Having right portfolio of documents on hand might counter insurer issues during auto body repairBy on
Business Practices | Education | Insurance | Legal | Repair Operations
A good repair contract and authorization can put a shop on solid ground with insurers and customers, but a few additional documents could be helpful as well during the course of a repair, based on a SCRS Repairer Driven Education presentation this fall by a collision repair attorney.
Erica Eversman (Vehicle Information Services) during the Oct. 31 SEMA talk offered a series of sample documents which would formalize and solidify the shop-customer relationship — and respond to various insurer issues. They were slated to be posted on her Vehicle Information Services website, she said then.
(Note: Eversman stressed that the educational session was not intended as legal advice, only as ideas, and the same applies to this coverage of the talk. Anything you see here and the actual sample documents should be modified in consultation with a qualified state-licensed attorney to fit the laws of your state.)
We discussed in prior articles the core repair contract and authorization and a form requesting insurers declare how they’ll remedy the loss. See that coverage here and here. Here’s some of the other highlights from the documents Eversman described.
Notice of additional damages
After the vehicle owner authorizes the cost of repair and any amendments to those charges covering all vehicle damage, a shop might send a “friendly note” alerting an insurer that the carrier missed a few things, Eversman said.
The first part of that sentence bears repeating: The vehicle owner — the only person to which the repairer has an obligation — has already authorized the repair for that damage and signed a contract that they’re responsible for the bill.
The notification is just a courtesy, Eversman said. Typically, in first-party claims, the insurer only has the right to see the vehicle once, she said. They don’t have the right to keep coming back.
You’re being courteous in providing that access, but you also note that you’re a professional business and “‘we can’t be screwing around'” waiting, Eversman explained. The document gives the carrier 24 hours to both call for an appointment and appear to review the vehicle.
“‘If you do not call for an appointment and review the customer’s vehicle within the allotted 24 hours, we are entitled to assume that you waive any right or interest you may have in reviewing the vehicle, and we will proceed to repair the customer’s vehicle per our additional damage analysis,” the document states. “We will be entitled to prompt payment for the additional repairs in full.”
An independent adjuster also gets 24 hours, as they’re working for the insurer, according to Eversman.
Some repairers only give a few hours, she said.
She said she developed the document after a situation where a shop had disassembled the vehicle for a customer who lacked rental but was able to borrow his sister’s car for a short while. They sent their report to the insurer’s hotline and waited three days but received no response, Eversman said. The shop could have completed the repair in the time it spent waiting, she said.
Eversman drafted a letter along the lines described above and had the shop fax it to a local office of the insurer, she said. “Within 30 minutes,” the carrier had sent a representative over, she said.
In some states, an insurer’s rights regarding inspection might vary and such a document might not work, she said.
Notice of deficiency
After the insurer balks at a particular charge, a shop can send a notice of deficiency to a customer, according to Eversman. It tells the customer that the carrier won’t reimburse them enough “to PROPERLY AND SAFELY REPAIR your vehicle.” (Emphasis Eversman’s.) It explains what the insurers won’t cover and why this is a problem. For example, items like “Repairs using a process/technique that is not approved by (the OEM’s) technical repair standards,”
Insurers badmouth shops to customers, accusing them of trying to “‘gouge,'” and the document is an opportunity to do the same by pointing out, “‘The insurance company does not give a damn about you,'” according to Eversman.
You can also use this as an opportunity to demand to see where in the policy the insurer’s refusal to pay for a specific operation is located, according to Eversman. Obviously, it won’t be in there, she said.
It can be sent to a customer with the insurer CC’d, or you might want to just send it to a customer and let the upset customer contact the carrier.
Notice of insurer delay
A similar document, the notice of insurer delay, can alert the customer that the scheduled delivery date might be delayed because “‘the insurance company is gonna slow us up,'” according to Eversman.
It lists a delay of requesting to review the vehicle to supplement their estimate, noting that the insurer “may not perform this review immediately, thereby possibly causing several days or weeks delay.”
