Repairers and the California Auto Body Association (CAA) have taken issue with proposed towing and storage fee regulations by the state’s Bureau of Automotive Repair (BAR).

During the fourth workshop on the proposed changes, held Jan. 30, the main concerns were the language causing a cap on storage fees and losing days of storage revenue. Some speakers returned to voice concerns about the newest changes made after previous workshops.

Patrick Dorais, BAR chief, and Mathew Gibson, BAR program manager, have headed up the workshops and also gave an overview of the proposed regulations during the Jan. 21 open meeting of the Society of Collision Repair Specialists (SCRS) Board of Directors.

The passage of AB1263 last year gave BAR the authority to address storage fees. It also allows BAR to codify its guidance and unify existing laws on the subject. The changes also include teardown disclosures.

Pete Bezeck, CAA Northern California representative board member, said CAA and the Department of Insurance spent five years on LaborRateHero and couldn’t come up with a “statistically valid number.” CAA and DOI then hired three statistics professors to try and find the right number. Their responses were used to develop the locale in the standardized labor rate survey and that’s currently Insurance Code 2695.81.

“We urge the BAR to use the 2695.81 model, as written in the insurance code, to determine a statistically accurate storage rate when investigating these consumer complaints. It’s fundamentally the same but it’s the method of determining what that number should be,” he said. “What we found is that the more you compress the circle, the closer to accurate the charges are, and if there are fewer than six shops in that circle then you extend it another 1 mile. This works for rural areas and metropolitan areas.”

The proposed regulations from BAR include the creation of a public database that would provide median and average storage rates by radius. Tim Ronak, AkzoNobel senior services consultant, asked during the SCRS Board meeting if BAR considers “average” as a mode, or mean arithmetic average, and suggested a clear definition be added.

Another requirement would be for shops to allow at least three days for authorization after teardown before charging for storage. Based on the wording in the regulation, shops would also have to use public storage or towing rates if no repair is completed on a vehicle, such as when it’s declared a total loss.

Josh White, general manager at Knockout Collision Repair in Northern California, said insurance companies tend to take 10 or more days to review what shops send to them before deciding if a vehicle is repairable or will be totaled.

“We’re seeing stuff drag out for two, three-plus weeks before they come back,” he said. “We can’t afford to sit on those cars that long… The insurance carriers themselves need to do better.

“Our process is vehicle comes in, we put the estimate together within a few days, and immediately send it to the customer and the insurance carrier. We start charging storage three business days after that information is submitted to both parties. It seems to be fair. We still have insurance companies that are allowing vehicles to rack up 30 to 40 days of storage and we’re on them constantly to come and get these things off of our property.”

White added that carriers have said it’s up to them to determine totals.

“Well, no, it was a total from the minute it was in the accident,” White said, referring to vehicles that repairers can initially tell will likely be totaled based on the type and extent of damages. “It’s just a matter of moving it through the process to get the customer made whole… I don’t think it’s fair to say that an ARD [automotive repair dealer] has to wait for an insurer to decide whether or not the vehicle’s a total or whether or not it’s repairable… They don’t repair cars.”

A similar line of questioning occurred during the SCRS Board meeting, in which repairers said delays tie up shops’ bays and equipment. It was also noted that the issues aren’t just in California, they’re nationwide.

Kye Yeung, president of European Motor Car Works in Costa Mesa, California, and SCRS Vice Chairman Michael Bradshaw, vice president of K&M Collision in North Carolina, said the regulations wouldn’t hold third-party payers accountable for delayed repair authorizations, including delayed total loss determinations.

“Customers’ decisions are often predicated on whether or not they will be indemnified for their loss,” added SCRS Executive Director Aaron Schulenburg.

Schulenburg elaborated on scenarios shops often deal with as described by Yeung and Bradshaw. After disassembly to identify damages, an insurance company may consider totaling the vehicle, he said. At that point, the customer is informed by the shop that the vehicle could be a total loss.

