SCRS said that the efforts of the repair and OEM groups did succeed in having an amendment added that requires a repair facility to place a permanent label on the dashboard of the vehicle indicating that the facility had used a salvage airbag. According to the language of the amendment, "any person who removes such a label shall be guilty of a criminal offense."
A second amendment was added as a drafting note indicating that states should consider allowing a regulator to adopt a protocol to insure that only salvaged airbags that had met specific criteria were used.
"The car companies and auto body shop representatives felt that these airbags were a safety risk and that by including them in the model, this was an inadvertent endorsement of salvaged airbags," says Susan Nolan, NCOIL executive director. "The two amendments added to the bill address some of those concerns."
While Schulenburg described the final version as still flawed, the SCRS was satisfied with the limitations placed on the use of salvage airbags by the amendments.
The OEM and repair industries representatives have opposed the use of salvage airbags on the grounds that it would be difficult to document the conditions in which salvaged airbags were removed or stored, and that there are enough variations in safety and restraint systems, even in the same make/model vehicle, that it would be possible to install the wrong airbag in a vehicle.
The anti-fraud model, sponsored by Rep. Brian Kennedy of Rhode Island, was created to address the problem of malfunctioning or fraudulently replaced airbags in vehicles that had been repaired after an accident. According to a report for the National Highway Traffic Safety Administration, of 1,446 fatal accidents between 2001 and 2006, there were 255 instances in which airbags that should have been replaced following deployment in a previous crash were missing, and Carfax estimates that one in every 25 airbags replaced in the United States are either bogus or substandard.
While the anti-fraud elements of the model law were hammered out in conference calls between the July and November meetings, the salvage airbag component was held for discussion at the full meeting.
"This was intended as a straightforward anti-fraud bill, but the salvage airbag component became a big issue," Nolan says. "That's why we saved that discussion for the November meeting."
Insurers and salvage yards have generally supported the use of recycled airbags as a cost-saving measure. The high cost to replace OEM airbag modules (sometimes as high as $2,000) has often been blamed for the increase in total losses over the past several years.
"The use of these evaluated components is a cost-effective option for a consumer," says Michael Wilson, executive vice present of the ARA. "But more importantly, extensive research and years of experience have proven them as a safe alternative as well."
The organization launched its ARAPro standard in 2006 (www.airbagresources.com) to provide national guidelines and best practices for extracting, handling, inspecting and storing non-deployed OEM airbags from salvage vehicles. Participating recyclers have to carry at least $1 million in product liability insurance, and employees must be trained and certified through the program.
But beyond the safety issues, Schulenburg says there are questions about liability that neither the insurance nor the salvage industries have addressed. If a recycled airbag were to malfunction, it would be the repair shop – not the insurance company that ordered the use of the salvaged airbag – that would bear all of the liability.
"The model outlines a process to utilize these parts, which are not regularly used in the repair environment," Schulenburg says. "There are safety and liability concerns that fall squarely on the repairer. If we ignore the warnings from the manufacturers, we open ourselves up to tons of liability, and could potentially even void our garage keepers insurance."
The ASA and SCRS encouraged members to contact their state legislators about the salvage airbag issue during the NCOIL meeting, with impressive results. "It was incredibly effective," Schulenburg says. "I had numerous legislators come up to me and tell me they had heard from a number of body shops on this issue, and I was very proud of the industry for doing what was necessary to make sure we had a voice in this discussion."
The proposed Model Act Regarding Motor Vehicle Crash Parts and Repair has been held for consideration until the March meeting. The ASA and other repair groups are opposing that measure because of language that equates certified replacement crash parts with OEM parts, and because of issues surrounding the choice of a repair facility.
About the Author
Brian Albright
Brian Albright is a freelance journalist based in Columbus, Ohio, who has been writing about manufacturing, technology and automotive issues since 1997. As an editor with Frontline Solutions magazine, he covered the supply chain automation industry for nearly eight years, and he has been a regular contributor to both Automotive Body Repair News and Aftermarket Business World.