CDOI workshops examine paint, material capping

The California Autobody Association (CAA) participated in a workshop Aug. 1 conducted by The California Department of Insurance (CDOI) to discuss the practice of capping paint and material costs.

The CDOI's position on some insurers' practice of placing arbitrary caps or limits on the costs of paint and materials used in repairing vehicles is that it is illegal, according to David McClune, executive director of CAA.

"The CDOI is looking at a possible regulation that would address this," he says. "If that doesn't happen we might implement some kind of legislation. I've talked to several legislators who understand this issue and would be willing to introduce a bill."

CAA requested the workshop based on the number of complaints it got from its members, he said. This was the second workshop on the topic conducted by CDOI in the last year. Shop owners, insurance company representatives, information providers, industry representatives and members of the legislature attended the workshops.

"Our members feel strongly about this because it is costing them money," McClune says. "It is frustrating for the shops because it may or may not be a problem. Insurance companies don't handle them consistently."

Ted Stein, service manager who oversees the collision center at Drew Ford in San Diego, said some progress was made since the first workshop.

"The undertone from the first meeting was positive," Stein says. "Some insurers stopped the practice of capping materials without being told to do so. The practice is not as prevalent as it once was. But there are still a few large and several smaller insurers that continue to cap."

To determine the cost of painting vehicles, he suggests removing cap rates and using the rate times the labor units to determine the cost.

"You win on some and lose on some because red pigments cost more than white pigments, but in the long run it works for most people," he says. "The lobbyists at the workshop from the insurer's side are eager to put this to rest. On some jobs, the maximum amount may be only $200 to $300, but that is a lot to shops that experience it every day."

Mitchell International and other information providers offer a paint calculator built into their management systems. Tom Fleming of Mitchell attended the workshop to present an overview of the company's paint calculator guide. Many insurers accept the paint calculator values to determine costs, according to McClune.

Stein said it's frustrating when insurers ask shops to prove they exceeded the amount allowed by showing them invoices for paint or materials. "But the insurers can't substantiate how the cap or limit was established," he says. "Nobody at the workshop could answer that."

Stein tries to avoid working with insurers that he knows practice capping.

"We've aligned ourselves with insurers who have the same interest as us in repairing a car," he says. "Our goal is that the vehicle will act and react in the exact same way if it's involved in another collision. We align ourselves with insurers who share that philosophy. If insurers know we won't use a substandard part or cap materials, they will steer their customers elsewhere."