Understand your collision repair shop's liability risks

March 1, 2019
A workshop at SEMA, “Understanding Shop Liability in this Era of Diagnostics, Calibrations, and Programming,” featured a panel of collision industry professionals including Jack Rozint, Aaron Clark, Chuck Olsen, Nick Notte, and Scott Kaboos.

Editor’s Note: This article was originally published by Dealer Magazine.

Everyone in the industry has heard of the $30 million-plus award against a franchised dealer’s Texas bodyshop for gluing a roof on a Honda Fit, as instructed by the insurance company, versus the 128 welds as it was manufactured originally. A subsequent relatively minor accident caused the passenger compartment to collapse onto the occupants, causing severe injuries. 

And the insurance company was not held liable for anything; the entirety of the repair liability was laid on the shop for choosing not to do the repair per OEM specs. According to the courts, the shop personnel had a choice to repair properly regardless of the insurance company’s compensation, or to not do the job. Ouch!

SEMA speaks

The one-of-a-kind annual SEMA extravaganza always features literally hundreds of learning opportunities, including informative I-CAR workshops, a plethora of booth demonstrations and professional presenters from all facets of the automotive industry. To say it was an eye-opener regarding individual shop collision liability would be the proverbial understatement, especially learning that insurance companies are off the hook, no matter what they will or will not pay for or instruct in any repair process. 

A workshop, “Understanding Shop Liability in this Era of Diagnostics, Calibrations, and Programming,” featured a panel of collision industry professionals including Mitchell’s SVP of Sales Jack Rozint; Technical VP Aaron Clark (ASE Master) from Assured Performance Network; Chuck Olsen, director of operations AirPro Diagnostics; Senior VP Nick Notte, I-CAR; and American Honda’s Scott Kaboos, assistant manager collision marketing. Each of these professionals was well-versed and integrated into vital portions of the automotive collision world. 

The session was moderated by SVP of Business Development Michael Quinn of AirPro Diagnostics. The capper of this was an introductory talk by none other than Todd Tracy, the aggressive lead lawyer in the aforementioned multi-million-dollar collision settlement. 

We were reminded that insurance personnel “are not the experts,” and that the collision repairers are the ones who make the right or wrong decisions. Every collision professional has the choice of refusing a job based on insurance payment coverage or collecting extra funds from the vehicle owner to do it correctly. Doing it inadequately or incorrectly should never be an option.

The session began by pointing out that high-end vehicles now contain some 100 million lines of code, three times the amount on the new F35 fighter plane! New repair requirements are abundant and utilizing OEM procedures is absolutely not an option now. Noteworthy was the proclamation that the “post-repair” inspection industry is popping up in support of consumers, something that will become predominant in the collision industry.

Tracy proclaimed that the insurance industry has “dictated repair procedures far too long” and that if this situation continues, it will “destroy the collision industry.” Unfortunately, when insurance dictates it will not pay for OEM parts and procedures, it will not be sued in case of another accident. He also stressed the importance of ADAS calibrations at the end of every repair, “whether it gets covered or not.” He suggested to “take it on the chin now, or someone else will own your shop!” 

Tracy stated that not following procedures like these is “inviting potential criminal penalties for shop owner and technicians.” Documenting all calibrations and scanning for all types of codes, some hidden, is mandatory even when the insurance company won’t pay because no warning lamp is illuminated. “You are in the diagnostic business like it or not … both civil and criminal penalties will happen,” Tracy said. 

He stated that the industry must get customers, politicians and the state insurance departments involved, including a PAC to have the money to battle the insurance companies.  “When a bicycle tech makes more per hour than you, something has gone astray. You are not vehicle repairmen, you are ‘safety specialists’ — you need a unified mission statement to save lives. You are protecting families who cannot protect themselves. I will be there to defend you if you do get sued,” Tracy said.

