Richmond, Va. - On March 2, Virginia Governor Timothy M. Kaine signed into law Senate Bill 697, making the use of paint caps by insurers an unfair settlement practice.
The new law adds to section 38.2-517 of the Code of Virginia language stating that no one shall “Engage in the practice of capping. As used in this subdivision, ‘capping’ means the setting of arbitrary and unreasonable limits on what an insurer will allow as reimbursement for paint and materials."
As part of section 38.2-517, written complaint authorizations from insured parties or claimants, “submitted by an individual or a repair facility”, will be investigated by the Virginia State Corporation Commission (of which, the Bureau of Insurance is a division). The section holds accountable “any insurance company utilizing a third party representative” for violations of the law by the third party representative.
In its original form, the bill would have prevented insurers from compensating repairers for parts and service at rates less than what retail customers were charged. Language in that version of the bill restricted insurers from using “menu-priced parts or services, group discounts, special event discounts, and special event promotions” as part of their compensation formula.
The previous version also allowed repairers to increase their service compensation based on “100 consecutive repair orders or all repair orders over a 90-day period, whichever occurs first.”
The law goes into effect July 1, 2008.
