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Friday, 22 July 2016 18:21

Ruling Favors PA Shop Over Nationwide's Claim of "Excessive" Fees

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After Nationwide Insurance filed a claim against a Pennsylvania body shop for charging “unreasonable and excessive fees,” a county arbitration panel in that state ruled in favor of the collision repair center in May.

Nationwide filed the original complaint against Professionals Auto Body in October 2015 in Blair County, PA Court of Common Pleas. According to court documents, Nationwide was disputing a towing bill in the amount of $837.50, as well as the reasonableness of a daily storage fee of $75 per day. The costs also included a 25 percent markup fee on a towing charge, which amounted to $167.50.

“It’s the cost of doing business and those costs have to be covered and passed on,” said Ron Perretta, who owns Professionals Auto Body as well as a full mechanical facility and KarPro Tire and Auto Center towing company in Altoona, PA.

Professionals was represented by Jonathan Rose, an associate attorney at Forr, Stokan, Huff, Kormanski & Naugle in Altoona, Pennsylvania. Rose said the plaintiff’s amended complaint failed to state any cause of action or any legal theory against the body shop.

In May 2015, Debra Howard and Monica Devett were involved in an accident and according to court documents, Howard was at fault. Devett’s 2012 Chevrolet Malibu was towed to Altoona Emergency and then towed a second time by KarPro to Professionals Auto Body.

Professionals paid the cost for both towing companies, which included a 911 response tow, recovery, debris removal, service fees and storage.

Perretta said KarPro’s tow manager marked up the first tower’s invoice 25 percent, which came to $167.50. Before the vehicle was brought into the body shop for disassembly, Professionals asked Howard to come in and authorize the rates and charges. After disassembly, the vehicle was declared a total loss.

Howard’s insurance company, Nationwide, paid all of the charges for the services provided. According to court documents, Nationwide alleged it made the payments only “under protest” and declared the charges unnecessary and asked that they be refunded.

In the complaint against Professionals, the insurance company claimed that the costs were not agreed to by Howard or Nationwide and requested that certain charges, including the markup amount be refunded, which amounted to $837.50.

“Nationwide wanted a breakdown of that sum probably with the idea that they would reimburse KarPro for the amount originally charged by Altoona Emergency but a denial of any markup,” said Rose.

“All items were very reasonable and necessary charges,” said Perretta. “Our defense for the charges were simple and easily justified. We use our money for their benefit and deserve a markup.”

In addition to staffing fees, Perretta said the body shop needs to cover a variety of other costs. These include maintaining secure lots that are accessible 24 hours a day, seven days a week, paying for the liability of each vehicle from theft or damage, insurance and taxes on their property and costs associated with protecting the environment.

“If [the] plaintiff believes it should not be responsible for the full amount of the damage its insured has caused, plaintiff should seek restitution from its insured rather than demanding defendants rewrite their bill for damages caused by Plaintiff’s insured,” court documents stated.

Rose said part of the theory that Nationwide was looking to proceed on was an unjust enrichment theory, which relies upon an implied contract. “They’re actually not permitted under the law to proceed under an implied contract theory where there is an express written contract,” he said.

In this situation, Professionals had the customer sign a contract outlining the charges, including the rate per day so it wasn’t an issue. Otherwise, Rose said the insurance company does have the ability to come in and debate the rate.

He stressed the importance of always maintaining good records. “My advice to shops that may be in a similar situation would be to make sure they always have documentation,” said Rose. “Be sure that they have signed contracts with their customers that indicate that they know what the charges are and that the procedures that are going to be done have been authorized by the customer.”

The case went to an arbitration panel consisting of three local attorneys that heard the case and a decision was made in favor of Professionals. Nationwide had a 30-day period to appeal for a de novo hearing before the court, but did not.

“This is something that is definitely a problem for independent shops, shops that aren’t participating in direct repair programs who are accounting for their own costs and trying to make a reasonable profit,” said Rose.

He said that shops need to know they can operate independently, although independent shops have to be prepared to defend all of their rates and charges as they would be setting those themselves based upon their costs, rather than simply utilizing whatever fee schedule is put in place by the insurance company.

“They don’t have to be fully dependent on direct repair programs,” said Rose. He said that he is not condemning direct repair programs, but that a different business model of an independent shop is something also available to auto body repairers.

Due to the design of today’s vehicles, Perretta said total losses, such as the one in this instance, have become considerably more common. “The costs associated with handling of total losses and claims has to be looked at,” said Perretta. “There’s a limit to the amount of these costs business can absorb.”

Nationwide provided the following statement to Autobody News in regards to the claim and the decision by the arbitration panel:

“Nationwide evaluates the facts and circumstances of each claim individually and pays for covered losses that are reasonable, claim-related and supported by documented evidence. Nationwide does not publicly discuss claims litigation.”


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