A New York bill (A 7234) (similar to one introduced in Maryland) takes aim at PartsTrader by prohibiting an insurer from requiring a shop to use a specific vendor or process for the procurement of parts or materials necessary for repair of a vehicle.
Another New York bill (A 3872) introduced would require consumer notification and consent regarding the type of parts to be used in repairing their vehicle, and would prohibit the use of anything other than new OEM parts for vehicles less than three years old. A similar bill (HB 362) in Vermont would place a 2-year ban on the insurer-use of the parts on new cars.
New regulations that will go into effect in California early next year place significant new limitations on the use of non-OEM parts in that state. The California Department of Insurance finalized regulations this year requiring insurers to pay for the costs to remove, replace and return a defective or non-compliant part; to cease the use of any part known to be non-compliant and to notify the distributor within 30 days; and to pay for repairs based on “accepted trade standards” set by shops licensed by the California Bureau of Automotive Repair.
Insurer groups have indicated they may challenge the new regulations, which they say are unnecessary and thwart their ability to negotiate “the most effective, less costly repair,” nor do anything but “pay whatever auto repair shops demand.”
Eileen Sottile, vice president of governmental affairs at LKQ Corporation, told non-OEM parts distributors at their convention earlier this year that it’s unclear whether the regulation will have a significant impact on insurers’ use of non-OEM parts in California. She said LKQ is reviewing legal analysis related to a possible suit against the regulator. Such a suit, she said, could challenge the Commissioner’s authority to promulgate the rule, or could be based on the rule’s impact if “we see it has damaged our ability to compete.”
Other options, she said, could be to address the issue through legislation, or to do nothing “if we see there truly is no market impact.”
Rates are focus of some bills
Nevada lawmakers have approved a bill (SB 170) capping daily storage fees charged by shops at 1.5 times the prevailing storage rate determined by state survey; the new law also sets limits on when storage fees can be charged.
After three attempts over the last six years to get legislation related to labor rates passed by Massachusetts lawmakers, a fourth such bill (H 969) has been introduced for the 2013-14 legislative session. The bill has evolved over the years, and now if passed would establish a labor rate in Massachusetts based on data from an independent study of the average labor rate of five other Northeastern states.
Airbags under scrutiny
The National Highway Traffic Safety Administration’s warning last fall to consumers to avoid counterfeit airbag replacements seems to have resurfaced the topic of airbags among some state lawmakers.
The New Mexico House unanimously passed a bill (H 118) that would prohibit the manufacturing, sale or installation of a counterfeit or substandard airbags. It would also prohibit selling or installing a device that causes the vehicle diagnostic system to inaccurately indicate that the airbag is functional when a counterfeit airbag is installed. Similar bills have been approved by lawmakers in New York and Connecticut, and by the House in Ohio.
Also in New York, a bill (S 3779) would place significant new restrictions on anyone selling or installing a recycled airbag. The seller or installer, for example would be required to maintain records including the airbag identification number, the VIN of the vehicle from which it was removed, the name and address of the purchaser, and the VIN of the vehicle in which it was installed.
Other proposals, new laws
Bills in other states tackle a variety of topics impacting the industry.
Some states have established a damage value threshold at which a vehicle must be declared a total loss. But previously nothing prohibited an insurer from totaling a vehicle below that threshold. The Rhode Island legislature, however, has approving a bill (HB 5263) prohibiting an insurer in that state from declaring a vehicle a total loss if the cost to repair is less than 75 percent of the vehicle’s pre-accident value, unless the vehicle owner provides written authorization to do so.
Texas Gov. Rick Perry in June signed a new law (HB 500) that allows independent repair shops to be taxed at the same rate as dealerships, parts stores and tire stores; previously shops operated by dealerships were taxed at a significantly lower rate because these businesses were classified as “retail” businesses.
A new North Carolina law (HB 247) signed by Gov. Pat McCrory, deals only with health insurance but does ban insurer’s use of “most-favored nation” clauses (such as the one in State Farm uses to require the best rates and discounts that its Select Service shops offer any other insurer) when contracting with health care providers.
The Automotive Service Association (ASA) in June wrote to a New Jersey Assembly committee, opposing proposed “Right to Repair” legislation (AB 352), saying that it puts at risk ASA’s agreement with automakers that “already provides independent repairers access to service, tool and training information.” Aaron Lowe, vice president of government affairs for the Automotive Aftermarket Industry Association (AAIA), told the committee his group supports the legislation, but also urged lawmakers to hold off further action on the bill while his group is in “negotiations with the vehicle manufacturers regarding a national agreement on Right to Repair.” Similar Right to Repair bills have been introduced in Maine and New York this year.
Connecticut Gov. Dannel Malloy has signed a new law (effective January 1) designed to reduce insurer steering of glass claims; under the new law, insurers (or third-party claims administrators) must disclose to insured’s during their initial contact that, “You have the right to choose a licensed glass shop where the damage to your motor vehicle will be repaired. If you have a preference, please let us know.”
And under a new law (SB 86) that went into effect this past December and designed to combat chop shops, Pennsylvania shops must photocopy the ID of anyone towing or selling a vehicle or major component; the law, requires that photocopy (along with the name and license number of the towing company) must be maintained for three years, and law enforcement agencies have the right to inspect body shops or other automotive businesses (to look for stolen vehicles or parts) any time work is being performed.
John Yoswick, a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for a free 4-week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at: