Since November 2012, Three-C has filed 104 suits against the insurer, all of which accuse State Farm of engaging in “repeated underpayments for services generally rendered and charged to their customers when their vehicles have been deemed total losses.”
Currently, owner Bob Juniper is seeking $405,000 in recovery, including legal fees and court costs, of which State Farm previously agreed to pay $31,565.03.
Juniper notes that he rarely has problems with insurers refusing to pay the full cost of repairs because “we negotiate with them pretty well. We spend a little time with their adjusters and can generally get to where we need to be. We may not always get the full amount of our estimate, but we get close by compromising until we come to terms we can both agree on.”
In fact, Juniper hasn’t experienced difficulty from State Farm in paying for repairs either. Three-C’s shortpay lawsuits are associated with costs related to vehicles that are deemed total losses which the insurer objects to paying. Juniper provides the following example: if the shop writes a $10,000 estimate on a car valued at $11,000 and the insurer’s adjuster estimates $4000 in damages, the shop has to perform many additional steps as part of the process of writing a thorough estimate. Moving the disabled vehicle, disassembly, taking inventory of parts, recycling hazardous waste, and performing a comprehensive safety check to test for damages are just a few of the many steps needed in order to document the car as a total loss; however, when the adjuster returns to discuss the estimate and declares the vehicles to be a total loss, State Farm only wants to pay the cost of storage and a few minimal charges, though all of these processes are required. Other processes which Juniper feels shops should be aware that they can charge for include suspension checks, rough access, preparing the pack-totaled vehicle, glass clean-up, and labor.
Meanwhile, Three-C has time associated with the estimate for which they expect (and deserve) to be compensated since they’ve lost time being involved with a job they aren’t being paid for, yet State Farm wants to pay only the minimum charges. Juniper explains, “our charges are necessary to offset our lost opportunity. When we’re working on these total losses, that’s time we can’t work on jobs where we could make money, but the insurer does not want to understand that—that’s why we have to sue them. Other shops also have to perform these steps, and they should ask why they’re not getting paid for all of their time and hard work!”
Over the past three decades, Juniper has been an active voice in the industry, speaking out against insurers and their attempts to exert control over the repair process. “Insurers have been beating on body shops for many years. They used to just pay the bill, but over the years, they’ve decided that they don’t want to pay the labor times and rates. Instead, they want to argue about which steps are necessary because they are trying to control the repair itself. This industry has been beat down so far that many shops are going out of business; insurers have found the bottom on pricing and can’t push anymore because there’s nothing left. We have to charge them for our time because we can’t afford to work for free!”
Though Juniper admits that his relationship with State Farm is currently less than perfect due to the pending lawsuits, he hopes that will change after matters are settled. He also believes that he is taking a necessary step towards preventing shortpays in the future. “Nationally, there are over 70 body shops with pending shortpay lawsuits right now, and we need to win these battles to change things. With enough victories, maybe the insurers will change their behavior.”
Three-C Body Shops asks their customers to sign documents, such as the Authorization to Repair and Assignment of Proceeds, to enable them to pursue proper compensation when the need arises. Juniper explains that they “involve the vehicle owner instead of dealing with the insurance company directly because the insurer is bound by a contract with the insured, but the problem is that many consumers don’t know the laws. Some are savvy, but others don’t understand or want to be involved; that’s what the insurers take advantage of and the reason that lawsuits are necessary… It’s not convenient, but this still has to happen. I don’t see any other alternative.”
A family-owned business since opening in 1956, Three-C Body Shops works on around 250 vehicles monthly, yielding $700,000 to $800,000 in sales. They have never participated in DRPs because when the insurers introduced these programs in the early 1990s, Juniper foresaw the negative aspects associated with them, predicting that they would start off good and get worse over time. Though he spoke out against DRPs, the industry moved forward, and he believes “most DRP shops now wish they’d never gotten involved, but we weren’t loud enough with our objections. DRPs have caused many body shops to go out of business. Once you’re dependent on them, you can’t afford to lose them—you’re unable to walk away because you’ve become reliant on the insurance companies.”
Now, Juniper fears that insurers are using parts procurement systems, such as PartsTrader, to exert even more control over repairs, and he worries that insurers will take over parts distribution also, leaving shops as labor providers only and inhibiting them from supplementing their incomes with the price of parts. Because of this, many shops will be unable to pay some of their personnel, such as office staff, customer service teams and detailers, whose salaries aren’t paid by the estimates but by parts profits. “If the insurers absorb this discount, we won’t be able to afford these employees, so customer service will decline, and that will be the beginning of the next big problem for our industry,” Juniper predicts.
Juniper notes that the industry did not stand up for themselves when DRPs were developed and they have since regretted it; he believes the industry will really regret it if they do not step up to inhibit parts procurement as it will lead to poor customer service in the collision repair industry, forcing repairers into a position where they are not making any money and may be unable to pay their bills. He asks “when and where does the collision industry say no? Because it’s time!”
A State Farm spokesman was invited to comment on these charges but declined due to unfamiliarity with the specifics of the cases. Autobody News will continue to invite comment on this story for future issues.