A bill outlawing insurance company “capping” of paint and materials payments to collision shop owners has been introduced in California following passage of similar legislation in Virginia. Virginia’s measure has been signed into law by the commonwealth’s governor and takes effect in July. California’s Senate Bill 1371 has an April 16 hearing before the upper chamber’s banking, finance and insurance committee. Prior to then, though, the language is to be rewritten to rectify a disagreement between the state’s two major collision repair industry associations. The dustup between the California Autobody Association (CAA) and the Collision Repair Association of California (CRA) stems from the use of a single word – “arbitrary” – within the legislation. In its current form, as introduced by state Sen. Lou Correa (D-Santa Ana) on behalf of the CAA, SB 1371 reads: No insurer shall recommend, apply, or include any arbitrary limit, cap, or threshold when adjusting labor, parts, or other material on any written automobile repair estimate. The CAA is going to remove “arbitrary” from the bill following objections from the CRA. “We’re going to tighten it up to make sure we get it right,” says Jack Molodanof, the CAA’s lawyer and lobbyist. “The intent is to stop capping. I don’t care what we call it as long as it stops capping.” Molodanof noted that the word “arbitrary” appears throughout the legalese of California’s insurance code in addition to Virginia’s recently enacted SB 697. California’s SB 1371 was patterned after Virginia’s SB 697. The CRA is withholding its support of SB 1371 until “arbitrary” disappears from the legislation. According to CRA President Gene Crozat, the word arbitrary in the bill would inspire insurers to create some sort of methodology similar to the problems body shop owners have experienced with the controversy over the labor rate survey issue. “They can put caps on anything as long as they apply a methodology,” Crozat observes, imagining what the response from insurers will be, “We talked to four Girl Scouts in San Francisco and they thought the price was fair.” While less vociferous than Crozat, Richard Steffen, the CRA’s lobbyist, echoes the concern that “they can come up with some convoluted terms like they do with those phony labor rate surveys.” In Virginia, SB 697 sailed through both chambers and won prompt approval from the governor. The measure’s sponsor, Sen. J. Chapman Petersen (D-Fairfax), tells ABRN that he lined up widespread support – gaining bipartisan backing from fellow legislators, small-business organizations and consumer advocates along with the Virginia Auto Body Association (VABA) and influential car dealer representatives. VABA made the first contact in December of 2007 and provided key insight into the problems associated with payment capping. “I had a lot of documentation from the industry,” says Petersen, allowing the bill to be presented “as a small-business protection issue.” He describes the insurance industry response as “a little bit muted” as SB 697 progressed toward passage. “We went through a couple of rewrites on the legislation,” Petersen recounts. First drafts attempted to regulate capping; the finished version bans it altogether. If inclusion of the word “arbitrary” causes a problem, the language will be adjusted to make sure capping does not occur anywhere in the commonwealth: “That’s what the bill is all about,” he says. The text of Virginia’s SB 697 is available at: |
