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Letter to the Editor
This article originally appeared in the July 2002 Issue of INSIGHT
©2002 Collision Repair Industry INSIGHT All Rights Reserved
Florida Supreme Court Hands Diminished Value a Defeat
ASA Applauds Senate Bill 1648 Approval in California
U.S. Senate Version of Motor Vehicle Owner's Right to Repair Act Introduced
U.S. Department of Justice Proposes Rule on Stolen Motor Vehicles
Sterling Gets Preliminary Approval to Build in Blue Island
Ford Opens Memphis Daily Parts Advantage Center
CertifiedFirst Network Selected for First Motor Trend Preferred Designation
Fix Auto Names Dan Dutra Western Regional Development Manager
SAFECO Sees New Business Growth from New Auto Insurance Product
ArvinMeritor Donates $150,000 to Northwood University Aftermarket Education Center
INDUSTRY UPDATE
According to a report from ASA, in the case of Siegel vs. Progressive Consumers Insurance Co., the Florida Supreme Court has found the insurance policy does not cover inherent diminished value.
The Court found that "proper interpretation of the policy language at hand requires that we deem diminished value a loss not covered by this policy."
In an earlier decision, the Florida Fourth District Court of Appeal found that "having restored a vehicle to its pre-accident level of performance, appearance and function, and having complete top-notch repair, Progressive is not required to also compensate its insured for any remaining inherent diminution of value."
The Alliance of American Insurers had joined a friend-of-the-court brief asking the Florida Supreme Court to affirm the appellate and trial courts' decisions negating the concept of diminished value, and called the ruling "a major victory" for insurers.
"We asked the Florida Supreme Court to uphold the Florida Fourth District Court of Appeal's affirmation of a lower court's ruling that neither the insurance contract nor Florida law obligates an insurer to compensate for lost market value," said Joyce Kraeger, the Alliance attorney who helped prepare the brief. "And that is what the high court did."
The plaintiff's attorney originally had filed a class-action suit claiming that automobiles repaired following traffic accidents suffer a reduction in market value. The alleged reduction of value is known as diminished value.
Several class action suits have been filed throughout the country based upon the theory that once an automobile is repaired, the value of the vehicle is diminished. The lawsuits seek compensation for the alleged loss in value.
"The insurance industry has been successful in defending class-action litigation for alleged diminished value in Delaware, Florida, Illinois, Indiana, Louisiana, Massachusetts, Missouri, Ohio, Pennsylvania, Rhode Island, Texas and Washington," said Kirk Hansen, Alliance director of claims. "The only certified class action that has gone against insurers was one in Georgia, which ordered the insurer to make up the difference in value."
In the November 2001 Georgia case, the Georgia State Supreme Court ruled in the case of State Farm vs. Mabry that State Farm is responsible to pay their policy holders for financial loss associated with diminished value of the repaired vehicle.
As a result, the Georgia Insurance Commissioner issued Directive No. 01-P&C-1 to all insurers to "adjust claims accordingly, including assessment and payment of diminution of value relative to physical damage."
The Massachusetts Superior Court also upheld diminished value, finding that diminished value is covered under a Massachusetts auto policy.
The court accepted that diminished value is inherent in accidents involving property damage and that the concept of contractual mutuality holds that such a loss is covered.
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The California Senate passed Senate Bill 1648 by a vote of 29-7.
The bill would make it unlawful for insurance companies to have a financial interest in auto body repair facilities. Any insurance companies that currently have an interest in auto body repair facilities would be required to divest themselves within eight years.
The bill would also require an insurer with an interest in an auto body repair business to disclose that interest and give policyholders a choice when they're selecting a repair shop.
The Automotive Service Association (ASA) actively supported this bill and sent letters to collision shop owners in California requesting that they contact their state senators seeking approval of S.B. 1648.
"ASA is extremely pleased with the Senate passage of this bill. We think the Senate made the right decision in supporting 1648," said Bob Redding, ASA's Washington, D.C., representative.
"This vote is an overwhelming signal to insurance companies that consumers do not want to see the automotive repair industry continue on the same slippery slope as our nation's health care system. ASA believes consumers have a right to choose, and insurer-owned repair facilities limit those rights," Redding added.
The bill now moves to the California Assembly.
On a related matter, the ASA board of directors approved earlier this year the following policy:
ASA opposes insurance companies having a controlling ownership interest in automotive repair facilities and views such ownership as being in direct conflict with the consumers' right to choose. ASA has historically supported the consumers' absolute, unequivocal right to choose a repair facility for a collision or mechanical repair.
U.S. Sen. Paul Wellstone, D-Minn., has introduced the Senate version of House Resolution 2735, "The Motor Vehicle Owner's Right to Repair Act."
