In Nevada the metaphor is just as apt when it comes to stopping the growth of tied shops—those in which an insurance company owns an interest. The Nevada collision community has just succeeded in getting an anti-tied shop bill, AB 297, passed by the State Assembly. The reasons why insurers should not own body shops could, and have, filled volumes.
But now, just when Nevada shop owners were starting to feel reassured by their first-stage victory, Mark Manendo, D-Las Vegas, is being assailed because of his support of the bill. Why? Because his day job is marketing director at Collision Authority, a Henderson, NV, body shop that competes with the only insurer-owned shop operating in Nevada, a Sterling facility in Las Vegas. Of course, Collision Authority also competes with every other shop in Las Vegas as well, but that’s not getting traction in the local press.
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Opponents of the bill have latched on to Manendo’s part-time job as Assemblyman to cry foul, and have co-opted some of the Las Vegas media to carry water for them. Shop owners who know the issues can’t help but feel Manendo is being scapegoated.
Manendo has said he has no conflict of interest in backing the bill because he wouldn’t benefit any more from reduced competition in the auto body industry than any other body shop employee in the state.
AB 297 passed the State Assembly with a 31 Yea, 10 Nay vote on April 21 and is now before the Nevada Senate. The bill was primarily written by Michael Spears, and backed by Nevada Collision Industry Association. It was supported by a solid contingent of the state’s repairers, and a telephone and e-mail campaign fostered by the NCIA.
Now that AB 297 is in front of the Senate, but the hearing has been postponed as of April 28, the media attack is focusing on Manendo himself, and not the legislation that he supports. In moving the battle from the message to the messenger, has the camel’s nose been pushed even further into the tent?
What the repairers know, but the public likely doesn’t, is that repairers everywhere have joined with consumer advocates in many states to ban insurer ownership of collision facilities—most notably in Texas—where HB 1131 was signed into law in 2003. In August that year, Allstate and Sterling filed a legal challenge to HB 1131 and got an injunction against enforcement, which led to a trial, and a further appeal. In Texas, Allstate and Sterling appealed on the basis that the bill violated First Amendment right of free speech and the Commerce Clause by unduly interfering with interstate commerce. The 5th Federal Circuit of Appeals has since determined that insurer owned shops have an unfair competitive advantage, cause an inherent conflict of interest, and can be legally banned by state law.
The Nevada bill was inspired by the passage of Texas’ HB 1131 in 2003. When Allstate proved unsuccessful in overturning the law and the Court of Appeals ruled in favor of Texas AG Greg Abbott, it paved the way for other states to follow. The US Supreme Court turned down Allstate’s appeal request last year.
Opponents of AB 297, notably Sterling Autobody, are singling out Manendo’s support of the bill, calling it a conflict of interest. However Manendo is not, and has never been the actual sponsor of the bill. The bill was launched when the Nevada Collision Industry Association placed it in their legislative agenda, the primary author being Michael Spears. The association overwhelmingly voted ‘yes’ for this bill as one of their choices, and in the end it was determined to be the best choice in serving the collision repair industry while preserving consumer choice and protection. Manendo is simply doing the responsible thing by supporting it.
In focusing on Manendo, rather than the anti-competitive principle of insurers owning body shops, the opponents of the bill have tried to end run the issue, by implying that it’s Manendo who’s anti-competition. After all, isn’t this bill trying to prevent Sterling Autobody from competing with Manendo’s employer, Collision Authoritiy? Could it be mere coincidence that Sterling was pursuing a leased location a half mile from Collision Authority while the bill was being heard in committee?
Manendo says that’s exactly what it was—a coincindence. Like every other informed repairer in Nevada, he was aware Sterling was looking to expand in Las Vegas and Northern Nevada, but didn’t know that Sterling was planning a Henderson location. (Sterling has ongoing expansion goals in many locations, and will open a new, 17,000 sq. ft. Livonia, Michigan facility on May 4 this year, for example.)
Stoked by gotcha-style articles in the Las Vegas press, good public policy is in danger of being obscured by allegations of cronyism and anti-trust action by a part time Assemblyman in a state with a part-time Legislature that meets every other year and pays a salary of $7,200.
Since the entire Nevada legislature is working a part time job—a fact legislative lawyers say means overlap between day jobs and elected positions is all but inevitable—there have been calls for ethics reviews, which is red meat for mainstream journalists.
“I don’t have confidence they’ll adequately police themselves,” said Julie Tousa, president of the Nevada Center for Public Ethics. The Legislature has tried to take oversight of members’ potential conflicts of interest away from the independently appointed Nevada Commission on Ethics. Legislative leaders favor self policing, but neither Assembly nor Senate Ethics committees has met yet this session.
Manendo has shown he’s not alone in dealing with such perceptions, which are common to medical, judicial, and even teachers and firefighters. Furthermore, this bill doesn’t try to block Sterling’s operations—it’s grandfathered. Collision Authority has only a few cars a month which Allstate insures.
Jim Haas, Southwest regional general counsel for Allstate, has pointed out that Sterling doesn’t serve only Allstate customers. Sterling is a preferred provider for more than 30 insurance companies, said Haas. Michael Spears, with Collision Authority, answers “I’m curious as to who those 30 might be. Sterling in Nevada seems to be direct [repair] only with Allstate.”
Manendo is steadfast in his anti-steering convictions: auto body shops that are owned by insurance companies create a conflict. Allstate “punishes” customers who don’t take their cars to Sterling, he has said.
Haas disagrees, calling AB 297 “an effort to prevent competition in the auto repair industry by eliminating one possible competitor.”
Michael Spears of Collision Authority was invited to comment by Autobody News: “I am not worried about fair competition, it’s the unfair that concerns me. 911 Collision Centers just opened down the street from our Green Valley store and they are family owned. This type of competition is welcomed as we compete on a level playing field with equal opportunity for the consumer. It’s this competition that will make us all better! No one can compete with an insurer and their aggressive steering tactics. Insurance companies will always have first contact with the customer while privately owned shops will just not have an equal chance for that same customer.
“If insurers are allowed to own shops, the independent and dealer owned shops will become a thing of the past. The consumer will lose a valuable ally when it comes to looking out for their best interests!
“Unbeknownst to the majority of consumers and perhaps even lawmakers, auto insurers are unlawfully steering them away from the repair shop of their choice now and dictating where they can go and what parts can be used in the repair process. Many of the members in the Nevada Collision Industry Association are cognizant of this anti-competitive business practice, but are reticent to act for fear of insurer retribution. Imagine how much worse this practice will become if insurers actually own the shops.
“With the predictable insurer owned shop expansions, this unlevel playing field will be further exasperated due to their steering abilities, especially as more insurers join in pursuit of shop ownership. We as small business owners just cannot compete with these tactics. Insurance companies’ payments for claims drive over 90% of our industry. If they are allowed to own their own repair facilities where do you think these payments will go then? How big do these insurance companies need to be? Why should they be allowed to control so many aspects of our daily lives? Do we really need another AIG?”
The bill was to have been heard by the Senate April 29, but has been postponed. At this writing it has not been rescheduled.
For background see Autobody News, Western, April, and search www. autobodynews.com.