“The customer says, ‘Well, don’t do anything until they tell you otherwise,’” Schulenburg said. “Now it sits for three weeks… At the end of the day, Kye or any other facility like Kye’s, is holding this vehicle on a piece of equipment waiting for an answer, and has no ability to move forward but is also maintaining possession of that vehicle, protecting it and has liability around it.”

Gibson replied that repair authorizations shouldn’t be left up to insurance companies; it should be the customer’s decision as the vehicle owner.

During the workshop, Jack Molodanof, CAA counsel, said shops would have to give away three days for free.

“I’m not aware of any law or any governmental entity that tells a small business owner, ‘You can’t charge for a service,'” he said. “If the shop wants to give free storage for three days or five days or seven days that’s their option… It’s like the state telling you to work three days for free. I just don’t think there’s any legal authority for that.”

For collision repair facilities, storage is ancillary rather than primary business, he added.

“Something needs to be put into 3351.82 that says the shop can get their retail rate if they don’t repair the car, they don’t perform what you call a ‘teardown repair,'” Molodanof said.

Erica Williams, CSAA Insurance Exchange counsel, called the changes between the third and fourth BAR workshops “disturbing,” and warned that if they’re approved as is, there will be litigation because of the risk it creates.

“It flies in the face of consumer protection,” she said.

Referring to § 3351.8.1(g)(2), Williams said the proposed prohibition of using published storage rates to establish, influence, limit, or suppress an ARD’s rates is contradictory and overreaches the BAR’s authority.

“How can an average consumer, carrier, anybody — even a shop — go to a court and prove the ordinary and reasonable market rate if this tool is out there in existence? Whether or not it’s made public or within the BAR’s private records, it’s in existence and should be used as evidence; otherwise, what’s the point of this? …There’s no practical effect of this.”

She suggested the section be reworded to “published storage rates can be used.” She also suggested using a tier system, such as type of storage and vehicle size, rather than allowing variable rates.

Jesse Parks, Freeman Collision Center director, said insurance companies have all moved toward a virtual model and cut their staff to maintain their margins, leaving shops to absorb all of the administrative labor.

“We will spend five, six, seven times going back and forth on an estimate just to get to where we were the first time,” he said. “We beg them [appraisers] to come out. We’re not the people that park it out back and hope they forget about it… Could you imagine if you had to give three days free insurance on every policy that you sold? Putting it in comparison I think is fair.”

Jeff Butler, a licensed public insurance adjuster and auto damage appraiser in neighboring Washington State, said at the workshop that repair facilities shouldn’t be expected to provide free storage just as insurers don’t provide free insurance.

“If you don’t pay your premiums on time and you miss one day, your coverage is denied,” Butler said. “I support the notice to the insurer… that includes the storage fees at the location and terms and conditions. My repair facility has done that forever. We send that notice every single time. An email is sent [with] what our terms and conditions are, what the storage rates are for — indoor, outdoor, on a frame rack, large vehicle, et cetera, so it’s clear we’re not just making stuff up; it’s the same rates every time.

“[If] the rules that say you can’t charge for storage up until the time the car’s become a total loss, well who’s determining that? The insurers, of course. It’s not the shop’s ability to determine the coverage under the policy. That’s the insurer’s obligation.”

Butler also said that using the average storage rate for each location doesn’t allow for differentiating market cost of real estate and doing business, and therefore, wouldn’t reflect market prices.

Dorais said changes will likely be made to the draft regulations based on feedback given during the Jan. 30 workshop and a recent CAA meeting.

“We’re ready to move the package forward fairly soon,” he said. “I’m hopeful we’ll get it forward to our department for review. We’ve already had our Legal Office look at the regulation text… Once they’ve been approved, we’ll file them with the Office of Administrative Law… and that begins a formal 45-day public comment period on the proposed regulation so this is by no means the last opportunity to weigh in.”

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Featured image: File photo from K&M Collision (Lurah Lowery/Repairer Driven News)