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Letter to the Editor

Arizona Collision Craftsmen's Association Reports Passage of Anti-Steering Legislation HB2468

One of America’s founding fathers once noted that the legislative process is evolutionary, not revolutionary. In that he meant that issues need to be addressed over time and that those who are willing to achieve regular incremental gain will, in the long run, be most successful. That is probably the most succinct way to describe our efforts and successes in the 2004 regular session of the Arizona Legislature in this our real inaugural effort to seek legislative relief from the problems our industry faces in its relations with insurance companies.

FAC originally approached this session with the goal of prohibiting insurance companies from owning and operating their own tied repair facilities. Similar legislation had been passed in Texas in 2003 and was under consideration in many other states. While Allstate was the main target since they purchased Sterling Shops, (they currently operate two in Arizona) other companies were partnering in places like California to engage in the same operation. We were concerned about the impact this would have in consumer protection and maintaining balance in the competitive collision repair environment.

Representative Clancy Jayne of Phoenix volunteered to introduce our legislation and did so as HB2298. It received initial shows of support from a broad array of legislators and a not unexpected visceral reaction from the insurance companies. Their opposition was heard in high places and the House leadership indicated that they would not consider the legislation this session. We did not stop, however. We engaged our members and their employees in a powerful grass roots letter-writing campaign producing over 700 letters from individuals to their legislators. It had its impact – so much so that legislators were telling House leadership that they needed some legislative solution so that they could report back to constituents that they had listened to their concerns.

While the prospects of HB2298 dimmed, the possibility of finding another bill to use as a vehicle to address our issues emerged. As we evaluated the concept of prohibition of insurance companies from owning and operating their own tied repair facilities, it became apparent that one of the main reasons for concern was the ability of the insurance companies to use steering tactics to drive claimants to their facilities. So if prohibition was not going to be a practicable solution at this time, then perhaps legitimate anti-steering provisions would be. Interestingly enough, when association members listed the most important issues they faced, prohibition of tied repair facilities was not in the top three while steering was almost a unanimous number one.

The insurance companies had recommended some anti-steering provisions early in the negotiations but their proposals did not appear to have any teeth to them and we were not inclined to support them. But when Representative Gary Pierce, the Chairman of the House Transportation Committee and a former auto dealer, joined the fight on our side, it became possible for anti-steering provisions to be crafted that would in fact have some meaning and some teeth.

Pierce also acknowledged that the tied repair facilities issue needed to be addressed with some reporting requirements and some limitations on who could make the repair decisions. Reporting is critical if we are to have the evidence necessary to pursue prohibition in the future. Pierce had language included in the bill to state, “If an insured or claimant selects a repair facility to repair the insured’s or claimant’s motor vehicle in which the insurer owns an interest in that repair facility, the adjuster for the motor vehicle shall not be employed by the repair facility or have any direct authority over that facility’s recommendations or decisions relating to the repair of the insured’s or claimant’s motor vehicle.”

He added that language and reporting language on to HB2468 in House Transportation Committee and that bill passed the House. The reporting language stated an insurance company that owned an interest in a tied repair facility had to file with the director of the department of insurance a statement delineating the number of motor vehicles repaired and the dollar values of those repairs in absolute numbers as a percentage of the total number of motor vehicles repaired. While these reports are confidential, the department is required to make the information available to the President of the Senate or the Speaker of the House of Representatives upon request. That means that legislators will have access enabling us to get the proper questions asked and answered at the legislative level.

Also of importance were the stiff penalties that were included in the House version and would later be amended so as to be enforceable by the Department of Insurance when Senate amendments were adopted. The penalties are drawn from the Fair Claims Practices Act which allows for fines on insurance companies for violations of up to $50,000. Despite hesitance by the insurance companies, both Pierce and Jayne insisted on these penalties and Senator Dean Martin perfected them in the Senate.

But the House version still had language that we were not satisfied with. We moved to the Senate with HB2468 to resolve those issues. And resolve them we did with amendments in the Senate Finance and Insurance Committee. While the insurance companies sought to loosen the language, Pierce pushed negotiators into maintaining legislative intent and an agreement was reached.

As we discussed at the Arizona Collision Craftsmen’s Association’s bi-monthly dinner in March, there is currently in Arizona law no specific statute that allows claimants to choose whichever repair facility they want. Just that change would be a step forward, although not nearly enough at this point in time. The insurance companies are very effective in engaging their talk track where they cajole, spin, sweet-talk, persuade and coax customers to go to the repair facility of the insurance companies’ choice.

Senate amendments by Senator Dean Martin, which had been recommended by our original sponsor Representative Clancy Jayne, and Representative Pierce acknowledged that this needed to be addressed in some manner. The Senate amendments included the language “…A person in this state has the right to choose any repair facility for the repair of a motor vehicle loss. If an insurer provides information about a repair facility, the insurer shall inform the person of this right at the same time as making the recommendation or providing the information.”

Now it is understandable for us to be concerned that the insurance companies’ talk track will seek ways to get around this provision. But this language gives us a powerful opportunity to poll our customers to find out if in fact the insurance companies are complying with both the letter and/or intent of this law or whether they are thumbing their noses at it.

©2004 Collision Repair Industry INSIGHT
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