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Saturday, 02 August 2008 10:05

Paint Capping Measure Passes California Assembly

The California Assembly unanimously passed California Senate Bill 1371–the fifth version of the bill–that prohibits insurance companies from placing caps on payouts for collision repairs. The problem for the past two years has been that lawmakers cannot agree on a definition of capping.

The latest definition of capping, which was approved July 14 by the State Assembly, is “… offering or paying an amount that is unrelated to a methodology used in determining paint and materials charges that is accepted by automobile repair shops and insurers.”

The methodologies, which must be accepted by both automobile repair shops and insurance companies, are determined by multiplying the cost of paint and other materials by the refinishing rate.
Now that the California State Assembly has approved this latest version, it must now be passed by the Senate.

Long time coming
The issue of paint capping in California has been on the table for a long time. Over twelve years ago, the Department of Insurance (DOI), now CDI, issued a letter that stated the departments position on paint capping. Their position at that time was that the practice was illegal.
As recently as late 2006, the CDI held a workshop chaired by then staff members Deputy Insurance Commissioner Woody Girion and Tony Cignarale to discuss capping paint costs by insurance companies.
After a lengthy discussion, Cignarale stated that the act of arbitrarily capping paint costs is an unfair claims practice.
“Our interpretation of applicable law says it is illegal to cap paint materials,” said Girion. “Insurance companies cannot tell the shop that the paint charge is too much. This is an arbitrary cap. This is all we are going to pay is capping.
“The body shops and insurance companies differ in their interpretations. Shops say the caps are unreasonable. Insurers say this is merely a threshold. The results of our research were quite amazing. Investigation exposed unacceptable patterns and practices in both body shops and the insurance industry.”
Girion expressed the hope that clarification of the issue could alleviate long-standing concerns, along with other issues that may have been festering. “We will encourage understanding between all the parties. The [CDI] has been concerned about the capping issue for quite some time, but the wheels of justice turn slowly.”

More states come on board

Some states have paint capping regulations that are clear but there are many states that either don't address the paint cap issue or have vague statutory language. Virginia collision repairers were successful in acquiring the most recent paint cap law.
This states legislation requires that the compensation paid by the insurer for repair parts and service will not be less than the amounts charged by the repairer to retail customers unless the amounts are not reasonable, and excludes certain items from determinations of the compensation paid by the insurer.
The measure also requires that (i) increases in service compensation be requested in writing and be based on 100 consecutive repair orders or all repair orders over a 90-day period, whichever occurs first, and (ii) increases in com-pensation for paint and parts be stated as a percentage of markup to be uniformly applied to all parts.


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