"This legislation is proof positive that what is good for small business is good for the consumer," Wellstone said. "The big manufacturing companies are acting like a cartel, and it is hurting independent auto mechanics and car owners alike.
"In April, I met with a group of [ASA] auto repair shop owners from Minnesota who told me that some auto manufacturers are effectively preventing them from working on newer cars. The last thing America needs is another industry where all the little guys - the small, independent businesses - are driven out. It is terrible for our communities that lose businesses and jobs, and reduced competition means higher prices for the consumer," Wellstone said.
"ASA is pleased that Sen. Wellstone has agreed to take the lead in the Senate on this important piece of legislation," said Bob Redding, ASA’s Washington, D.C., representative.
The legislation requires original equipment manufacturers (OEMs) to provide access to service information, both emissions and non-emissions, to the independent repairer. ASA supports this legislation and encourages its members to contact their Senators and ask them to support this bill.
"This bill provides independent repairers with the information they need to properly repair motor vehicles," said Redding. "Vehicle owners want service information to be made available to the independent repairer."
Reps. Joe Barton, R-Texas, and Edolphus Towns, D-N.Y., both members of the House of Representatives Energy and Commerce Committee, introduced H.R. 2735 last year.
Currently, H.R. 2735 has 38 co-sponsors and was referred to the Commerce, Trade and Consumer Protection Subcommittee. Towns is the ranking member of that subcommittee.
Thousands of consumers have signed petitions, provided by ASA, in all 50 states. ASA presented the petitions to Towns during its Annual Convention held in April in Washington, D.C.
The U.S. Department of Justice has issued a proposed rule on the National Stolen Passenger Motor Vehicle Information System regulations (NSPMVIS).
Under the proposed rule, an insurance carrier selling comprehensive motor vehicle insurance coverage or a person engaged in the business of salvaging, dismantling, recycling or repairing passenger motor vehicles must verify the theft status of salvage and junk motor vehicles or major parts.
Bob Redding, the ASA's Washington, D.C., representative, represented ASA on the Federal Advisory Committee for NSPMVIS that assisted in developing the rule. "ASA supports the National Stolen Passenger Motor Vehicle Information System proposed by the Department of Justice and will make formal comments to the department," Redding said.
The rule outlines procedures by which a business or person intending to transfer a vehicle or a motor vehicle part may obtain information on whether the vehicle or part is listed in the system as stolen.
Sterling Auto Body has been granted preliminary approval to build a new facility in Blue Island, Illinois, even though the initial application of the collision repair consolidator owned by Allstate Insurance was denied twice by Blue Island's City Council.
In March, Sterling sued the city and six aldermen, resulting in the judge ordering Sterling to re-apply for the permit, which was granted preliminary approval on May 23. The City Council is expected to vote on the final approval of the ordinance.
Sterling representatives have indicated that they will drop the lawsuit if the aldermen pass their request for the special use permit.
The Alliance of Automotive Service Providers of Illinois commented on the turn of events, "It is a sad statement of this government body, when good people vote their conscious believing their position is right for their community, and in doing so are threaten with lawsuits holding them personally liable."
In April 2002, Ford Customer Service Division (FCSD) launched a new parts distribution center in Memphis, Tennessee. FCSD's new Daily Parts Advantage facility in Memphis includes a high cube center that distributes sheet metal and bumpers.
This is in addition to its two high cube centers located in Sacramento, California and Detroit, Michigan. There is also one low volume, low cube center that distributes small, low volume products overnight to most dealers in the U.S.
The new facility is allowing FCSD to keep its promise for restructure and expansion of its U.S. parts distribution network. Total fill rates in Memphis are now approaching FCSD's set goal of 98 percent.
Dealer orders are running between 17 and 23 percent of total volume each day. Dealers are receiving orders on time, and sometimes even earlier. Emergency orders have dropped from 13 to six percent as a result of daily ordering availability.
According to the Ford timeline, FCSD does not plan to stop with the Daily Parts Advantage Memphis facility. It has plans for continued expansion until mid-2004.
In addition to Memphis, rollout programs have taken place in San Francisco, CA; Denver, CO; Portland, OR; and in the southwest region of Texas. The Daily Parts Advantage facility in San Francisco should launch during the summer.
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MOTOR TREND Magazine, a PRIMEDIA publication, and the CertifiedFirst Network, PPG's North American group of auto body repair centers, have announced that the Certified-First Network is the inaugural recipient of the "MOTOR TREND Preferred" designation from MOTOR TREND.
"The concept of 'MOTOR TREND Preferred' grew out of our commitment to be a comprehensive, one-stop source of automotive information, particularly about top-of-the-line products and services," said Lou Mohn, President, Motor Trend.
