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Mississippi Collision Repair Association and Parts Suppliers File Suit Against PartsTrader The Mississippi Collision Repair Association and Parts Suppliers are seeking industry support in suit against State Farm and PartsTrader. Over 30 plaintiffs, mostly Mississippi body shop owners, have filed an injunction against State Farm and PartsTrader in an attempt to prohibit the insurer from forcing any Select Service shop in Mississippi to use PartsTrader. The suit was filed Aug. 28 by Jackson, MS-based attorney for the nearly three dozen plaintiffs, John Arthur Eaves, Jr., in the Hinds County, MS, Chancery Court against State Farm Mutual Automobile Insurance Company and PartsTrader LLC.
Plaintiff include the Mississippi Collision Repair Association (MSCRA) OEM parts dealers and other parts suppliers and dozens of collision repair principals, including prominent local repairers John Mosley (Clinton Body Shop) and Doug White (Capitol Body Shop). The suit seeks the court’s declatory judgment and injuction to block State Farm from requiring the PartsTrader ordering process in Mississippi. The requested injunction is to 1) Prohibit the Defendants from forcing implementation of PartsTrader in the State Farm Select Serv-
by Chasidy Rae Sisk
Executive Director, Howard Batchelor, explains their goals: “we want to educate members on the new products and information available in the industry, in hopes of helping them improve their businesses.” Each GCIA meeting is broken into various segments to focus on specific issues. One of the association’s main focuses is to be their members’ voice when it comes to legislative issues. Currently, GCIA is interested in Mississippi’s recent lawsuit against PartsTrader and shop owners’ right to purchase parts from the supplier of their choice. They are also trying to put together a class-action lawsuit for
See Suit Against PartsTrader, Page 16
GCIA Sees Role as to Educate and Support
See GCIA Events, Page 6
Change Service Requested
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Arguably, the most important roles of collision industry associations is to advocate for its members rights and keep members educated on and informed of changes, both potential and real, in the industry. The Georgia Collision Industry Association (GCIA) agrees with this philosophy which is why they focus much of their efforts on hosting meetings and events to provide members with current information that may impact their businesses. This fall, they plan to be quite busy with their upcoming meeting, annual golf tournament and First Responder Emergency Extrication Program.
VOL. 4 ISSUE 8 OCTOBER 2013
Quintela Sues 21st Century A Second Time for Short-Pays, Makes ‘Cents out of Sense’ by Barrett Smith
Eddie Quintela, Owner and President of Collision Concepts of Delray Beach, FL has once again found it necessary to file a lawsuit against 21st Century Insurance on behalf of his customer who made a claim under their policy with the carrier. In 2012, on behalf of his company’s customers, Quintela filed three separate lawsuits against 21st Century of which the insurer agreed to settle before the trial dates. In addition to the disputed amounts, the insurer paid all of Eddie’s legal fees and costs. In spite of recent claims whereas the insurer has provided full payments, as of late, 21st Century claims representatives have elected to once again deny payments for the repairer’s
posted labor rates, processes and procedures as deemed to be reasonable and necessary to properly restore their customer’s vehicle. As Such, Quintela, on behalf of and with the full support of his customer, has Eddie Quintela found it necessary to once again file a lawsuit against the insurer on his customer’s behalf for such denials. “As in the past with this company”, states Eddie, “they pay us only after we file suit but before they go before a judge and/or jury. Thereafter they pay in full for every needed material, process and rates for a while… See Quintela, Page 4
Special SNAPSHOT of the Collision Industry, survey by Collision Repair Educational Foundation and I-CAR p. 22
State Farm and PartsTrader Offer More Info on Roll-Out, Use of the System by John Yoswick
Whether or not they participate in State Farm’s Select Service program, shops and parts vendors still have lots of questions and concerns about PartsTrader as State Farm continues its roll-out of the program. Here is some additional information addressing some of those questions that representatives of State Farm or PartsTrader have provided. Roll-out schedule. PartsTrader rolled out in September in major markets in California, Nevada and Utah, and in will do so in October in Michigan and Ohio. It will reach major markets in Wisconsin, Illinois, Indiana, Kentucky and Tennessee later this year. Vendor choice. Shops are not required to get price quotes from anyone beyond their designated pre-
ferred dealer. In fact, Partstrader’s Dale Sailer said, the system defaults to sending a job’s parts list only to the shop’s preferred dealer, though the shop can expand the search from this default. State Farm does not get data about whether a Select Service shop’s parts list for a job went only to the shop’s preferred dealer for quotes. A shop can “direct order” a part through the system without waiting for any parts quotes; State Farm does know, however, if a Select Service shop does this. And if a dealer always gives a shop the same discount, the dealer can set the system up to automatically respond with that discount to all requests for quotes from that shop. “Dealers don’t have to hire a whole bunch of people to fill out See More on PartsTrader, Page 28
