New York repairer Mike Orso, owner of Nick Orso's Body Shop in Syracuse, has filed more than $1 million in short pay claims against several large insurance companies.
Orso filed the claims against Adirondack, Allstate, State Farm, and several other companies, and has claims in the works against Liberty Mutual and Nationwide. The short pay claims total more than $1 million, and additional causes of action, interest and penalties increase the value to more than $3 million. Orso filed the claims in Syracuse City Court, Onondaga County Court, or the county small claims court, depending on the size of the claim. He says there are several other claims ready to be filed later this year as well.
The cases are based on the concept of "assignment of proceeds," and Orso says his shop has recouped more than $1 million in revenue during the past five years by going after insurers for short pays using this particular legal maneuver. An assignment of proceeds form generally entitles the repairer to receive payment from the insurer in place of the vehicle owner, but does not limit payments to whatever the insurer elects to reimburse.
If the insurance company won't pay the full claim, the body shop will turn the repaired vehicle over to the owner and then (with the vehicle owner's permission) pursue the remainder of the claim. When particular insurance companies consistently short pay on multiple claims, the shop can group the claim together for the purposes of the lawsuit (depending on state law).
Orso now has an in-house attorney, Joseph Talarico, to handle the increasing number of suits he has in the works in order to collect on short pays. If an insurance company offers to settle with Orso, he and his attorney have been pushing to receive the full amount.
"We have one insurance company with $40,000 in short pays that went from a $5,000 settlement offer to $37,000," Orso says. "They're holding out on the last $3,000. They basically do the same thing at that level that the appraisers try to do at our level, just basically nickel and diming back and forth, and telling us that the insurance company hasn't given them the authority to do any more or allow any more. We generally won't settle these cases unless they pay at least the full amount of the short pay."
If the cases go to court, Orso and his attorney also seek interest and punitive damages, in addition to the initial claim.
According to Orso, the current claims stem from the insurers short paying or refusing to pay for Orso's full labor rate, paint and materials, P-page omissions, OEM parts, and from what Orso characterizes as "arbitrary caps" on clearcoat or materials. Some of the claims also stem from vehicles that were later totaled after the insurer denied labor claims from the shop.
The reason the current group of claims has grown so large is because Orso had put his assignment of proceeds cases on hold pending an appeal on another case against Adirondack. Once Orso prevailed in that case, he was able to move forward with more claims.
“The reason some of these cases were delayed in filing is two fold: on-going negotiations and the motion for standing," Talarico said in a written statement. "Some of the current suits filed this month were actually delayed while that appeal navigated through the courts for two years. The word spread fast when Adirondack won their initial motion and some on-going negotiations stalled. The week we won the appeal some companies called and paid up.”
According to Orso, obtaining assignment of proceeds paperwork from his customers is now part of his standard business process. He says he explains that insurers may ask that the repairs be handled using salvage or aftermarket parts, and that they might not pay claims on new parts or some procedures.
"I ask them if they want us to handle the claim, or if they want to do it themselves," Orso says. "I'm not going to do anything I'm not authorized by the customer to do. But New York State has a provision that allows consumers to appoint a knowledgeable person to negotiate for them. If you are a registered repair shop, you can negotiate on behalf of the consumer."
The approach is paying off for Orso, who says that the amount of short pays the shop experiences is now lower than when he began filing these suits in 2007.
"To date, collections have amounted to well over $1.5 million," Orso said in a written statement released after he announced the lawsuits. "One batch of cases settled for almost $100,000 early last year."
Earlier this year, Rutland, Vt.-based Parker's Classic Auto Works won an assignment of proceeds case against Nationwide Insurance involving nearly $12,000 in reimbursements and 31 claims. In Lakeland, Fla., Gunder’s Auto Center has had repeated success using assignment of proceeds to recover on insurer short pays. Last June, Orso won another case against Adirondack, and in 2009, Alpine Body Shop in Ogden, Utah, took GEICO to court using assignment of proceeds documents, although that decision was later overturned on appeal.