Tuesday, 22 December 2015 19:52

New Year Brings the Collision Industry Some ‘Unfinished Business’ from 2015

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December 31 may have marked the end of a new calendar or fiscal year, but there remained a lot of “unfinished business” at the end of 2015 that will spill over to this new year. Here are four statements heard in the past year that highlight continuing activity that will play out in the year ahead.

“Despite becoming much wordier, the [shops’] pleadings have not come remotely close to satisfying the minimum requirements as to any of the claims asserted.”
– U.S. District Court Judge Gregory Presnell

Presnell didn’t mince words in his dismissal last September of the lawsuit brought by Florida shops who accused State Farm and other insurers of conspiring to manipulate shop labor rates and compensation. But whether the two dozen similar lawsuits by shops in other states will face the same fate is one of the industry news stories that will stretch into 2016.

“I think that with the amount of energy and enthusiasm and money that was put into this, that the case should have been thought through far more significantly,” Ohio attorney Erica Eversman said of the dismissal of the Florida suit last fall.

Eversman has not been directly involved with these suits but has worked on other shop-insurer legal disputes. Although she had praise for some of the attorneys involved in the lawsuits, she said she was concerned early on that there seemed to be a “rush to the courthouse” and pressure to bring virtually the same lawsuit from different states despite each having different laws.

“Mostly anything [gets past] a motion to dismiss, so to get thrown out on a motion to dismiss means your complaint was really lacking,” Eversman told CRASH Network last fall. “That does not reflect well on plaintiffs’ council.”

Many observers say the outlook doesn’t appear promising for the other shops’ lawsuits. All of them were consolidated into Presnell’s court in Florida, and all have been dismissed at one point, although he has given them opportunity to refile amended complaints. But little in Presnell’s rulings indicate he has much sympathy for the arguments put forth by the shops’ attorneys.

In one dismissal, for example, Presnell addressed the shops’ argument that they were misled by insurers as to what the true “prevailing rate” is by pointing out that the lawsuit states the insurers named in the suit collectively make up 70 percent of the auto insurance market.

“One would expect to find that the rates paid by (at least) 70 percent of those in the market are, in fact, the prevailing rates,” Presnell wrote.

Whether any of the suits will remain in-process into 2017 will likely become clear fairly early in 2016.

“This doesn’t mean that the result that might come up at the end would be something that CIC would completely condone, but I think it behooves us to at least be involved in what might be something that we’re going to have to deal with.”

– Pat O’Neill of the Collision Industry Conference (CIC) Insurer-Repairer Relations Committee

O’Neill’s committee has over the last several years examined the challenges posed by the wide-ranging formulas some insurance companies use (or require direct repair shops to use) to determine length of rental, some of which set unrealistic expectations for consumers as to how quickly their vehicles will be repaired.

At the CIC meeting this past November, O’Neill some insurance companies were planning to work on a new formula, so the committee “felt it would be very important that as an industry we had input into that and were able to participate in whatever that outcome may be.”

O’Neill said the goal would be to develop an alternative formula by the end of 2016 that could be tried by some insurers.

“We’re going to bounce up against some regulators.”

– Clint Marlow, one of two national auto claims directors at Allstate

As automaker shop certification programs proliferate, and as collision repair processes continue to become ever-more vehicle-specific and complex, the days of every shop and technician being able to fix every car seem to fading. Speaking at NACE last summer, Marlow and other insurer representatives were asked what they will do if they know that a customer’s chosen shop is not equipped or certified to properly repair the type of vehicle or damage involved in a claim. Will they, for example, push that customer to choose a different shop?

Marlow said he thinks they should though he admitted that may lead to some friction with regulators over anti-steering regulations. Marlow said that type of situation, in which the chosen shop may not even have access to purchase the structural parts needed (because of automaker restrictions), becomes a “moral dilemma” for insurers trying to honor customer choice and follow anti-steering regulations.

“At the same time, you’re thinking, ‘I’m really not feeling great about this repair facility’s ability to fix this Cadillac CT6 or this Ford F-150,’” Marlow said.

He said Allstate hasn’t “worked the details out yet,” but will “take the high ground” by “educating the consumer” in such cases.

“So we’re not going to go as far as saying, ‘You need to take your car to [a particular shop],’ but we are going to have a discussion around the uniqueness of their vehicle, some special repair techniques that may apply, and some questions that we feel strongly they need to ask their repair facility,” he said.

How Allstate and other insurers respond to these situations will be something to watch in 2016.

“We can’t put our heads in the sand and say, 'Gee, we wish this was 1965 again when we just had to have a good sound system and a convertible and everyone was happy,.’ We need to completely rethink our business model, really redefine ourselves from a car and truck company to a mobility company.”

– Bill Ford, executive chairman of Ford Motor Company

Okay, so Ford isn’t going to get out the business of selling cars in 2016, but the comment back in November by the great-grandson of Henry Ford is indicative of the shake-up that everyone in the industry – from car-makers to car-repairers – is going to be feeling in the coming months, years and decades. Accident avoidance technology, car-sharing and autonomous vehicles appear poised to play havoc with a lot of business models.

“I think [the OEMs] are still looking at these trends and really trying to figure out how to participate in them,” Tim Nixon, former chief technology officer for OnStar, said at last fall’s “Telematics West,” a 2-day conference focused on “connected car” technology and trends. “I think it’s going to take them a while to figure it out, but they can’t take too much time. These alternative disruptors are starting to accelerate.

It’s not like [the automakers] can wait until 2025, because it will be game-over by then. A lot of this is going to happen before then.”

As Nixon suggests, savvy business-owners in any part of the automotive industry won’t let 2016 pass without starting to think about the future.

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 jyoswick@SpiritOne.com 

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