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Contents Pending Claims . . . . . . . . . . . . . . . . . . . 4
CarGuys Opens 2nd Location in Crystal
Automotive Service and Technology Expo: Networking and Training to Occur Last
Weekend of September in Cary, NC . . . . 6
River, Florida . . . . . . . . . . . . . . . . . . . . . 4
Best Way to Research New Product
Shop . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
BLS Says Collision Industry Production
Own a Car . . . . . . . . . . . . . . . . . . . . . . 12
Caliber Collision Opens Two New
Support . . . . . . . . . . . . . . . . . . . . . . . . . 1
Daimler to Sell Self-Driving Production
and Parts Suppliers File Suit Against
Illinois Newest State with Electronic
CARSTAR Opens Another Atlanta-Area GA and CA Most Expensive States to GCIA Sees Role as to Educate and
Mississippi Collision Repair Association
PartsTrader . . . . . . . . . . . . . . . . . . . . . . 1
Quintela Sues 21st Century A Second
Time for Short-Pays, Makes ‘Cents
out of Sense’ . . . . . . . . . . . . . . . . . . . . . 1
COLUMNISTS
Attanasio - Is Radio Advertising a Sound
at SEMA Show. . . . . . . . . . . . . . . . . . . 10
Rose in June . . . . . . . . . . . . . . . . . . . . 12
Locations in CO and CA . . . . . . . . . . . . 10
Car by 2020 . . . . . . . . . . . . . . . . . . . . 12 Insurance Proof . . . . . . . . . . . . . . . . . . 38
Indiana Autobody Association Expresses MD Shop Owners Prevail Against Short Mitchell Announces its New Reputation
Manager Package . . . . . . . . . . . . . . . . 14
Shops Will Help the “Haves” . . . . . . . . 36
NABC Partners with ATT on Anti-Texting
AASP/NJ Announces Support of MCRA
Suit Against PartsTrader. . . . . . . . . . . . 15
Management firm KKR. . . . . . . . . . . . . 38
Campaign . . . . . . . . . . . . . . . . . . . . . . 12
New SRS Checklist Available . . . . . . . . . . 27 SCRS Issues Position Statement on
Insurer Mandates. . . . . . . . . . . . . . . . . . 8
ABRA Helps Raise $30,000 for Veterans’
Sherwin-Williams and Online Blueprint
AMI and ASA Give the 2013 Emil Stanley
Snapshot of the Collision Repair Industry . 22
Service Dogs . . . . . . . . . . . . . . . . . . . . 14
Provider Team Up . . . . . . . . . . . . . . . . 14
Merit Award . . . . . . . . . . . . . . . . . . . . . . 4
State Farm and PartsTrader Offer More
Repairer Tools . . . . . . . . . . . . . . . . . . . 10
Tesla Motors Surges, Only Two ‘Galleries’
ASA Launches New Website, Improves ASA President Risley Writes to State
Farm’s Ed Rust Jr. on Mandates. . . . . . 15
ASRW’s New Format Will Be ‘Vastly
Different Experience’ . . . . . . . . . . . . . . 14
Attorney Spearheads Suit Against Carfax . . 37
Automotive Instructors Get Special
Target Ta arget Success S with Autobody y News. News Come t sa visit u oth o NACE B 50 5 1 #N
Info on Roll-Out, Use of the System . . . . 1
in Texas Where Legacy of Franchises
Holds . . . . . . . . . . . . . . . . . . . . . . . . . 33
The 1963 Federal Consent Decree . . . . . . 18
Three CARSTAR Stores Get Praise for
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Allstate Pays Labor Rate to Settle 12
AAPEX 2013 Invite . . . . . . . . . . . . . . . 10
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AutoNation Chevrolet Coral Gables . 39 BASF . . . . . . . . . . . . . . . . . . . . . . . . . 7 Car Bench America. . . . . . . . . . . . . . 5 Car-Part Pro. . . . . . . . . . . . . . . . . . . 24 Certified Automotive Parts Association (CAPA). . . . . . . . . . . 25 Chief Automotive. . . . . . . . . . . . . . . . 9 Classifieds. . . . . . . . . . . . . . . . . . . . 38 Dent Tools Direct USA . . . . . . . . . . 28 Don Reid Ford. . . . . . . . . . . . . . . . . 16 Equalizer Industries . . . . . . . . . . . . 14 Ford Wholesale Parts Dealers FL, GA, AL, MS . . . . . . . . . . . . . . 31 Forklift Wrecker . . . . . . . . . . . . . . . . 10 GM Wholesale Parts Dealers . . . . . 36 Gray-Daniels Auto Family . . . . . . . . 13 Gus Machado Ford . . . . . . . . . . . . . 32 Honda-Acura Wholesale Parts Dealers. . . . . . . . . . . . . . . . . . 20-21 Hyundai Wholesale Parts Dealers . 33 KBS Coatings . . . . . . . . . . . . . . . . . 16 Kia Motors Wholesale Parts Dealers. 29 Landers Chrysler-Jeep-Dodge . . . . . 9 Malco. . . . . . . . . . . . . . . . . . . . . . . . 11
Mercedes-Benz . . . . . . . . . . . . . . . . 17 Mercedes-Benz Wholesale Parts Dealers . . . . . . . . . . . . . . . . . . . . 33 Mitchell International. . . . . . . . . . . . 12 MOPAR Wholesale Parts Dealers . . 27 Motor Guard Corporation . . . . . . . . . 4 Nalley BMW. . . . . . . . . . . . . . . . . . . 18 Nissan Wholesale Parts Dealers. . . 37 Porsche Wholesale Parts Dealers . 32 PPG . . . . . . . . . . . . . . . . . . . . . . . . . . 2 PreFab Ads . . . . . . . . . . . . . . . . . . . . 6 Preval Spray Gun . . . . . . . . . . . . . . 40 Rare Parts, Inc. . . . . . . . . . . . . . . . . 10 SATA Spray Equipment . . . . . . . . . . 8 Sherwin-Williams Automotive Finishes . . . . . . . . . . . . . . . . . 14, 15 Southtowne Hyundai . . . . . . . . . . . 30 Starlite Coatings . . . . . . . . . . . . . . . 28 Subaru of Gwinnett . . . . . . . . . . . . . 30 Subaru Wholesale Parts Dealers . . 37 Tameron Hyundai . . . . . . . . . . . . . . 18 Valspar Automotive . . . . . . . . . . . . . 19 Walcom USA . . . . . . . . . . . . . . . . . . 26
www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 3
Allstate Pays Labor Rate to Settle 12 Pending Claims by Barrett Smith
