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California leaves consumer on hook for State Farm storage fee short-payment

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Business Practices | Insurance | Legal
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Steven Lee says he contacted State Farm almost daily asking for an adjuster to look at his vehicle brought to Pacific BMW in California after a May collision. 

Every day State Farm would send him an automated text message saying the adjuster was on the way, Lee said. Yet, the adjuster would never arrive. 

“It was frustrating from the beginning that it was taking so long for them to send someone out there,” Lee said. “After two weeks, I found out that the car was totaled and they were setting up the bill. That’s when they mentioned that the storage fee was too high.” 

The storage rate at Pacific BMW is $275 a day, Andrew Batenhorst, body shop manager, said. He said State Farm said it would only pay $250 a day for Lee’s vehicle. Yet, the insurance company had paid the $275 rate for another vehicle a week earlier. 

Batenhorst said the California Bureau of Automotive Repair (BAR) had previously confirmed that the $275 daily rate was not unreasonable for the market.  

Labor Rate Hero shows the average storage rate for a 2-mile radius from Pacific BMW is $258, with the highest storage rate at $350 and the lowest at $175. 

Multiple factors can contribute to the cost of storage rates, Batenhorst said. This includes real estate values, rent, and indoor versus outdoor storage. He also said shops lose daily sales when a spot is held by a dead vehicle. 

Lee said it felt unfair that State Farm failed to send an adjuster to view the vehicle and then refused to pay the storage fees. 

“I was doing what I could by calling them almost daily to check on the status,” Lee said. “It left a very bad taste in my mouth.” 

Batenhorst assisted Lee in filing a complaint with the California Department of Insurance (CDI). This included making him aware that under California code 2695.8(k), insurance companies are required to pay reasonable towing and storage charges incurred by the claimant. 

Yet, CDI responded they were unable to resolve the dispute and suggested Lee sue State Farm, Batenhorst said. 

In an attempt to understand the decision, Batenhorst called CDI. He said the department told him he couldn’t file complaints on behalf of the consumer without being a public adjuster. He also was informed that storage rates are a “gray area” that lacks legislation, leaving CDI with no ability to enforce the issue. 

Repairer Driven News (RDN) reached out to CDI for clarification and was told body shops could assist customers by providing the consumer the CDI complaint form along with language and/or laws the shop thinks are appropriate to the consumer’s dispute. However, a shop should not act as an authorized representative of the consumer with CDI. 

“Given the proliferation of body shop complaints, where the shop is allegedly owed money from the insurance company, a separate process was created where they can file an Auto Body Repair Shop complaint form with CDI,” CDI responded in an email to RDN. 

RDN asked for clarification of CDI’s response because the insurance company’s contract is with the consumer, not the repair shop. 

“While the insurance company (that insures the vehicle) generally owes the consumer for all reasonable repair costs (covered under the policy), the insurance company may not agree with the amounts being charged by the repair shop,” CDI responded. “Our understanding is that in many of those situations, the shop does not always seek unpaid costs from the consumer. When this occurs, the shop may still seek payment from the insurance company for the unpaid amounts.” 

When asked if CDI can enforce storage rates, CDI responded that it does and has required insurers to pay some or all storage costs. It added that doing so depends on the specificities of the cases. 

 That did not happen for Lee. 

“At the end of the day, I felt pretty helpless,” Lee said 

Batenhorst said it is also frustrating for the shop. 

“This is a precarious situation for a shop to be in as it can quickly erode customer confidence and trust if we do not prepare them for the road ahead,” Batenhorst said. “The CSR or estimator handling the customer must be aware of the pitfalls and build rapport early on when there’s a strong possibility of the vehicle being totaled.

“Some customers react positively as they see we are fighting for them but others may not see it that way and feel like they are getting dragged into a fight that they don’t want to be involved in. Eighty percent of the situations in which this takes place, the customer ends up dropping their policy and switching to a carrier that is more reasonable.”

In Lee’s case, Batenhorst refunded the $325 State Farm deduction back. He said the business would not have been able to do so with a larger amount. 

“What makes me scratch my head on this is that we have the insurance industry driving this bus towards more storage regulation,” Batenhorst said. “BAR listened to their concerns and is trying to address them as well as collision repairers’ concerns with the proposed language. The accountability for the insurers, in my opinion, is nil. This situation is a perfect example of playing by the rules and getting punished for it anyway. Why isn’t BAR and CDI working together on this?” 

In July, BAR  fielded more than two hours of comments about proposed regulations on storage and towing fees that could significantly change the way collision repair shops operate in the state. 

The passage of AB1263 last year gave BAR the authority to address storage fees, according to BAR documents. It also allows the bureau to codify its guidance and unify existing law on the subject. 

Those in attendance raised concerns about the regulations requiring them to set a storage rate annually, with no ability to change it during the year for unforeseen circumstances. Concerns also included but were not limited to criteria outlined to set storage rates, the inability to charge storage rates while a vehicle is in the process of repairs and the state creating an “average storage rate.”

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Photo courtesy of DustyPixel/iStock

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