Insurance Commissioner Dave Jones announced Jan. 4 that the Office of Administrative Law (OAL) approved amended regulations submitted by the California Department of Insurance (CDI) regarding the use of non–original equipment manufacturer (OEM) replacement crash parts, generally known as aftermarket parts. These regulations were sought by Commissioner Jones to further protect California consumers from physical and financial harm caused by defective or inferior aftermarket parts and to enhance insurer accountability in the claims process.
“The amendments build on existing protections by requiring insurers to settle automobile insurance claims using repair standards described by the Bureau of Automotive Repair, and not the insurer’s own standards of repair,” said Commissioner Jones. “This also places greater accountability on the insurer when they require use of an aftermarket replacement part so that damaged automobiles are repaired properly and safely.”
After investigating complaints from consumers and automobile repair shops and evaluating the law, CDI drew the conclusion that defective or otherwise non-compliant aftermarket parts continued to infiltrate the repair process due to insurers’ failure to perform the necessary steps to ensure public safety. CDI had been made aware of defective aftermarket bumper reinforcements, hood latches, and other safety related parts being required by insurers that otherwise were not compliant with current repair standards. CDI had also been made aware of substantial costs borne by automobile repair shops and their customers associated with installing defective or poorly fitting parts required by insurers. Performing repairs that do not comply with current repair standards or placing an inferior aftermarket part in a vehicle may cause the vehicle’s value to depreciate. Defective parts may cause injury or even death if they malfunction.
Prior to beginning the formal rulemaking, CDI listened to stakeholders representing consumers, insurers, automobile repair shops, distributors, and automobile manufacturers. CDI also held a pre-rulemaking workshop in November 2011, which included strong representation of many stakeholders involved in the process.
Specifically, this rulemaking will strengthen and enhance current law by:
- Requiring an insurer to pay for the costs associated with returning a defective part and the cost to remove and replace the defective part with a compliant non-OEM part or an OEM part;
- Requiring the current insurer’s warranty be expressly stated in the estimate of repair generated by the insurer;
- Requiring an insurer to cease use of a part known to be non-compliant, and to notify the part distributer within thirty (30) days;
- Requiring an insurer to pay for an amount to repair the damaged vehicle to its pre-loss condition in a good and workmanlike manner, based upon the repair standards required by auto body repair shops licensed by the Bureau of Automotive Repair.