In June 2013, Allstate claim’s management contacted Ray Gunder and requested a meeting to discuss Allstate’s interest in bringing closure to the lawsuits of which Ray had filed against the nation’s second largest insurer on behalf of a dozen of his customers. During the meeting with Allstate’s Tom Travis and Greg Ashley it was agreed, based upon service and quality, that Gunder’s Auto Center was indeed entitled to their labor rate, however, not all repairers deserve the same labor rate, and concern was expressed, that should the word get out, how Allstate would pay Gunder’s labor rate without having to do so for other shops. Ray advised he would continue to share his journey with the industry, and regardless, if a settlement with Allstate was reached or litigation continued, others would find out as his intent was that all repairers and their technical staff would be compensated fairly for their efforts, not just Gunder’s. In July Gunder’s was advised that Allstate would settle all twelve pending lawsuits by paying the full labor rate and all related attorney fees and costs. Full payments for each were received last week. Allstate makes the 44th insurer to date which has agreed to pay
AMI and ASA Give the 2013 Emil Stanley Merit Award
The Automotive Management Institute (AMI) and the Automotive Service Association (ASA) have announced that Mark Steinke, production manager for Rydell Collision Center, Grand Forks, N.D., is the recipient of this year’s Emil Stanley Merit Award. Steinke has worked in the collision repair industry for more than nine years. He is currently completing the necessary requirements to earn his Accredited Automotive Manager (AAM) designation. When not working in the shop, he contributes his time to various community and industry organizations. As the scholarship recipient, Steinke will receive $1,000 to be applied toward expenses to attend educational sessions and view the latest repair technologies and equipment during the 2013 International Autobody Congress & Exposition (NACE), Oct. 16-18 in Las Vegas. “I am honored to be selected as the recipient of this scholarship.," said Steinke. "I’m looking forward to the training and networking opportunities that this scholarship makes possible. This opportunity will provide me with new knowledge acquired from many of the best instructors in the industry.” The Emil Stanley Award is made possible by a grant from ASA to AMI.
Gunder’s full labor rates and materials. “I am very appreciative of the way this was handled by Allstate,” says Gunder. “No one wants litigation; however, sometimes it is needed to get disputes resolved. My hope is that this is truly a new way Allstate does business nationwide and they speak to the entire industry with one voice.” The largest payment from Allstate was for $1,575, while the smallest payment was for $198. “Enclosed please find payment in the amount of $1,575.24 for your loss on 10/28/2012,” an Allstate representative wrote in documents included with the payments to Gunder Auto Center. Gunder has an ongoing track record of suing insurers on behalf of his customers over short pays. “We’ll be in depositions all week with Geico representatives and have continued lawsuits with State Farm,” Gunder says. “Perhaps [Allstate] agreeing to our rates will encourage GEICO and State Farm to pay rates and allowances that are fair and reasonable. One can be sure that we’ll continue to pound the rock until they do.” Gunder Auto Center settled a similar case with State Farm in 2012. The collision center offers auto glass replacement and repair services for its customers. This service is outsourced.
CARSTAR Opens Another Atlanta-Area Shop
CARSTAR has announced the opening of a new collision repair facility in the Atlanta area. ACE CARSTAR Collision, owned by Virginia Patel, is located at 3320 Laventure Drive in Chamblee, GA. Patel has been in the auto body repair business for more than 15 years. The location has been around for 25 years and formerly operated as Alfa Romeo, a car dealership. “The CARSTAR brand adds tremendous value to my business,” said Patel. “As a woman in this industry, I appreciate the national network of family business owners and expanded resources that will help my shop grow and succeed.” Added David Byers, CARSTAR CEO, “We congratulate Virginia Patel on joining the CARSTAR family and her commitment to operational excellence. We are thrilled to expand our collision repair family’s presence in Atlanta with this topnotch collision repair center.”
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CarGuys Opens 2nd Location in Crystal River, Florida
Dave Mitchell, former president and CEO of Master Collision Repair, has announced the opening of the second CarGuys Automotive. CarGuys opened its first location in Seffner, FL, earlier this year. The newest facility, formerly Greg’s Car Care, is located in Crystal River, about an hour north of Tampa. The location is 20,000 square feet and sits on nearly 3.5 acres. This new location will provide full-service collision as well as mechanical repairs. A third location is expected to open in Lady Lake some time during the fourth quarter. Mitchell sold Master Collision Repair, an eight-location operation, to Gerber Collision and Glass in early 2012 and worked with the group throughout 2012 to help Gerber further develop the Florida market. He left the company earlier this year to start this new venture. Mitchell feels there is still plenty of room in Central Florida for professional collision repair centers. CarGuys’ growth will be achieved through acquisition as well as brownfield locations. When asked about competing with larger groups, Mitchell said, “I’ve always said that a good local operator can easily compete with larger groups. The independent is able to make decisions much quicker and will have a much better feel for the local market. The larger a company gets, the harder it is to identify the need for change, let alone implement it.”
