Topics covered how to avoid entering into contracts of adhesion, designing repair authorization and repair contracts, and how a body shop should document its services. The seminar, attended by about 250 repairers, focused on how to get paid in full for your repair services.
In this edition of the seminar three attorneys spoke – Erica Eversman of Bath, Ohio; John Parese from New Haven, Conn.; and Kurt Lundgren, whose New York practice specializes in representing doctors in their disputes with insurance companies.
Eversman’s practice advocates for body shop owners and operates the Vehicle Information Institute, an Ohio- based firm with a specialty in settling claims for loss of value.
Eversman also has formed the Automotive Education & Policy Institute – a non-profit organization created to fill in the information void where government regulation and other automotive services leave off. While the National Highway Traffic Safety Administration oversees the manufacturing of safe motor vehicles, there is no federal governmental agency and very few state agencies that have the power or obligation to make certain that consumers’ motor vehicles stay safe throughout their lifetime.
The Ohio attorney’s presentation covered the contracts that collision repair shop owners are party to, some without realizing their implications.
“It is extremely important that you have a written contract, which differs from a signed repair order,” Eversman said. “I’m a huge advocate of written contracts. In a direct repair program (DRP) relationship a contract exists before an accident even happens.
“An insurance company always acts as though a shop has duties to it,” Eversman continued. However, a body shop has no contract with an insurance company, unless of course, it is under a direct repair contract in which there may be concessions in terms of charges for parts, labor and sublet fees.
“You are the professional,” she said. “It is your professional judgment. Insurance companies do not fix cars.”
Eversman related the Hibbs vs. Allstate case, in which a California appeals court ruled in favor of the insurance company who provided their policyholder with the option to pay for damages to or repair an insured vehicle. According to reports on the case, an insurer satisfies its contractual obligation by electing to repair damages even though the policyholder may have refused to authorize repairs. The appellate court also held that an insurer can be liable in bad faith if it pays for repairs not authorized by the insured and subsequently recovers from the tortfeasor in its subrogation.
Eversman covered the options an insurance company has to pay a claim. An insurer satisfied their obligations under their policy in its election to repair a damaged vehicle as opposed to tendering the costs of a repair to its policyholder. Eversman said, “Its election has to be obvious.”
Parese presented a segment focused on the assignment of proceeds, which has become an effective tool for body shop operators. Parese said that in an assignment of proceeds a shop is essentially saying, “I won’t sue you for what you owe me and I’ll release your car without payment, [under the condition] a customer promises to release the assignor from claims assignee had against assignor…I’m allowing the assignor to stand in the shoes of the assignee.”
“There needs to be consideration and a valid assignment must have clear evidence of intent, description of subject matter of the assignment," Parese said. "It must be clear and unequivocal and must be noticed by the obligor. The consideration could be the fact you let them take their car without payment in full.
“There are anti-assignment clauses in insurance policies which prohibit a policyholder from assigning his rights under the policy. Hence, the assignment of proceeds,” he said.
In the event you have to go to court, Parese said, “Bring the signed authorization and final invoice to court – those are two essential documents. Most of the shops [his clients are] working with are making more money as a result of suing on short pays. These things reverberate like you wouldn’t believe”
However, don’t expect to win every case. “Some magistrates spent their careers in the insurance industry,” Parese said. “Small claim judges don’t want big trials. If you have a first-party claim, I would just serve the papers on the insurance department. Once you go to bat a few times, they just pay you.”
Parese showed the group his firm’s small claims intake sheet. He also showed them a stamp for the back of an insurance check in payment of a claim one would consider a short pay. It reads, “Accepted under protest as a partial payment only for property damage.”
Parese says by stamping the check with that language it shows that there was never a deal made between insurance company numbers and your shop.
New York attorney Lundgren, whose practice specializes in representing doctors in their disputes with insurance companies, spoke of the “parallel universes” of the medical profession and collision repair industry.
“The doctors are unsophisticated businessmen,” Lundgren said. This has been said about collision repair shop operators, though due to an increasingly tough market and the nature of the business, it is not universally true.
Notice to admit establishes prima facie case into the record. The burden now shifts to the defendant. It is in discovery, request for admissions. By serving the defendant with a notice to admit “I want to avoid my doctor clients [having to] come into court,” he said.
Lundgren says he “forum shops” to find the best jurisdiction to file a lawsuit against an insurance company. He said, “The Bronx is the jurisdiction where he will file as they [tend to] favor the little guy.”
Seminar attendees left with dozens of forms and stamps they could use to help them operate their businesses relatively free of third-party interference. The documents will assist an independent body shop operator in securing full payment for every required operation on the invoice that is presented to customers.
Quotes from attendees
“Misinformation and lies all have a shelf life. The truth does not. Start by getting the customer on your side. I’ve only had two customers refuse to sign the documents, and one changed his mind.”
– Alabama shop owner Truman Fancher.
“The insurance estimate is just that, an estimate, as opposed to an invoice, which is a statement of fact. Never put anything on a piece of paper you’re not prepared to defend in court. Don’t post to Facebook either.”
CCRE president and New Hampshire shop owner
Tony Lombardozzi, who advised
to keep insurance documentation away from court.
“I follow the underlap. The database providers are the biggest tool used by insurers to limit their costs.”