How shops can avoid and resolve conflicts with insurers

Anderson's advice: Start with the path of least resistance and friction, which is a civilized discussion. When Anderson was operating his two shops, he tried to avoid forcing estimators to explain one of the shop's charges every time. Instead, he'd try to sit down with a decision-maker at the insurer to explain why a process is needed and why his shop should be paid for it.

"In addition to being the least confrontational route, it also develops credibility for you," he says. "Once you've proven your case, you gain trust; and as you gain trust, it makes future discussions and negotiations much easier."

Knowledge, too, is power.

Anderson cites several tools for shops to help explain necessary procedures and charges. The Automotive Service Association (ASA) has a chart with side-by-side comparison of refinish procedures for blended panels versus new ones. The blended panel requires 22 procedures; the new panel requires 21.

Anderson also advises using the Database Enhancement Gateway (DEG) when an insurer is misinterpreting what is or isn't included in a estimating database time. The DEG website (www.degweb.org) offers a quick way for anyone in the industry to submit a question or concern about an estimating database-related question and receive a response from the database provider.

An insurance appraiser, for example, told Autocraft Bodyworks in Austin, Texas, the insurer wouldn't pay to paint the top and bottom of the floor pan replaced on a 2009 Honda Accord that the shop was repairing. The shop submitted DEG Inquiry No. 1787 and used the confirmation from Audatex (that its paint labor allowance is for the interior surface only, not the underside of the floor pan) to receive payment by the insurer for the work.

Anderson admits there are downsides to the educate-rather-than-alienate approach. It can be time consuming, lead to delays that hurt cycle time and cash flow, and may require developing a spreadsheet, PowerPoint presentation or video to bolster your argument.

"It can wear on your patience," he says. "About the time you have someone trained and understanding what you charge for, they move on, and someone else comes in. It can be frustrating. However, once you convince somebody that what you want to charge has credibility, it can return big dividends."

The power of numbers

Judell Anderson supports another approach: action through association. Such groups can be effective at resolving some issues because it allows individual shops to remain anonymous and because the association has a big-picture perspective to see common issues throughout the industry or with a particular insurer, says Anderson, who's the executive director of the Alliance of Automotive Service Providers of Minnesota (AASP-MN), which represents more than 600 mechanical and collision repair shops in that state. Whether working on a legislative, regulatory or public education solution, there's strength in numbers.

As an example of the association's ability to resolve issues, complaints from shops channeled through AASP-MN have led to state investigations of several insurers' practices. In late 2009, GEICO Insurance agreed to a consent order with the Minnesota Commissioner of Commerce for alleged violations of state law when GEICO paid a prevailing rate to shops that resulted in consumers paying out-of-pocket costs that should've been paid by the insurer. Under the order, GEICO paid a $30,000 civil penalty, reimbursed the consumers referenced in the order, and must cease from any further violations of the state statute that requires insurers to pay all costs for the satisfactory repair to the insured's or claimant's vehicles. The commissioner took a similar action against AIG in 2007.

The downsides of taking an association approach to resolving disputes with insurers is it requires being an active, informed member of the group and only broader issues – not those relative only to a particular shop – are likely to be addressed by the group. An individual shop also may not like every decision taken by the group, so it may require looking at the bigger picture even if you disagree with some points. But group decisions tend to be made by active participants, so they have a strong say in the direction the association takes.

Working with state agencies

Associations and individual shops also can try to redress issues with insurers through their state department of insurance (DOI) or attorney general. But a key problem, shops often find, is that the two offices often say it's the other that should be addressing shops' concerns.

State departments of insurance generally only accept complaints about insurers from consumers, says Erica Eversman, an Ohio attorney with Vehicle Information Services. It can be valuable for shops to file complaints, if only because the DOIs often track – and decide whether they'll investigate certain insurance companies and their behaviors or practices – by the number of complaints they receive.

State attorneys general can address complaints about insurers but often think they don't have jurisdiction to do so, Eversman says. But Connecticut Attorney General Richard Blumenthal has sympathy for shops' struggling with insurers.

"We should work to promote competition without undue pressure, influence or interference by anyone, principally the insurance companies," Blumenthal said at an industry event in his state in 2009, telling repairers from several states he'd be happy to contact the attorney general in their state on their behalf.

One key to success when working with a state attorney general or DOI individually or as an association is consistency, Eversman says. There's often a lot of turnover within such departments, making ongoing meetings at the administrative level almost mandatory to keep shop issues on their agendas.

Going to court

A number of shops, have used assignment of proceeds actions to collect amounts insurers refused to pay for repairs. Because of the contract between the consumer and insurer, it's generally the consumer's responsibility to sue the insurer for an amount not paid. But shops can use assignment of proceeds to sue the insurer on the consumer's behalf.

Shops that have used assignment of proceeds successfully often have waited until they have had numerous claims against one insurer and filed those in one action. Anderson cautions the cases aren't a slam dunk, and some states don't allow collection of legal fees unless intentional fraud on the insurer's part is proven.

Shops individually filing larger lawsuits against an insurer often make headlines. New York shop owner Greg Coccaro is in the midst of a highly publicized tortious interference (the legal term for steering customers) against Progressive Insurance. Georgia shop owner Danny Hernandez is suing State Farm and seven individually named State Farm adjusters for trade libel, alleging the defendants have continuously and systematically steered potential customers away from Hernandez' company.

While Coccaro, Mike Anderson and Hernandez say they're not promoting or discouraging such actions by shops, they say it's important to understand the costs and commitment such actions involve. Legal fees can run in the hundreds of thousands of dollars, and the amount of time suits can involve – sometimes throughout the course of years – can be staggering, Coccaro says. If a shop owner has any skeletons in his closet, an insurer being sued will discover them, Coccaro says.

On the upside, second-generation Illinois shop owner Wade Ebert, whose father successfully sued State Farm in 1999, says the potential outcomes of such suits can be vindication and a feeling of being more in control over your business, in addition to the financial compensation. They also can change claims practices used against your shop and perhaps change market practices also.

Whether you go to court, contact a state agency or association, or attempt to work through disputes one-on-one with the insurer, each of these approaches can be successful. Most shops find themselves using a combination of these methods to resolve issues with insurers. The key is understanding all you options to choose the one that best fits the circumstances.

Panel examines dispute resolution system

During a Collision Industry Conference (CIC) last year, a panel of insurers was asked what they'd suggest a shop do if they felt an insurer's policies and procedures were being interpreted or implemented differently by that company's field staff.

Joe Lacy of GEICO says that in those instances a shop should contact a supervisor for a clarification, advice echoed by other insurers on the panel.

Randy Hanson of Allstate understands shops sometimes are hesitant to move up the chain of command because of possible reprisals. But he balked at the idea of a way to submit concerns anonymously or through a third-party or hotline, saying it complicates the resolution and often lacks enough detailed information to be actionable.

If a problem involves fraud, such as an insurance company employee seeking a payoff, repairers should contact the corporate security department at the company.

Panelist Mike Condon, one of the consultants who conducted a 2009 study to examine the viewpoints of top auto claims personnel, said the study found most carriers wanted, or were interested in, a dispute resolution process, but none had an idea of how to do it.

The fact no such mechanism exists could provide a good opportunity for the industry to work together to develop one, rather than having a number of different ones pop up.