Continued from Cover
Quintela
then abruptly change back to their old ways. I’m puzzled; as I am confident their company share-holders would be as well, since the insurer has often paid 20 times the amounts in dispute, often paying upwards of $2,500.00 in legal fees and costs for a dispute that may be under $100.00!” “I don’t care” said Eddie Quintela; “it would be much easier for their policyholder if they just paid what they owe without the need for litigation, but when they don’t, I’ll be helping my customer to have their ‘day in court.’ As I see it, they [insurers] can either pay fairly now… or pay much more later! “It doesn’t make a lot of sense and even makes less ‘cents’ says Quintela. “It’s no wonder insurance rates continue to climb and it has absolutely nothing to do with the cost of proper repair as the insurers would have people believe!”
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Continued from Cover
GCIA Events
shortpays with the goal of helping shops get compensated for the things insurers refuse to pay for, causing shop owners to complete these items at their own expense. GCIA will hold their next meeting on September 19, from 6:30 to 9 pm. The meeting will include a catered dinner for members. They also plan to meet in January 2014 when Jake Rodenrot of AES Modules is scheduled to present on the company’s new code reader. GCIA brings the value of education to its members, and Batchelor emphasizes the importance of such information. “Vehicles are becoming increasingly high-tech, so repairers need the tools and education to fix these vehicles properly.” Batchelor also notes that, in conjunction with educating shops on the newest technology and products, GCIA also focuses on educating the consumer; however, because it is a non-profit organization, GCIA relies solely on the funds gathered from members and raised through their various events. One such event is their 17th annual golf tournament which will be held on Wednesday, October 2 from
11am to 5pm at the Trophy Club of Atlanta in Alpharetta, GA. Registration costs $75 per person and includes lunch, dinner and a chance at over $1000 in door prizes. The golf tournament usually attracts around 80 attendees, but Batchelor hopes to see an increase this year since the proceeds from this year’s event will be donated to two local collision repair schools. This is significant because, according to Batchelor, “the children in these programs are the future of our industry, so we want to ensure that they are provided with the tools, equipment and training necessary for success.” GCIA’s belief in the importance of education is also why they support and promote their member, Sports & Import Collision Center, who is hosting a First Responder Emergency Extrication Program on October 8 from 9am to 1pm at their facility in Dulith, GA. Though this year’s program will be smaller than in the past, it is being co-hosted by the National Auto Body Council, and Batchelor is confident that much useful information will be disseminated through the program. For information on GCIA or any of their sponsored events, contact Executive Director Howard Batchelor at: 770-367-9816 or Howard@GCIA.org.
Indiana Autobody Association Expresses Support for SCRS Position Statement The Indiana Autobody Association (IABA) has announced its full support of the Society of Collision Repair Specialists' (SCRS) recent position statement on insurer mandates (see p. 8 this issue). The IABA believes that all repair decisions, vendor selections and business processes should be left to the collision repair professionals who work on vehicles and have been entrusted by the vehicle owners to make correct repair decisions. The IABA also believes that the intent of these mandated programs is not to improve efficiency in any current business process, or for the bene-
fit of the vehicle owner. It believes these attempts are solely driven by insurers and other third parties seeking to make additional profits and gain control of the collision repair business through practices that can be considered extortion and tortious interference, as previously identified in the 1963 Consent Decree (see page 18), and the IABA will pursue to deter these actions using the fullest extent of the law. ASA President Dan Risley has also made ASA’s position clear that it is against all forms of direct repair program requirements to use specific suppliers or products (see p. 15.)
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Automotive Service and Technology Expo: Networking and Training to Occur Last Weekend of September in Cary, NC
During the last weekend of September, September 27-29, the Independent Garage Owners of North Carolina (IGONC) are hosting their Automotive Service and Technology Expo (ASTE) at the Embassy Suites Hotel and Convention Center in Cary, NC. Their website boasts this event as the “largest automotive aftermarket event in the Carolinas.” According to IGONC President, John Hill, the event, previously the IGONC Expo, was dissociated from the association five years ago to appeal to a wider audience by renaming it ASTE. Typically, between 400 to 600 shops register to visit the 50+ vendors on the exposition floor. Hill notes that the most important benefit of the exposition is the opportunity for networking; “attendees are able to learn from one another’s experiences as people open up and are willing to discuss their business. They develop relationships, all while receiving afford, worthwhile training that they can take back to their shop and benefit their jobs.” The three days of automotive training will include 25 management and training sessions, featuring some
of the nation’s top trainers delivering the most current information in the collision repair industry. Speakers include Gary Gunn, Danny Sanchez, Scott Brown, Bob Beckmann, Joe Knight, Alvin Tyson and Sam Strickland. The seminars cover all aspects of the collision repair industry, from budgeting and marketing to customer service, modern technology and even diagnostics. Saturday night, an awards banquet will be held at 6:30 pm, followed by a casino night beginning at 9 pm. Those interested in registering can visit http://www.asteshow.com/ where the registration form is located. Attendees can register for one day or the entire weekend. IGONC was established in 1959 and has since grown to include 560 members statewide. They have nine active chapters across NC, and each holds monthly meetings.
