Proper contracts and documentation are needed to ensure collision repair shops get paid for total loss claims, Tony Adams, AkzoNobel services consultant, and Tim Ronak, AkzoNobel senior services consultant, said during a 2024 Society of Collision Repair Specialists (SCRS) Repairer Driven Education session at the SEMA Show. 

“As the frequency of total loss incidents rises, repairers must meticulously account for the documentation, administrative, and storage tasks involved in the process to ensure accurate billing,” Adams said.

CCC’s most recent Crash Course Report shows total losses accounted for 21.5% of claims through the first half of 2024. The report indicates that total loss claims have steadily increased since 2013, when they made up 14% of all claims. 

The report also says that the number of total loss vehicles will likely increase with the erosion of used vehicle values and an increasingly mature vehicle pool. 

“I think if you’re really trying to write a safe and proper repair leveraging all of the P-page logic that exists in the estimating systems, trying to follow all the OEM repair procedures to the best of your ability — and you’re billing for all those things — you’re going to see more [total losses],” Adams said. 

Ronak said that for about 30-40 years, total loss processing was typically covered as part of a contracted agreement with a vendor partnership. 

“What’s happened is that the vehicles have changed and the thresholds have changed,” Ronak said. “It’s one thing to have 10 to 12% of your activities spent on a non-reforceable vehicle. It’s quite different when that exceeds 22 to 25% as it is today.” 

Businesses must be aware of how much it costs them to process a total loss vehicle, Ronak said. 

Adams said the process includes multiple stages. He said it starts with repair contracts protecting both the shop and the consumer. 

Repair businesses should have contracts that consumers sign at the beginning of any job, Ronak said. He said that in total loss cases, it is specifically important that the contracts establish that the shop is acting as a bailee in a bailment process when it accepts vehicles from a consumer (or bailor). 

Bailment, a legal term, is the transfer of assets or property but not ownership from a bailor to a bailee. 

Ronak said the establishment of bailment makes it legally harder for a third party, such as an insurance company, to use a legal remedy called replevin. The remedy enables the recovery of personal property taken wrongfully or unlawfully to obtain compensation for resulting losses. 

Insurance companies use replevin to abandon vehicles after denying storage fees because they claim they never authorized them, He said. He added insurance companies have often gained ownership of vehicles because the owners gave them the titles in total loss settlements. 

However, Ronak said if the shop legally has created a bailment then transfer of ownership isn’t allowed until the shop releases the vehicle. 

“Given that used vehicle values are falling, the consequences are much lower value vehicles,” Ronak said. “That means when the storage bill gets up to $4,500 because people have dragged their feet, they may just say, ‘Eh, keep the car,’ because the car is not worth anything to them and it will cost them more to pay the fees, tow the vehicle out, and get less money back for the reimbursement.” 

Repairer Driven News reported in September about a total loss 2008 Chevrolet Trailblazer that was left sitting at a New York shop for nearly 10 months after the vehicle owner released it to Liberty Mutual. 

A bailment keeps others from making decisions about the vehicle outside of a shop’s purview, Ronak said. 

“That’s probably the crux of what you have to do if you’re going to look at billing for total loss,” he said. 

Ronak added that attorneys have built contract formats specifically for collision repair businesses and can often be purchased at a reasonable price. 

Another step in the process includes billing for towing and storage, Ronak said. Shops should consider whether a vehicle is running or immobile, he said. He added that shops should also consider if the vehicle was supervised on drop-off, if components of the vehicle needed to be sealed to protect elements from water, and if hazardous material had to be disposed of.

Consumer contracts should clearly define storage pricing, he said. Bills also should be itemized. 

Adams said that another step in a total loss process involves a detailed inspection of the vehicle, which includes a comprehensive disassembly and a thorough evaluation of structural and mechanical functionality, ADAS functionality, and cosmetic impacts. 

He said this step can include the actual time it takes to research OEM procedures for each specific vehicle. 

“If you’re dealing with a fully electric vehicle, there’s different power down procedures,” Adams said. “There are things to do to make sure those cars aren’t spontaneously combusting themselves because of a damaged battery pack.” 

Following OEM specifications along with using OEM or compatible software and tools is important when handling low voltage systems and batteries, according to panelists who spoke at a Collision Industry Conference (CIC) meeting on July 10.

Ronak said there could be costs for securing removed components. Other costs could be restocking fees for parts ordered before the total loss determination or return freight charges for parts returns. 

Each cost during this part of the process should be documented, along with the reason why the process was necessary, Ronak said. 

“What you do and documenting specifically what you do is going to be absolutely critical as you go forward,” Ronak said. 

The next step in the process includes determining the vehicle’s fair market value, which includes examining the vehicle’s history, condition, mileage, and verifiable recent sales data. If there is a disagreement on the value between the consumer and insurance company, a consumer can invoke an appraisal clause, if they have one in their contract. 

Following a total loss determination, a repair shop prepares a detailed estimate with supporting documents to be sent to the insurer on behalf of the consumer. This step has administrative time that should be billed, Adams said. It could include maintaining dialog and addressing any questions or concerns from the insurance company and/or consumer. 

Ronak said it is also important that repair shops use tools to help document. This includes utilizing parts management tools and repair tracking software. 

“I don’t know if you’ve experienced it yet but insurers are using AI to push back on your billing,” Ronak said. “If you’re lacking any documentation, it’s coming back to you in three minutes with those items removed as unsupported. There’s AI you can use on your side to ensure that you’ve got all the documentation.” 

Repair shops can find total loss worksheets and compilation of total loss billable operations from numerous sources, Ronak and Adams said. 

They said third-party sources can also help with training and tools such as SCRS, the Database Enhancement Gateway (DEG), and Elite Body Shop Solutions. 

Images

Tony Adams, AkzoNobel services consultant, and Tim Ronak, AkzoNobel senior services consultant, present on Nov. 5 during a 2024 Society of Collision Repair Specialists (SCRS) Repairer Driven Education session at the SEMA Show./Teresa Moss