Some of the claims included in the lawsuits were Breach of Contract, Bad Faith, and Unfair/Deceptive Trade Practices. K&M Collision was represented by attorney William E. Morgan of Morgan Law PLLC in Hickory, NC.
According to Bradshaw, “These claims stem from the insurers’ continual refusal to pay for factory correct repairs according to manufacturer repair specifications and guidelines. Not all insurers are bad; what we’re finding is that many of these companies are doing the right thing and paying for manufacturer correct repairs; however, there is a select group of insurance companies that show complete disregard for manufacturer specified repairs, procedures and safety checks on a consistent basis. Unfortunately, those insurers put us in the position of either performing the operations for free, making the customer responsible for the additional costs or resorting to legal action.”
While the six shortpay cases Bradshaw is currently pursuing encompass a little bit of everything, “the most consistent problem is the failure to recognize and reimburse customers for manufacturer recommended repairs and safety checks.” This is particularly the case when only a few shops are performing the operation as it leaves the insurance company uninterested in the manufacturer’s documentation showing the need for the repair, and they will refuse to pay for something which other shops don’t charge, even though the absence of the charge is due to the fact that it is not being done. Bradshaw fears that these insurers are “basing their repair standards on sub-standard repairs being performed.”
An example of this is seen with a BMW recently brought to the shop. Because the manufacturer’s facility is only 45 minutes away from K&M Collision, Bradshaw toured the facility and learned about a procedure they use to correct any imperfections in the paint; however, Nationwide refused to pay the shop to perform this procedure, though manufacturer guidelines indicate it is required and should be billed separately without being included in the paint time. The insurer insisted they have to do what the market dictates, and because most shops don’t perform this requirement, K&M Collision cannot perform it either (or at least they won’t be paid if they do).
K&M Collision has been in business since 1991, and though Bradshaw did not begin working there officially until 2006, he has always been around this family-owned and operated business. Despite their decision to refrain from participating in any DRPs, the shop repairs a high volume of vehicles, grossing just over 1.3 million this past year.
When questioned about the importance of pursuing shortpay lawsuits, Bradshaw explains, “in order to maintain our 12 manufacturer certifications, pay employees, and make a profit, it’s really a necessity; either we do it, or we don’t make money. The shortpay amounts are usually our profit margins on these jobs.”
Though Bradshaw just won a shortpay lawsuit against Nationwide this past summer, he has not seen any improvements in their behavior since the victory; “they seem to change the way they handle claims, in terms of what they will and won’t pay, every few months.” He also notes the oddity of how Nationwide handles appraisals; they usually send at least two people to the shop, one of whom is generally a supervisor, and these individuals will engage in a review of their findings before making a decision about what they’ll pay. It is not uncommon for Nationwide representatives to be at the shop for four hours or more to process just one claim.
Additionally, Bradshaw recently ran into a case where Nationwide did not believe certain repairs were necessary, and even after K&M Collision proved the necessity by performing measurements and providing this evidence, the insurer only paid for a portion of the repair.
In contrast, Bradshaw notes that he is seeing some improvements from some other insurers. For example, he filed a claim against one insurer for refusing to pay his labor rates because they claimed the rates were too high. Since the lawsuit was filed, this same insurer has not contested four new claims that were processed with higher labor rates than the first case which caused K&M Collision to lodge the complaint.
Though Bradshaw believes that the majority of insurance companies are changing their behavior due to the recent influx in shortpay cases being pursued, for some insurers “this is the way it is and the way it’s going to be. Some of these insurers fear paying one shop more than the others because they have the mistaken belief that it’s necessary to pay all shops the same.”
This is especially untrue as it pertains to shops that are certified by rare manufacturers, such as Porsche which only has around 50 certified shops in the nation, making it logical that these shops should receive increased compensation when performing the more difficult repairs that these cars call for. Bradshaw believes there will be “fewer cases being filed in the future due to a combination of factors.”
“As always, our main concern is that our customer’s vehicles are repaired safely, as close as humanly possible to their pre-accident condition. The costs involved in having the proper equipment, training, facilities and staff to repair today’s vehicles continues to escalate. But the reimbursement rates have moved very little in the past several years. I think the problem is many times an insurer is attempting to base payment on the lowest cost in the market and not the cost of proper repairs in the market. Based on our conversations with other shop owners around the country, this is a situation I believe is occurring nationwide. I remain hopeful that someday these actions will no longer be necessary as all insurers will choose to do right by their customers.”
Bradshaw is fairly confident and optimistic about the outcome of these pending lawsuits. “We put a lot of research into this, and we believe these cases will be decided in our favor.” Trial dates for these six lawsuits have not yet been set, but they are expected to occur sometime during the first half of this year.