California Gov. Arnold Schwarzenegger signed into law Senate Bill 1371, which will make it illegal for insurance companies to put arbitrary payment caps on paint and materials used to refinish cars. The bill will become effective Jan. 1, 2009.
The California Assembly unanimously passed the fifth version of this bill in July. Lawmakers have been struggling for two years trying to agree on a definition of capping. The latest definition of capping, which was approved July 14 by the State Assembly, is “… offering or paying an amount that is unrelated to a methodology used in determining paint and materials charges that is accepted by automobile repair shops and insurers.” The methodologies are determined by multiplying the cost of paint and other materials by the refinishing rate.
This bill does not cover repair shops that entered into direct repair program agreements with insurers, because those are voluntary pricing agreements that are not considered capping.
“On behalf of the California Autobody Association (CAA), we would like to thank the governor, Senator Lou Correa, (the bill’s sponsor), the insurance industry and our members on getting this law passed,” says Ted Stein, CAA president.
In addition to CAA, the bill was supported by the Association of California Insurance Companies.
Earlier this year, Virginia Gov. Timothy M. Kaine signed into law Senate Bill 697, making the use of paint caps by insurers an unfair settlement practice. That law went into effect on July 1, 2008.