“Insurer has no right to approve or disapprove any repairs you have agreed with us to make to your vehicle,” the document states. “As a result, this is purely an administrative interest of Insurer to ensure its claim paperwork is correct and that activity could be readily performed after repairs are completed. Had Insurer prepared an accurate cost estimate for its claim paperwork prior to the initiation of your vehicle’s repairs, this issue would not have arisen.” (Emphasis document’s.)
The document explains that even though the shop has no obligation to the carrier, the customer has the right to make decisions about their own vehicle and may authorize a delay to satisfy the insurer if they choose. However, administrative fees because of the inconvenience of the delay might occur, it states.
As a presentation slide noted, the form eliminates the “insurer ploy that slows down repair, punishes independent shop, and leads to ‘if only you had used our DRP… argument.'”
The shop explains that the delay is the insurer’s fault, Eversman said.
“You’re taking back control,” she said.
Assignment of proceeds
An assignment of proceeds is a means by which the shop doesn’t have to be the bad guy, according to Eversman. If the customer owes an extra $2,500 the insurer refuses to pay, you have the right to hold their car as a lien, she said.
“You have no good options,” she said. An assignment of proceeds is an alternative, by trading the right to hold the car to the right to collect the money from the insurer, according to Eversman.
Eversman said that while some shops will attempt these assignments on third-party claims, “I think it is dangerous” because it involves the shop suing the at-fault driver. She only uses them in first-party situations.
Insurers might have anti-assignment clauses, but most states hold that the language doesn’t apply post-loss, according to Eversman. The majority of courts have said it only prevents pre-loss transfers like assigning one’s policy to a bad driver, which would expose the insurer to risks to which it didn’t agree, she said.
Eversman said she approaches these like accounts receivable, a term which helps shape attorney and judges’ thinking. Accounts receivable are bought and sold all the time, she said.
While the notion of champerty states that you can’t make a business out of buying rights to sue, a shop with an assignment of proceeds doesn’t have an champerty issue, according to Eversman.
She cited two rulings in New York noting that the shop had an interest in the case and therefore wasn’t buying rights.
“Thus, in taking the assignment from Hickey, M.V.B. did not act with a ‘basic litigious purpose’ but rather had such a pre-existing relationship with Hickey as to give it a ‘substantial and legitimate interest’ in the transactions involved in the suit,” a New York Appellate Court held in 2012, according to copy of the opinion on Leagle.
“(P)laintiff’s auto repair business and defendant’s involvement in claims settlement gave plaintiff a ‘preexisting proprietary interest’ in getting paid a fair labor rate from defendant,” a Nassau County District Court ruled in 2010, according to a Justia copy of the opinion.
Termination of repair
When an insurer convinces a customer to pull their vehicle out of your facility despite the repair contract between the shop and customer, you could have the customer sign a termination of repair document.
Eversman said the form declares, “‘I know I’m breaching your contract,'” and asks for the name of the insurer and specific individual that convinced them to do so.
“That is a perfect setup” for a tortious interference with contract lawsuit, she said.
It also includes a hold harmless for the vehicle, noting that “the repairs to the above referenced vehicle are not complete,” potentially limiting shop liability for whatever happens to the vehicle after it leaves.
If a customer experiences behavior like steering from an insurer and the shop anticipates having to go to court, the customer can offer an affidavit declaring what happened.
Affidavits are better than emails and text messages because they’re legal documents, according to Eversman. You can use them even if the customer isn’t available, according to her presentation.
However, they can be used as well to get emails or other exhibits into evidence by the customer in the affidavit legally verifying the content, according to Eversman.
Vehicle Information Services website (expected to contain link to sample documents for shops)
Automotive Education & Policy Institute
Collision attorney Erica Eversman of Vehicle Information Services gave a presentation during the 2018 SCRS Repairer Driven Education series on documents a collision repairer could use in their business. (John Huetter/Repairer Driven News)
From left, collision attorney Erica Eversman of Vehicle Information Services and Wade Ebert, former owner of American Auto Body, gave a presentation during the 2018 SCRS Repairer Driven Education series on documents a collision repairer could use in their business. (John Huetter/Repairer Driven News)