IGONC www.igonc.com info@igonc.com PO Box 90426 Raleigh, NC 27675 80-243-1560
www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 7
SCRS Issues Position Statement on Insurer Mandates
The Society of Collision Repair Specialists (SCRS) has issued a position statement regarding insurer mandates. It reads as follows: In representation of collision repair businesses across the United States, The Society of Collision Repair Specialists (SCRS) takes exception to business mandates that property and casualty insurers impose upon collision repair businesses; particularly those that specify required vendors, business platforms or internal processes that must be followed in order to be included in, or avoid being excluded from, certain lines of work. As an example, insurer mandates surrounding parts procurement platforms may inhibit independent collision repair businesses from utilizing parts vendors with whom they have an existing relationship, providing insurers with greater influence and control over the parts supply chain. SCRS believes this control falls outside of the scope of the insurance business. Some insurers are stipulating agreement to these terms, as a condition of being recognized in Direct Repair Programs (DRP). SCRS supports efforts that
rightfully seek to eliminate such intrusion into the collision repair business, and enforcement of existing laws, regulations and codes that currently prohibit such actions. It is the opinion of SCRS that voluntary agreements cannot include stipulations which violate existing laws, rules and regulations. SCRS believes that collision businesses are capable of establishing successful vendor relationships and internal processes that will best accommodate the needs of the consumer, and that service providers will continue to respond to the market with increasingly creative solutions that drive performance for their customers and the respective market entities. We believe that solutions with tangible value propositions will be utilized and supported by the marketplace without the undue influence of insurer mandate. The encouragement to embrace open platforms to enhance performance, rather than rely on exclusionary program agreements influenced by one or more of the participants, follows an acknowledgement from State
8 OCTOBER 2013 AUTOBODY NEWS | www.autobodynews.com
Farm Insurance that the nation’s largest carrier is transitioning from “piloting” the requirement to use the PartsTrader online part sourcing and ordering program, in select marketplaces, to a tiered national rollout. State Farm had previously included a provision in its Select Service Agreement requiring participating repairers to agree to utilize automated replacement parts locating services or applications, as specified by the insurer, for ordering and/or sourcing replacement parts. According to SCRS, as the program rollout developed, so did the rules of engagement surrounding it. The organization provided a brief rundown of the history of the program: ● In May of 2012, State Farm issued a video on its B2B website where Auto Estimatics Consultant George Avery expressed: “... repairers are in control of who provides your parts, regardless of the part type. We have worked with PartsTrader on a process that [enables] you to maintain your relationships and negotiated deals with your vendors. We understand that relationships with
your suppliers are important in managing your business, much in the same way we value our relationship with you.” ● In an email distributed within the same month, PartsTrader communicated to suppliers who had declined the offer to participate in the quoting process that: “State Farm Select Service repairers will be placing all parts orders related to State Farm claims via the PartsTrader application from [date]. During our discussion you indicated that this was not in your interest to register online with PartsTrader to participate in the intended parts procurement process. We respect your choice and want to make sure you are still able to receive those State Farm orders. With that stated, it is not our intent to come between the relationships you have built with the shops. This email is to confirm that we have now modified your company’s configuration to be a ‘Fax Only Supplier.’ This means that a repairer can place an order to your company in PartsTrader, and we will send that order to you at the fax number... Note: This
process means you will not participate in the quoting process, and repairers may order from suppliers that have quoted first, then direct order any remaining parts to you via the ‘direct only’ option.” ● Just over a year later, the option to not be a fully active participating supplier was revoked. In an email communication issued in July of 2013, PartsTrader advised Select Service repair facilities in certain markets that: “As you were notified in a previous email, PartsTrader is discontinuing the fax only option for suppliers who choose not to utilize the PartsTrader platform as a fully active participating supplier... When you use PartsTrader after July 31, suppliers which you have nominated to use PartsTrader but have not yet begun to use the PartsTrader application to provide quotes or accept orders, will no longer appear on your system as an available vendor, and therefore will no longer be able to receive orders placed in PartsTrader via fax.... We would of course like you to encourage these suppliers to participate, but you should also identify suppliers for those makes who are participating to avoid any purchasing issues on Au-
gust 1 or later. We can assure you that we do have participating dealers covering every major vehicle make in the [market] area.” According to SCRS, “The rules of the game are changing and it is apparent that maintaining the relationships and negotiated deals of participating repair facilities is only a priority, so long as all involved submit to do business in the manner prescribed by State Farm Insurance, and other carriers with similar programs. Today these mandates address parts sourcing and ordering, but there is valid concern that they open the door to future market manipulation and influence over other similarly critical collision businesses purchasing habits as well.”
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www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 9
ASA Launches New Website, Improves Repairer Tools
The Automotive Service Association (ASA) has provided independent repairers access to a web-based advocacy program at the federal and state levels for a number of years. After researching various online advocacy programs, ASA has been working to remodel its legislative and regulatory website, www.TakingTheHill .com. The new website is more userfriendly and designed to move information quickly to members and to policymakers. ASA members are encouraged to visit the newly designed site and sign up for free legislative alerts. “With our Washington, D.C., office on Capitol Hill looking out for repairers, the industry looks to ASA for grassroots advocacy and information. Redesigning this site is one more step in the association’s commitment to provide members with the tools they need to stay informed and be heard on Capitol Hill,” said Angie Wilson, ASA’s vice president of marketing and communications. The TakingTheHill.com website redesign was donated by Autoshop Solutions, the website design and Internet marketing agency that recently redesigned ASA’s main website, www.ASAshop.org.