"Our review of the Certified-First Network assured us that the commitment of its participating shops to high standards of workmanship and customer satisfaction, and the warranties offered, make Network shops preferred places to have a car repaired," Mohn said.
"Recognition by one of the world's leading automotive information organizations is a tremendous milestone for the Network," said Mary Kimbro, director, the CertifiedFirst Network. "It's a testament to the strengths of the Network and reaffirms the value and credibility of the Network as a means for participating shops to sustain industry-leading levels of customer service. "Shops can proudly tell their customers that the CertifiedFirst Network, of which they are a part, is now MOTOR TREND Preferred," Kimbro said.
Auto body repair centers in the United States and Canada that are participating in the CertifiedFirst Network will display a "CertifiedFirst Net-work MOTOR TREND Pre-ferred" logo to identify the designation. The logo will also appear in Network advertising. Coverage of the Network's "Preferred" recognition will appear in MOTOR TREND and the MOTOR TREND Web site will have a link to www.certifiedfirst.com.
Since its inception in late 2000, the Network has grown to more than 900 participating shops in 44 of the United States and five Canadian provinces.
Fix Auto has named Dan Dutra, a veteran of 28 years in the collision repair industry, as its western regional business development manager.
For the past two years, Dutra served as the industry relations manager for DuPont Performance Coatings (DPC). His duties focused on the insurance industry as well as collision industry associations, such as CIC, SCRS, and NABC.
Dutra joined Spies Hecker as business development manager in 1990. In 1994, he moved to Standox, where he helped to create Partnership in Excell-ence, the Standox value added program. In 1999, he was named business development manager for DPC's E-business.
Dutra currently is co-chairman of the Industry Issues Committee for CIC and chairman of the Marketing Committee of CIECA.
In his new position, he will be responsible for growing Fix membership in the Western Region and assisting current members in upgrading and marketing their services. Working from his home near San Francisco, he will also maintain his contact with various industry groups.
The Fix Auto Network provides centralized services such as claims processing, CSI measurement and benchmarking, along with training and technology, to member facilities.
Numbering only 36 stores a year ago, Fix Auto's network now comprises 97 stores. Revenues this year are expected to exceed $260 million, nearly two-and-a-half times 2001's network sales.
One month after launching its new auto insurance product, SAFECO is seeing the results it expected: a substantial increase in new business. The new product more than doubles SAFECO's auto market reach and will help the company achieve the long-term goal of becoming a top-five national writer of auto insurance.
The new product debuted in Arizona, Utah and South Carolina in April. Agents there have offered SAFECO auto insurance quotes to their customers three times more often than before its introduction, with new-policy sales up over 40 percent in each state.
On May 30, SAFECO launched the new product in five additional states: Connecticut, Kansas, Indiana, Idaho and Wisconsin. The rollout will continue in several more states each month until the product is launched in all 44 states where SAFECO does business.
"This is a bold statement of SAFECO's focus on growth and profitability," noted SAFECO Personal Lines President Mike LaRocco. "Early agent feedback on the new product is very encouraging. We believe our vision of providing the market a blend of new products, new technology and our independent agents' skill in serving customers gives us a distinct advantage.
"My first priority when I came to SAFECO last year was to make sure we offered the best products in the industry, backed by our reputation for quality customer service," LaRocco said. "The launch of the new auto product is proof that we are on the road to fulfilling that promise. This puts us in the right market position for robust growth in business and revenues."
The increase in quote activity and new business is backed up by strong agent endorsements. "I've written more policies since the product was introduced here in April than I have in the previous two years. It's like night and day," said Phoenix, Ariz. agent Ryan Johnson. In Mesa, Arizona, Jack Bennett says his agency -- LeBaron and Carroll -- has gone from offering 10 SAFECO quotes a month to 190. "SAFECO did what it said it would do: it brought me a good product with good rates and decent commission levels."
The new auto product brings together three markets - preferred, standard and non-standard - into one model and thereby expands SAFECO's market reach from 40 to 95 percent. This marks the first time the company has offered non- standard auto insurance under the SAFECO brand.
SAFECO anticipates that the new auto offering will boost the insurer from its current market position of 13th closer to the long-term goal of top five. "We are making it easier for our agents to generate the sales we need to reach our target. The number one message to agents with the new auto product is 'Quote SAFECO every time, to every customer'," LaRocco said.
The Coalition for Auto Insurance Competition has called upon the McGreevey Adminstration to quickly address the likelihood that auto insurance will become more difficult for New Jersey drivers to purchase due to State Farm's application to stop doing business in New Jersey.
