Geico recently sent out a mass email to clients, and anyone else willing to listen, discussing the proposed bill in Rhode Island regarding compensation to auto body shops and fair settlement of property damage claims. Of course the insurance companies are using fear tactics informing everyone that rates may skyrocket with passage of this bill. I want to take this opportunity to offer a fair assessment of this bill, its purpose and the reasoning behind it. Trust me, I am not going to shed any tears for Geico, who I have previously described as one of the most difficult insurance companies to deal with, but I ultimately believe this bill is not going to pass as written even though it has a lot of strong points. Maybe I’ll be proven wrong…
If you’re involved in an auto accident, you may have a personal injury claim, but you will almost certainly have a claim for property damage. Property damage resolution is a major part of any motor vehicle accident claim and that is why my office helps clients with their damage claim for free if I represent them for their bodily injury claim. Insurance companies will fight for every penny on a property damage claim, cutting short rentals and lowering the value of your vehicle if a total loss. The purpose of this bill is to limit some of the tactics that insurance companies use to de-value property damage claims.
The bill puts into law many regulations that the Department of Business Regulations has already established for settlement of property damage claims. For instance, insurance companies are supposed to use NADA (or something similar) for the valuation of total losses. Insurance companies are also forbidden from trying to steer vehicle owners to a particular body shop. Almost all auto insurers, especially the larger ones, have partnerships with certain body shops in the State. Insurance companies try to direct customers to these body shops with the understanding that the auto body will be reasonable in negotiating the estimate and will work at agreed labor rates. This bill, if passed, will forbid insurance companies from steering vehicle owners to a particular body shop if the owner has already chosen their shop of choice. Of course, it has always been established that a person ultimately has the right to choose what shop they repair their vehicle at.
The most controversial part of the law, and the reason why ultimately, I believe it will not pass, concerns the obligation of the insurance company to negotiate the full amount of the vehicle estimate in good faith with the body shop. The reason this is a big deal is because insurance companies have capped body shops at certain dollar amounts for labor, paint, mechanical repairs, etc. If this bill passes, those caps will be destroyed and insurance adjusters will have to negotiate labor and painting rates as well as what repairs are necessary. If the insurance company does not comply then the auto body shop can file a lawsuit against the insurance company without the need of including the vehicle owner in the lawsuit. The problem with this bill, in my humble opinion, is that it is too harsh on the insurance companies. If they can not come to an agreed price with the body shop there is no alternative available for the insurance company except litigation. They are not allowed to withhold payment or ask the vehicle owner to repair the car elsewhere. Without any option available to them, insurance companies are going to be held to the fire by body shops or else face a lawsuit. I think another alternative will need to be included in the bill before passage.
It takes a lot for me to feel any sympathy for insurance companies and I would like to see this bill pass as it has a lot of merits, although increased insurance rates are likely to occur.