Automotive Instructors Get Special AAPEX 2013 Invite
Automotive instructors are invited to attend Inside AAPEX for Automotive Instructors on Wednesday, Nov. 6 and Thursday, Nov. 7 at the Automotive Aftermarket Products Expo (AAPEX) in Las Vegas, Nev. Attendees will learn about new technology, meet with manufacturer product managers and trainers, and earn National Automotive Technicians Education Foundation (NATEF) credit hours. The program features education sessions offered as part of the AAPEX Learning Forum that address new technology and timely repair issues including “Direct Injection Update,” “Wallet Flushing?” “New Exhaust Technologies Including the New Clean Diesel,” “Wiring Diagram Color Coding: A Tool for Understanding Electrical Circuits” and “TPMS Smart Maintenance and Repair.” All of the sessions have been approved by NATEF for continuing education credit hours. Each session is accredited for one hour. Attendance certificates will be available at the conclusion of each session. Instructors will have access to the AAPEX show floor to view products and talk with manufacturers.
Best Way to Research New Product at SEMA Show
The SEMA Show annually features a New Products Showcase to provide exhibitors with a designated display to highlight new product debuts, yearly updates and the latest versions of their best sellers. All of the products entered into the New Product Showcase are photographed and include product details and key information on how to locate and contact exhibiting manufacturers. Buyers can obtain a wealth of product information that will be relevant well into 2014 by taking advantage of the free scanners available. Provided via “Free Scanner Pickup” booths located around the New Products Showcase, buyers can scan all of the products they are interested in, while examining and researching additional products exhibitors have to offer. There is no limit to the number of scans buyers can conduct, and the information is gathered electronically, allowing for it to be retrieved or printed immediately. With new exhibitor and product information in hand, buyers can concentrate on making deals and spend more time on the Show floor connecting with existing partners and new suppliers. More information is available at www.SEMAShow.com.
Caliber Collision Opens Two New Locations in CO and CA
Caliber Collision Centers continues its aggressive expansion with the announcement today that it has acquired Mattocks Brothers Autobody in Denver, CO and opened a new location in Tustin, CA. “Today’s opening of two new Caliber locations in Colorado and California reinforces our commitment to add centers that provide the operational consistency, customer focus and cost management our clients require in today’s competitive insurance marketplace,” said Steve Grimshaw, CEO of Caliber Collision Centers. Caliber Collision’s new 13,000 square foot West Denver location opened today at 4171 Morrison Drive, Denver, CO. Caliber’s new 16,000 square foot Tustin location also opened today at 5 Auto Center Drive, Tustin, CA. “Our new Denver and Tustin centers increases Caliber Collision’s locations to 132 as we continue to restore our customers to the rhythm of their lives in Colorado and California,” added Mark Sanders, Caliber Collision Centers’ Chief Operating Officer.
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BLS Says Collision Industry Production Rose in June
According to the latest data from the U.S. Department of Labor Bureau of Labor Statistics (BLS), the total production for the auto body repair industry rose in June after declines in both April and May. The total average weekly production in June increased to 6.59 million man hours. The industry’s total production, which we define as the total average weekly hours by month multiplied by the total number of production and non-supervisory workers employed each month, closed June, 2013 at 6.59 million man hours. This represents an increase. from the 6.5 million man hours reported in May. Production hours in June 2013 stood at 1.4 percent above 2012. The decline came chiefly from an increase in average hours worked each week by production employees, up to 38.7 hours in June from 37.4 hours in May. The number of production and non-supervisory employees actually declined in June to 170,300 from 173,800 in May. Added together, the average weekly production over the past twelve months now totals 78.96 million man hours. That is 3.5 percent higher than the 12 month total a year ago.
Daimler to Sell Self-Driving Production Car by 2020
Daimler plans to start selling a selfdriving car by 2020 to help its Mercedes-Benz brand regain the top spot among premium carmakers, development chief Thomas Weber said. “We want to be the first to launch autonomous functions in production vehicles. You can be sure we will accomplish that in this decade,” Weber said. Carmakers and suppliers are working on ways to make driving safer and more comfortable through automation and the race is on to bring the technology to the mass market. Daimler is focusing on so-called highly automated driving, in which cars master situations such as cruising the highway or maneuvering through traffic jams while the driver relaxes. The car would recognize difficult situations such as dealing with traffic lights or urban driving among pedestrians and cyclists, and hand control back to the human behind the wheel. Daimler is not alone in its ambitions. Nissan, for example, has also announced plans to launch a car completely guided by computers this decade. The technology was shown at the Frankfurt auto show, with production estimate to take 10 to 15 years.
12 OCTOBER 2013 AUTOBODY NEWS | www.autobodynews.com
GA and CA Most Expensive States to Own a Car
The cost of buying and operating a car varies from state to state and you might be surprised to learn which state is the most expensive. Driving in Georgia will take a bite out of your pocketbook. A new survey by BankRate.com has found that Georgia is the most expensive state in the U.S. to operate a motor vehicle, followed by California. Oregon is said to be the most affordable for those hitting the roads everyday. The cost of gas, insurance, repairs, taxes and fees are all factored into what it costs Georgia residents an average of more than $4,000 per vehicle per year. Residents of Oregon benefit from the lack of a state sales tax, low auto insurance and the fact that they drive 16-percent fewer miles than the national average. Those factors land the state on the bottom of the list at $2,204 annually. The national average for operating a car is $3,201 according to the survey.
