NEWS
Repairers will be able to use data as negotiation tool to work with insurers
The livelihood of repairers and their shops depends on getting paid for all their work and materials. However, some insurance companies have decided to cap expenses by placing an arbitrary dollar amount on paint and materials. This ultimately keeps the shops from getting paid for their work.
In response to these practices, the Society of Collision Repair Specialists (SCRS) in 1996 contacted insurance companies and state insurance commissioners to determine whether each of these entities considered paint caps illegal and to what extent.
In late February this year, SCRS began work to update this information on paint capping. Dan Risley, SCRS executive director, says SCRS has begun to contact the major insurance companies and state insurance commissioners to find out whether their policies or laws have changed since 1996. Paint caps are considered illegal, but policies as to how this is defined vary. According to SCRS, paint caps are illegal when a consumer has an actual cash value (ACV) auto policy and the insurer places a cap on anything in the policy without notifying the policyholder of the limit in the original policy.
If a threshold cap is reached, both the insurer and repairer should work together to determine exactly what type of paint is being used, what color it is, and what stage of paint is (i.e. two-stage or three-stage paint). These data should then be used in conjunction with one of the information providers' refinishing materials guides or the computer in your paint departmentor another means of paint and material documentation--so the adjuster and repairer are able to agree on the final cost for paint and materials.
The first time that SCPS conducted the paint cap research, it found that 11 states said that paint capping "may be illegal," four said they never received a complaint, one state (Massachusetts) never responded to the query and New Jersey said the issue was being reviewed at the time.Twelve insurance companies said paint capping was against their policy and four would not give their positions on the issue. Thirty-six states and the US. territories, Guam and Puerto Rico, had said that they considered putting an arbitrary cap or limit on the cost of paint materials to be illegal.
"Now we're going to reaffirm and see if anything has changed:' Risley says. "We're using the information to combat any insurance company or independent appraisers trying to cap out materials."
Jeff Hendler, SCRS past chairman, says that gathering this paint cap information has both provided the documentation necessary for repairers to receive just compensation for their work and has created a milestone in dealing with insurance companies throughout the United States.
"This has been one of the grassroots level projects that SCRS has undertaken that has really enhanced the shop owners' ability to deal with the issues of paint and materials with regard to repairers,"
Hendler says.
Gary Wano Jr., owner of G.W and Son in Oklahoma City, says the updating of the SCP,S paint cap information is important because repairers are continually faced with insurers suggesting that thresholds and caps should be in place. He added that repairers get grief from insurers when they ask to be compensated for increased costs of a particular brand of paint.
"If you say,'I use ABC paint and it went up 3 percent this year, but I'm not getting the opportunity to increase sales and that is hindering me even more: the insurer may still refuse;'Wano says. An insurer might come back at the repairer and say that if he or she used the paint that only went up 2 percent, the costs wouldn't be as much. By doing an overall average for paint costs in general, it can serve as a base for negotiating with insurers, he says.
"A lot of us think we can go before an insurance company and say we can't allow a paint cap because of this or that,"he says. "But if we go about it in a more business-like fashion, grab all the data at hand and say here are all the costs, it will be more effective. I think this will be a wonderful tool that repairers as a whole will be able to use."
Boyd Dingman, owner of Dingman's Collision Center in Omaha, Neb., says insurers use paint caps as a way to make body shops do additional paperwork to prove that they have spent more money than what the cap was set at. For the most part, body shops are too busy to go back into files and look up invoices and other documentation to determine the true costs, so a high percentage of shops just let the issue go--and insurance companies know this, he says.
Dingman says when this happens, insurers are then able to argue that other repair facilities accept the cap. However, it's because there wasn't enough time to endure all the red tape. "The truth is, they didn't accept it," he says. "They just didn't have enough time to go back and figure out the true cost. They know we're
busy... we're swamped. However, if we put a little teeth into making paint caps illegal, then they won't be able to use these loopholes."
Additionally, Dingman says that insurers' claims of using a threshold instead of a paint cap are simply an issue of semantics. "What's the difference between threshold and paint cap?" he says. Either way, it's illegal, Dingman says. What really needs to be done, he says, is to either establish some sort of regulation and stick to it-instead of putting a cap at $250 or $400, for example. Or, repairers need to document everything and break it down into another estimate. For example, a repairer would have to record that he or she is going to use 27 sheets of sandpaper, a pint of reducer and three pints of paint.
"But we don't need any more clerical work," he says.
[Author Affiliation]
By Tina Grady Senior Associate Editor
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