The New York Insurance Department responded to a repairer’s questions about shop referrals, negotiating labor rates and reimbursable repair costs.
The questions and answers are:
Q: May an insurer recommend or suggest a particular facility for motor vehicle repairs if not expressly requested by the insured?
A: No. Insurance law prohibits an insurer from recommending or suggesting a particular facility for repairs in the absence of an express request from the insured. Any previous opinions issued by the Insurance Department to the contrary should no longer be followed.
Q: Must an insurer, as part of a good faith negotiation, negotiate labor rates?
A: Yes. A good faith negotiation, like a good faith settlement offer, should be inclusive of all elements of the cost of the repair, including labor rates.
Q: If an insured elects to have a vehicle repaired in a facility other than that recommended by the insurer, is the insurer financially responsible for any excess repair cost over the cost that the recommended facility would have changed?
A: The department has opined that if an insurer makes a good faith offer to the insured to pay for the cost of repair, and, after providing the insured with the prescribed notice of rights letter, identifies a facility that will repair the damage at the cost estimated by the insurer, the insurer is not obligated to pay for any repair cost that exceeds the amount of the good faith offer required by regulation. However, at least one court has held that an insured may be awarded the balance of the repair costs if the insured establishes that the excess cost was necessary to restore the vehicle.
Ed Kizenberger, executive director of the Long Island Auto Body Repairmen’s Association (LIABRA), said the department was responding to questions from attorney Donald Purpke Jr. LIABRA member Mid Island Collision has been bringing small claims lawsuits against insurers for refusing to pay their posted labor rates. The business has more than 100 cases in progress and they have been winning “virtually 100 percent of them,” Kizenberger says.
He advises New York shops to understand the department’s opinion and use the information when negotiating with insurers. For more information about LIABRA, visit www.liabra.com.