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NABC Partners with ATT on Anti-Texting Campaign
As an advocate of the ‘It Can Wait’ movement, the National Auto Body Council issued a call for its members and others in the collision industry to join the nationwide effort to curb texting and driving on Drive 4 Pledges Day, September 19. Drive 4 Pledges Day is a national day of action that aims to have every driver make a personal commitment to never text and drive and to also recruit others to do the same. The NABC is urging drivers to make the pledge online at go-att.us/NABC, a dedicated link created by AT&T specifically for the National Auto Body Council’s efforts. The campaign is a collaborative effort between major wireless carriers AT&T, Verizon, Sprint and T-Mobile. As part of the nationwide Drive 4 Pledges Day, NABC member companies will be implementing a variety of promotional events to educate employees and the public—particularly teens—about the dangers of texting while driving. While texting is by far the biggest distraction on the road, NABC notes that any distraction is dangerous, including phone calls, reading e-mails, eating, changing CDs, fixing makeup, etc.
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ASRW’s New Format Will Be ‘Vastly Different Experience’
The Opening General Session, sponsored by Axalta Coating Systems, will now offer two concurrent sessions, one for Collision, one for Mechanical, that will combine the best components of a keynote presentation with the industry-specific focus of a forum. The forum’s headlining guest speaker will be Mike Anderson. Admission to the new Opening General Session/Industry Forums are included in all registrations, and all attendees are invited to attend. “Vastly different from past years, we’ve completely redesigned the Opening General Session and attendees can expect a much different experience. Mike Anderson is extremely well-respected, and attendees are going to want to hear his message,” says Dan Risley, ASA president. “The format of this key event also aligns with our mission to create exceptional value for our audience and provide invaluable networking opportunities for the industry and by the industry.” “Axalta Coating Systems is honoured to sponsor this year’s Opening General Session,” said Mike Bennett, North America marketing director, Axalta Coating Systems.
Mitchell Announces its New Reputation Manager Package
Mitchell has announced the general availability of RepairCenter™ Reputation Manager. The new package offering combines real-time text and email updates with advanced customer insights from satisfaction surveys and social media data to improve the repair shop and vehicle owner processes. The tool should help increase repeat business and referrals by providing actionable insight into the customer experience. By adding online customer satisfaction surveys and incorporating comprehensive reporting and analytics technology, repair shops can better identify steps during the repair process that can be improved. “Customer retention and business growth go hand-in-hand, but until recently, repair shops haven’t had the breadth of automated tools needed to improve upon the customer experience,” said Anlin Sethi, Senior Manager of Product Management, Auto Physical Damage solutions. “By incorporating real-time interaction and engagement, alongside robust survey analytics, Reputation Manager allows repair shops to improve their reputation and build stronger customer bases.”
ABRA Helps Raise $30,000 for Veterans’ Service Dogs
Sherwin-Williams and Online Blueprint Provider Team Up
Sherwin-Williams Automotive Finishes A-Plus™ Network and VehicleOwnersGuide.com, an online provider of blueprint documents that help collision repair shops identify any missed revenues, are providing access to the provider’s Open Claims Gateway™, a full feature claims portal that includes claims workflow, dispatching, estimate review, vendor e-Coupons, consumer translations and analytics. The new dispatching system is already populated with the A-Plus Network’s leading collision repair facilities and will provide a turnkey repair network for insurance companies throughout the U.S. and Canada. The Open Claims Gateway portal will dispatch cars to A-Plus shops, and then these facilities and insurance companies can use the system to manage the claims. “Open Claims Gateway will be provided free of charge to A-Plus Network facilities, and there is no contract to sign. Says Troy Neuerburg, Director of Sales Excellence at Sherwin-Williams Automotive Finishes, “This system offers numerous benefits.” For information call call 1-800-SWULTRA (1-800-798-5872).
ABRA Auto Body & Glass helped to raise more than $30,000 during the first annual Bent Creek Charity Golf Tournament to benefit Helping Paws Inc. More than 100 golfers and guests gathered at The Bent Creek Golf Course in Eden Prairie, MN, on August 12 to support Helping Paws of Hopkins, MN, according to officials. This inaugural golf event is part of Helping Paws’ initiative to connect the healing power of service dogs with disabled veterans suffering from Post Traumatic Stress Disorder. The cost of raising and training a service dog is estimated at $30,000. These canine companions can help to transition returning veterans back to civilian life. “We are absolutely thrilled and proud to partner with important charitable organizations like Helping Paws,” said Duane Rouse, president and CEO of ABRA. “We recognize the amazing accomplishments of our military veterans who served with courage and their unending drive to make a difference for our country. Supporting these training dogs to help heal our heroes is a privilege.”
