A Game-Changing Proposal

Dec. 1, 2012
Fed up with a gamut of issues affecting the collision repair industry, the Northern Michigan Body Shop Association has set out to change industry operations, which could set a far-reaching precedent.

Sue Allor, spokesperson for the Northern Michigan Body Shop Association (NMBSA), says many Michigan repairers are feeling defeated and worn down. She says insurance issues are reducing efficiency and profitability, parts problems are influencing repair quality, and shops operating without a license are making it tough for legal operations to compete.

All of which prompted the NMBSA to propose legislation to eliminate obstacles that are hindering the state’s repairers. The legislation, dubbed the “Michigan Consumer Auto Repair Rights Act,” will be introduced in the Michigan House of Representatives in January. The proposed bill, packaged as a pro-consumer initiative that’s backed by two political action committees, could have a significant impact on the industry as a whole.

Andrew Rodenhouse, partner of Rodenhouse Kuipers, the law firm that drafted the legislation, says the bill allows body shops to sue insurance companies that violate their customers’ rights. And the bill could have nationwide implications, setting a precedent for other states to consider similar legislation, because repairers across the country face similar challenges. Rodenhouse says the bill was written to be easily transferable into other states’ existing laws with minor modifications.

It calls for the following actions, which for the first time subject violators to civil action and penalties:

Steering: Insurance companies would be prohibited from requiring consumers to visit a particular shop. Consumers must be informed of their right to choose.

Vehicle inspections: Insurance agents would have 24 hours, or one business day, to inspect vehicles presented for a loss.

Dale Verhey, president of Clarkston Auto Body and Towing in southeast Michigan, says vehicle inspections are one issue that routinely hurts his cycle time. Jobs have sat in the shop up to five days waiting for adjusters to check them out. He says both repair speed and customer satisfaction would improve without those delays.

Desk appraisals: Insurance companies would not be allowed to use desk appraisals when the amount of damage is in dispute. A physical inspection would be required.

“Desk appraisals can heavily delay repairs,” Verhey says. “If there are any large additional items found when the car gets taken apart, an appraiser has to come out anyway and the whole process starts over again.”

Aftermarket parts: Aftermarket parts could not be used for structural components, or anything that affects airbag timing or supplemental restraint systems. In addition, all nonstructural aftermarket parts would need to be certified by a national testing board, such as the Certified Automotive Parts Association (CAPA).

Verhey says that parts quality is one of his largest problems as a repairer. Although certified parts have occasional problems, too, he says he finds them to be consistently better than noncertified parts.

Insurance payments: Insurers would not be able to pay any unlicensed repair facility, either directly or indirectly. Allor says there are many illegal shops in certain parts of Michigan. Unlicensed shops often don’t have spray booths, enclosed facilities, worker’s compensation, building insurance, liability insurance or training.

“They don’t have the same business costs compared to other legal repair facilities,” Allor says. “There is no fairness in competition.”

Vendor requirements: Insurers would not be able to tell shops which vendor to use. Shops could use anyone of their choosing.

Labor rates: Insurers would not be able to disregard a shop’s “reasonable” posted labor rate. If they do, insurers would be responsible for tracking, proving and maintaining a market’s actual labor rate.

Rodenhouse says the proposed legislation has received support from both OEM and certified aftermarket parts distributors. He says aftermarket distributors are willing to give up structural part sales in exchange for a larger market share in certified parts.

He says the bill could affect other industries as well. Head and spinal injury groups are behind the effort due to automotive injury issues, as well as auto finance companies interested in preventing diminished vehicle values.

Rodenhouse says the legislation is not designed to beat up the insurance industry; it’s to enforce fair business.

“This legislation is very fair to insurance companies that already practice fair dealings,” he says. “This would make insurance companies with fair dealings more competitive.”