The panel chimed in after Tracy’s presentation.  I-CAR’s Notte noted: “Our responsibility is to train students correctly,” but Tracy added that students must be told that all work must be done right. Some bodyshops have customers sign that scanning wasn’t done, but that is not worth anything. “You cannot waive a child’s or other victim’s rights — it’s worthless,” Tracy said.

Tracy also claimed that a shop needs to keep a library of documents to back up what repair was done, and that the shop remains liable when the vehicle is sold to someone else. A later discussion about how much time to keep such documents resulted in forever, since there is not a timeframe where liability is null.

Notte stated that I-CAR has a document that outlines the skills needed in today’s shops, including electrical diagnostics. There will have to be some movement from electrical/mechanical techs in service into bodyshops, and that only 3 percent of the shops surveyed have the needed diagnostic skills currently. Olsen added that all shops must have a resource to access all OEM repair/service information. 

Tracy added that a bodyshop’s website can be a source of great liability. If you make claims that you have particular skills — but you don’t — that is a problem.

Sublet is another area of potential liability for a shop. “You have to know your vendors,” said APN’s Clark. Your vendors have to have insurance with your business name on it and a million dollars’ coverage is not much in today’s market.

The need for documentation
Being a certified shop by Honda doesn’t certify to anyone that the vehicle was fixed right, only that the shop has the “ability to fix it right,” said Kaboos. Documentation is critical to prove that you fixed the vehicle correctly and that includes pictures as the repairs are completed. 

Clark, who previously owned a bodyshop, was held responsible for an $8 million judgement because of OEM repairs that he could not prove were done. “It only takes one incident. If you don’t know how to do it, don’t. It’s OK to say you are not qualified to do a repair,” he said.

There is a need for a “quality cycle showing repairs were done right, including pictures as the work progresses,” said Rozint. “We need metrics and KPIs to document the process.” He noted that GM is asking Mitchell to set up a program showing that work was done as instructed.

You must provide the evidence through photos showing what was wrong, and related photos showing that you repaired each item correctly, stated Clark. That may include photos of welds and the welder used, and a log about what time particular work was done to be completely accountable.

Would your job files save you or crucify you?

ADAS rates and tips
As more advanced vehicle designs need more diagnostics and recalibrations, Rozint noted that outsourcing will affect cycle times. If shops can keep the work in-house, they can better manage cycle times and earn additional profit. This type of work should be billed at a higher rate and ADAS diagnostics should always be a separate line item, Tracy said. Manufacturers are looking at some type of record keeping system to show every time a car was worked on, Rozint said.

Rozint stated that any scan tool a shop purchases should have licensed software only, and that there are counterfeit scanners being sold. If your scan tool cannot retrieve live OEM data stream information for the technician, find one that can, Olsen said.

Olsen warned that pulling then clearing codes is not acceptable. A diagnostic procedure must be followed and that includes research and thorough documentation. “Pulling codes is just a beginning,” he said. 

Kaboos cited an example where airbag deployment doesn’t create a DTC which lights a dash indicator. “It’s not a malfunction; a DTC is a fault code, so you have to go into a secondary report to determine which sensors were affected,” he said. “If the battery is disconnected, you have to go through scanning. You have to read about disconnecting a battery, which requires more than just a reconnect.”

The air was thick throughout the session, and individuals lined up with questions which were answered in the aforementioned paragraphs. Note-taking was furious throughout. There’s a lot on the line for any collision center regarding repair liabilities.

AAA handout
It was noted during the session that AAA has new informative information regarding ADAS performance, and that this material should be provided to all customers.  I requested this data from AAA and received excellent explanations of the safety systems and the related eye-opening costs for their repairs.  If you would like to see what AAA provides, email me at [email protected] and put on the subject line “AAA Handout Info Is For Me” so I know what to send you. These documents will make great education tools for your staff and semi-informed insurance estimators too. 

Dealer Magazine (https://www.digitaldealer.com/magazine/) is published monthly by Emerald Expositions, LLC.

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