"New Jersey urgently needs a regulatory system that promotes competition, encourages companies to sell auto insurance in our state, and creates a stable market that offers more choices for consumers," said John Friedman, chairman of the Coalition. "Lawmakers need to get beyond general statements and offer specific proposals that will prevent a further shortage in auto insurance availability."
The Coalition expressed concern that an update issued by the New Jersey Department of Insurance and Banking on its auto insurance working group did not focus on the dire conditions in the auto insurance marketplace that lead to a lack of choice and competition.
"Four out of the six largest insurers in America already do not do business in New Jersey and when the state's largest auto insurer completes withdrawal, that number will increase to five out of six," said Friedman. "Now is the time to put forth sensible solutions that will empower New Jersey consumers with a greater choice of auto insurance companies and a marketplace where auto insurers actively compete against each other to sell auto insurance. We welcome the opportunity to work with the Administration to develop such a plan."
The Coalition for Auto Insurance Competition, a New Jersey-based group open to businesses, associations and consumers, cites excessive state regulation of auto insurance as the culprit behind limited competition by discouraging insurance companies from doing business in New Jersey.
The latest figures show New Jersey has 47 percent fewer companies selling auto insurance than Illinois and more than a third fewer than neighboring New York and Pennsylvania. More than twenty auto insurance companies have left New Jersey in the past ten years.
Seeking to prevent an unprecedented statewide auto insurance capacity crisis precipitated by the deterioration of the auto insurance industry's financial health in New Jersey, the Coalition was formed to educate the public and Trenton lawmakers about the need to reform New Jersey's auto insurance laws to create a stable and competitive market.
Capacity describes the volume of business an insurer can accept based on the size of its capital base surplus. Insurers must hold surpluses equal to at least one-third the premiums it collects from policyholders. If surpluses fall below the one-third standard, it signals that the company may be financially unstable. Companies with high financial ratings maintain their surplus at much higher levels.
"Having to operate under the state's restrictive and difficult regulatory regime where insurers are told what products to sell, to whom they must sell to and how much to charge, companies will lack an incentive to remain and invest in New Jersey, " said Friedman.
The group is calling for reforms that will attract more auto insurers to New Jersey, spurring competition and increasing consumer choice. These reforms include permitting companies to use industry-accepted standard underwriting methods already used in nearly every state, lifting the exit barriers for ailing companies and adjusting the low ceiling on company profits to permit a reasonable rate of return.
The Automotive Aftermarket Industry Education Center on the Northwood University campus in Midland, Mich. is another step closer to reality, thanks to a generous donation of $150,000 from ArvinMeritor, Inc., the Automotive Aftermarket Industry Association (AAIA) announced.
Dan Daniel, senior vice president and president of ArvinMeritor Light Vehicle Aftermarket, made the contribution at a recent reception during the Global Automotive Aftermarket Symposium in Chicago.
"We are pleased to support this important educational project initiated by Northwood and AAIA," said Daniel. "The future of our industry depends on the growth and success of tomorrow's leaders."
Since AAIA announced the fund-raising campaign to construct a $5 million state-of-art education center in January 2001, corporations and foundations have donated more than $1.5 million. AAIA, which is spearheading the campaign, contributed $100,000.
"ArvinMeritor's substantial donation demonstrates that the fund-raising campaign is gaining momentum and is moving us closer to groundbreaking," said Alfred L. Gaspar, AAIA president and CEO. "AAIA is proud to spearhead this important initiative on behalf of the automotive aftermarket industry. The education center will offer the learning environment where the new generation of business professionals will be educated, thus ensuring the future prosperity of our industry."
The 25,000 square-foot education complex will house Northwood's growing aftermarket program and University of the Aftermarket offices. The facility will be prominently located in the heart of the scenic campus that is home to the world's only four-year bachelors degree program focused on the management side of the automotive aftermarket.
The university system has a total enrollment of 6,000 students at its Michigan, Florida and Texas campuses - 2,000 of which attend the Midland. Campus - and 37 university college program centers located throughout the country.
"Smart classrooms" in the new building will link to interactive classrooms on the Texas and Florida campuses. This feature will allow resident faculty or visitors on any campus to simultaneously address aftermarket students on all campuses.
"Opportunities and demand for business professionals in the automotive aftermarket will continue to grow as the industry grows. A dedicated building for aftermarket studies will help attract students to aftermarket management careers to meet this demand," said Dr. David Fry, Northwood University president. "A stronger automotive aftermarket education program will ultimately strengthen the industry."
The university will provide the land, parking, entrance facilities and utility infrastructure, according to AAIA. The estimated $5 million that will be sought through donors will be used solely on the structure.
A fund-raising committee has been formed to solicit donations from aftermarket companies, organizations, foundations and individuals.
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©2002 Collision Repair Industry INSIGHT
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