After resolving a lawsuit with Travelers Insurance in March, a Pennsylvania body shop owner said he could have never predicted he would be involved in a similar lawsuit with GEICO a few months later. Both cases involved the reimbursement of markup fees charged for the administration of ordering, receiving, warehousing and dispatching of parts used on vehicles.
“Far more people need to be proactive and stand up for themselves and not be afraid to ask for what they are owed,” said Tim Kilkeary, owner of Kilkeary's Auto Body in Eighty Four, PA. “Nobody is getting rich in this business anyway and to do it and not make a profit, it’s just insane.”
In the first case, Kilkeary’s Auto Body repaired a 2006 Dodge Ram truck in February 2013. The body shop originally wrote the estimate using OEM parts; however, the Travelers’ estimate reflected using an aftermarket front bumper.
Kilkeary said the usual protocol at his shop is to contact the customer to let him or her know the cost difference between the parts. “We will install those parts if the customer gives us permission to, but at the same time we make it perfectly clear to the customer that it’s not our policy, it’s not our decision and it’s not what we would recommend,” he said.
After 35 years running his shop, Kilkeary has found that in most cases the customer will opt to pay the difference to install OEM parts on their vehicle, which can equate to approximately a 20 percent increase in cost.
Kilkeary called the owner of the vehicle and told him that he would use the aftermarket parts on the truck but if anything went awry, the customer would need to address it with the insurance company. “I’m not going to be held responsible for a decision that someone else made,” said Kilkeary.
His customer decided to go ahead and have the car repaired with the aftermarket part. After it was installed, the techs found it did not fit like the factory Dodge bumper. When Kilkeary told Travelers that his customer wouldn’t accept the aftermarket bumper, the insurance company sent an appraiser back to the body shop.
Kilkeary was told to put a factory bumper on the truck and he would be paid for the labor to replace the part as well as the cost difference between the OEM part and the aftermarket part.
However, he said he was not reimbursed for the markup on the part, which was $156.88 including tax. He filed a civil case in March 2013 for the markup fee and received a favorable settlement in March 2015.
“The bottom line is if you’re doing something that they insist you do, you have to be diligent about getting paid for whatever it is,” said Kilkeary. “I don’t think any collision repair shop owner should allow any insurance company to come in and dictate to them how to run their business.”
A few months later after receiving the settlement, Kilkeary’s shop was involved in a similar situation. GEICO wrote an estimate on a 2007 Mazda 6 that included aftermarket headlights.
The shop notified the customer and he decided not to use the OEM parts. Kilkeary said there were some internal issues with the headlight and it wouldn’t aim properly. After contacting the appraiser, Kilkeary was told to replace it with a used headlight. When the part arrived, the shop found it was damaged. “By this time the car was held up for four days so we put a factory headlight on the car,” he said. GEICO paid the difference between the list price of the parts as well as the labor to repair the vehicle.
“The issue on the Mazda repair became who is going to pay us the markup money on the aftermarket light and the used light — both of which they insisted we use,” said Kilkeary. “We submitted a supplement to them with the markup money on it and they refused to pay it.”
Kilkeary sued GEICO for $266.06 plus court costs and was awarded the full amount.
“Moving forward, we’ll have the ability to pursue an insurance carrier who chooses not to pay the same money for bad faith. We’ve now set precedence and it has been established that they in fact owe the money,” said Kilkeary. “That markup money is the body shop’s, regardless of whether the parts get put on the car or not.”
“Each of the cases is similar in the sense that they involve aftermarket parts,” said Tom Vreeland, Kilkeary’s lawyer.
“I think Tim wants other shops to know that the expenses they incur for these kinds of requests by the insurance company should be compensated,” he said. “When they say, ‘install an aftermarket part,’ and it doesn’t fit, why is the burden on the mechanic to absorb that overhead expense?”
Vreeland advises shops to document their personnel costs for doing inventory and office paperwork. “They need to be able to document what their expenses are,” said Vreeland. “Some people might think $100 doesn’t seem like much, but it adds up. Multiply that times the number of situations that you have on an annual basis and that could be substantial money for some shops.”
“With all of the money I spent to win these lawsuits the only saving grace will be that I can get some information to the rest of the industry that says, ‘Listen, the insurance companies knew they owned me that money,” said Kilkeary. “If they paid me, they will pay anyone else. You have to ask for it.”
Travelers Insurance and GEICO both declined to be interviewed for this article. Autobody News talked to Michael Barry from the Insurance Information Institute about who bears the cost of markup fees.
"U.S. auto insurers cumulatively pay the nation's auto body repair shops billions of dollars a year to repair their policyholders' vehicles," said Michael Barry, vice president, media relations, Insurance Information Institute. "Those monies are used to pay auto body repair shops for the parts they purchase as well as their legitimate labor costs. Auto body repair shop markup fees are not an expense auto insurers should be absorbing."