Consumers like recommendations
Paiva continued, "The Senator is not alleging that every insurer subscribes to this practice. In fact, we know it is the case that, for the most part, claimants are happy to have their insurance companies make recommendations regarding where to take their vehicles for repair."
Under the bill, insurers will continue to be permitted to refer a claimant to an auto repair shop if the consumer requests that referral. As long as the insurer allows the consumer to make a free choice as to what shop to use, there should not be any effect on Direct Repair Programs (DRPs) which currently exist.
In addition, if a claimant chooses a shop not recommended by the insurance company, the insurer may not limit or discount the actual repair costs based on the charges that would have been incurred had the insurer chosen the shop.
Readers can follow the progress of SB 551 (or any other California legislation) on the web at www.leginfo.ca.gov.
Amended text of the bill
[Amended text in italics]
Amended in Assembly July 3, 2003
An act to add Section 758.5 to the Insurance Code, relating to auto insurance.
Legislative Counsel's Digest
SB 551, as amended, Speier. Insurance: automotive repair dealers. Existing law generally regulates insurers by, among other things, defining certain unlawful practices.
This bill would prohibit an insurer from requiring that an automobile be repaired, at a specific automotive repair dealer, as defined. It would also place specified restrictions on an insurer's ability to recommend or suggest an automotive repair dealer. The bill would require, if the insured chooses the repair dealer, that the insurer pay for repairs to be made in a workmanlike manner, and in no less time than if the automobile was repaired at the repair dealer recommended by the insurer, and would prohibit the insurer from limiting or discounting the reasonable repair costs based on the charges that would have been incurred at the insurer's chosen repair dealer. It would make an insurer who violates these provisions liable for civil penalties.
The bill would grant the Insurance Commissioner specified powers to enforce these provisions, and would require the commissioner to adopt regulations to implement them.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
SECTION 1. This act shall be known as the "Auto Repair Consumer Choice Act of 2003."
SEC. 2. The Legislature finds and declares the following:
(a) Thousands of California consumers each year require repair of their vehicles as a result of collision or other damage.
(b) As a result of automobile collisions and other damage, many consumers make insurance claims.
(c) California consumers are entitled to select an auto repair shop of their choice to repair auto damage.
(d) Existing laws regulating the consumer's right to choose an auto repair shop are weak.
(e) Accordingly, the Legislature has determined that it is necessary to strengthen the existing auto repair consumer choice laws.
758.5. (a) It is unlawful for an insurer, including an affiliate or subsidiary of an insurer or a third party acting on the insurer's behalf, in connection with a claim, to require that an automobile be repaired at a specific automotive repair dealer, as defined in subdivision (a) of Section 9880.1 of the Business and Professions Code, or to suggest or imply that the automotive repair dealer identified and chosen by the insured or claimant is inferior or inconvenient.
(b) It is unlawful for an insurer, including an affiliate or subsidiary of an insurer or a third party acting on the insurer's behalf, in connection with a claim, to require, direct, suggest, or recommend any of the following:
(1) That an automobile not be repaired at a specific automotive repair dealer.
(2) That an automobile be repaired at a specific automotive repair dealer after the insured or claimant identifies and chooses an automotive repair dealer.
(c) It is unlawful for an insurer, including an affiliate or subsidiary of an insurer or a third party acting on the insurer's behalf, in connection with a claim, to suggest or recommend that an automobile be repaired at a specific automotive repair dealer, unless one of the following conditions exists:
(1) The suggestion or recommendation of an automotive repair dealer is expressly requested by the insured or claimant and the insurer complies with paragraph (2).
(2) The insured or claimant has been informed in writing of the right to select the automotive repair dealer. If the recommendation of the automotive repair dealer is made orally, the insurer shall provide the statement contained in this paragraph to the insured or claimant at the time the recommendation is made. The insurer shall send the written notice required by this paragraph within five calendar days from the oral recommendation. The written notice required by this paragraph shall include the following statement plainly printed in no less than 10-point type:
"WE ARE PROHIBITED BY LAW FROM REQUIRING THAT REPAIRS BE MADE AT A SPECIFIC REPAIR SHOP. YOU ARE ENTITLED TO SELECT THE SHOP TO REPAIR DAMAGE COVERED BY US. WE HAVE RECOMMENDED A REPAIR SHOP THAT WILL REPAIR YOUR DAMAGED VEHICLE. AS YOU HAVE AGREED TO USE OUR RECOMMENDED REPAIR SHOP, WE WILL CAUSE THE DAMAGED VEHICLE TO BE RESTORED TO ITS CONDITION PRIOR TO THE LOSS AT NO ADDITIONAL COST TO YOU OTHER THAN AS STATED IN THE INSURANCE POLICY OR AS OTHERWISE ALLOWED BY LAW. IF YOU EXPERIENCE A PROBLEM WITH THE REPAIR OF YOUR VEHICLE, PLEASE CONTACT US IMMEDIATELY FOR ASSISTANCE."
(d) If an insured or claimant chooses to have the damaged automobile repaired at the automotive repair dealer recommended by the insurer, the insurer shall cause the damaged vehicle to be restored to its condition prior to the loss at no additional cost to the insured or claimant, other than a deductible, if applicable.
(e) If the insured or claimant elects to have the automobile repaired at the automotive repair dealer of his or her choice, the insurer shall pay an amount that will allow for repairs to be made in a workmanlike manner, and in no less time than if the automobile was repaired at the automotive repair dealer recommended by the insurer, less any applicable deductible.
(f) If the insured or claimant elects to have the vehicle repaired at the automotive repair dealer of his or her choice, the insurer shall not limit or discount the reasonable repair costs based on the charges that would have been incurred had the vehicle been repaired by the insurer's chosen automotive repair dealer.
(g) An insurer shall not issue or deliver an insurance policy in this state unless the policy provisions are consistent with or more favorable to the insured than the provisions of this section.
(h) The powers of the commissioner to enforce this section shall include those granted in Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1. Any person who violates this section shall be deemed to have violated that article, and shall be liable to the state for a civil penalty to be fixed by the commissioner pursuant to Sections 790.035 and 790.05.
(i) The commissioner shall promulgate regulations to implement this section.
(j) Upon the effective date of this section, the commissioner shall notify insurers in writing of the provisions of this section.