California’s anti-capping Senate Bill 1371 has passed the muster of a key committee after it was revamped to address various industry concerns. Proponents of the measure expect it to continue wending its way toward becoming law. Following an 11-0 affirmative vote April 16 in the state senate’s Banking, Finance and Insurance Committee, the next step is a hearing on the senate floor sometime prior to May 30. If successful there, it moves on to the lower chamber’s Assembly Insurance Committee for further review. If ultimately approved, SB 1371 would become law in January 2009. “The intent of the bill is to stop capping of paint and materials charges,” says Jack Molodanof, lobbyist and lawyer for the California Autobody Association (CCA). “We have and will continue to work with all stakeholders to address concerns,” he says, referring to objections raised by the Collision Repair Association of California (CRA) over language contained in the original version of the measure. As rewritten, SB 1371 says, “The operators of auto body shops are concerned that some insurance companies cap or limit their offers and payments for paint and materials charges. Capping occurs when accepted industry methodologies are misused in determining a reasonable repair cost for paint and material charges…Insurers shall not engage in capping. For the purposes of this section, ‘capping’ means offering or paying an amount that is unrelated to an accepted industry methodology used in determining paint and materials charges.” Gone from the bill is the phrase: “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 CRA strenuously opposed inclusion of this terminology — especially the word “arbitrary” — which the organization feared would invite insurers to create methodologies similar to “ those phony labor rate surveys” that have long been a point of contention among Golden State collision repairers. The senate’s Banking, Finance and Insurance Committee also deleted the phrase “placing a factually unsupported limit for these charges” from the bill at the behest of both the CRA and State Farm Insurance, according to committee consultant Erin Ryan, who prepared an analysis of the legislation. Organizations on record as favoring passage now include the sponsoring CAA, the California New Car Dealers Association, Consumers for Auto Reliability and Safety, the Personal Insurance Federation of California, State Farm and the CRA, Ryan said. “We support the current effort and will continue to work with all parties as the bill moves forward,” says CRA lobbyist Richard Steffen. “Discussions continue as does our assessment.” He said he questioned if the bill will reduce the incidence of capping. State Farm had also requested that the “placing a factually unsupported limit for these charges” phrasing be stripped from the legislation because “it is inherently ambiguous and would lead to more confusion, and a need for additional regulations. State Farm also would like the bill to be amended to reflect certain voluntary agreements it has with its ‘Select Service’ auto repair shops. Specifically, State Farm asks that ‘Capping does not include voluntary pricing agreements entered into by automobile repair shops and an insurer’ be added to the bill,” says Ryan. Ryan observes that SB 1371 “would prohibit insurers from capping paint or material charges in automobile repairs.” State Farm’s proposed exemption for direct repair programs was rejected. “This committee did not find it compelling,” Ryan tells ABRN. The amendment could resurface, though, as the bill wends toward passage. “I don’t know what the Assembly will do,” she notes. According to Ryan’s analysis, “The Personal Insurance Federation of California (PIFC) supports SB 1371 and its efforts to prohibit capping. PIFC continues to work with the automotive repair industry to finalize this work in progress and remains committed to reaching consensus on the outstanding issues related to this important measure.” Ryan’s detailed backgrounder and analysis of SB 1371 is available at |