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AASP/NJ Announces Support of MCRA Suit Against PartsTrader The Alliance of Automotive Service Providers of New Jersey (AASP/NJ) has announced its support of the Mississippi Collision Repair Association’s (MSCRA) recently filed suit against State Farm and PartsTrader in an attempt to prevent the insurer from bringing the PartsTrader program to Mississippi. “What part of ‘no’ doesn’t State Farm understand?” asks AASP/NJ Executive Director Charles Bryant. “The collision industry has clearly rejected the concept of PartsTrader, yet State Farm is taking the position that they are going to force PartsTrader on the collision industry—like it or not! This lawsuit should be a wake-up call
for State Farm. State Farm’s attempt to create the appearance that they are trying to help the collision industry solve a problem has clearly failed. “The collision industry has clearly rejected the concept of PartsTrader, yet State Farm is taking the position that they are going to force PartsTrader on the collision industry,” said Bryant. “State Farm’s attempt to create the appearance that they are trying to help the collision industry solve a problem has clearly failed.” On Aug. 28, MSCRA and two dozen collision repair facility operators filed a lawsuit in the Hinds County, Miss., Chancery Court against State Farm and PartsTrader, stating the re-
quired PartsTrader program can damage their cycle time and therefore, harm customer satisfaction. “If PartsTrader was good for the collision industry, State Farm would have been able to convince the industry to accept the concept by now,” said Bryant. Said State Farm spokesperson Roszell Gadson, “State Farm recently received notice of a lawsuit in Hinds County, Mississippi.... We believe the suit is without merit. We intend to vigorously defend the suit,” said Roszell. “The Parts Trader program has not yet even been implemented in Mississippi,” he added, seemingly unaware that that is the point of the lawsuit.
ASA President Risley Writes to State Farm’s Ed Rust Jr. on Mandates
ASA’s Dan Risley has made ASA’s position clear that it is against all forms of direct repair program requirements to use specific suppliers or products. In a letter dated September 11 to Ed Rust Jr., chairman of the board and chief executive officer of State Farm Mutual, Risley commends the U.S.’s leading private passenger automobile insurer for its past decision to eliminate its requirement to use a specific estimating platform by its direct repair shops. The association also acknowledges State Farm’s scoring system that promotes competition among Select Service repair facilities. However, the association comes out firmly against State Farm’s recent requirement to use the PartsTrader online parts marketplace, stating it will increase a State Farm shops cycle time, negatively impacting customer satisfaction and increasing the insurance company’s costs in the long run. The letter states, “ASA would like to acknowledge State Farm as one of the first companies in the country to not mandate that a collision repair facility utilize a specific estimating platform. For many years, several top 10 insurance carriers required a specific estimating platform to participate in their direct repair program. In addition, State Farm was one of the first to implement a scoring system that allows Select Service repair facilities to compete against each other in a transparent and real-time environment. These decisions clearly elevated State Farm’s position in the industry as a thought leader and facilitated positive change. The letter continues, “In light of the recent announcement of the national rollout of Parts Trader, ASA is taking a firm stance against insurance company mandates that limit a repairer’s right to choose their vendors, distributors and suppliers.” ASA included three suggestions for State Farm to consider as a starting point to address the industry’s concerns. ● Immediately eliminate mandates requiring collision repair facilities to purchase or source parts using a specific third-party vendor. ● Encourage the use of these types of programs on a voluntary basis with a financial incentive. ● Heavily weight your scoring system to reward repair facilities that are leading their respective markets in parts cost, alternative parts usage, length of rental and cycle time. All of which are key operational metrics that drive overall repair costs. The complete text of the letter can be read and downloaded at: www.autobodynews.com.
www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 15
Continued from Cover
Suit Against PartsTrader
ice shops, 2) Finding the Defendants in breach of the 1963 Federal Consent Decree (and thereby voiding the Select Service agreements), and 3) Stopping the Defendants from interfering in the relationship between customer and shop by delaying service payments or otherwise limiting the use of rentals. The suit alleges that State Farm’s implementation of the PartsTrader system tortiously interferes with prior business relationships that collision repair facilities have with their long standing parts suppliers. (Tortious interference occurs when a person intentionally damages the plaintiff’s contractual or other existing business relationships.) In addition, the suit contends that State Farm is attempting to force the Plaintiffs to breach their legal fiduciary (trustworthiness) duty to their customers, ie. compromising a safe and reliable repair. “The relationship between consumer and repairman has been all but destroyed. The repairman
must do as instructed by the insurance company, not the consumer.” Said attorney Eaves Jr., “PartsTrader and State Farm will effectuate a ‘race to the bottom’ in quality and safety.” And though he says the case very likely will go to court, he is hoping for an out-of-court resolution. “We would love for them not to bring it (the Parts Trader system) to Mississippi. But it would be up to them,” he said. Cheaper parts have indeed been responsible for multiple injuries, said Eaves Jr., who is a former candidate for governor of Mississippi. “Nobody likes to be forced into filing a lawsuit but this is the largest automobile insurer in the country and we have a lot of mutual customers that will be impacted by this,” said John Mosely, president of MSCRA from Clinton Body Shop and a plaintiff in the suit. “We have invested tons of money in our business and State Farm telling us we have to buy through PartsTrader system, is not the best thing for the repair or the customer.” Mosely currently participates in the Select Service program with State Farm.
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In addition to seeking an injunction against implementation of the PartsTrader system, the suit seeks a declaratory judgment that State Farm is operating against the 1963 Consent Decree, entered into by several insurance company associations and the Federal Government, limiting insurer’s activities in collision repair to influence customers. Because of this conflict, the suit seeks to void the Select Service agreements between repair facilities and State Farm. Finally, the suit seeks to keep State Farm from interfering in the contract between the customer and body shops by “causing or implying delay in service payments, appraisal or limitation on the usage of rental automobiles.” State Farm is requiring use of PartsTrader for specified shops in its Select Service DRP but insists using the service is strictly voluntary because membership in Select Service is voluntary. State Farm’s public affairs representative Roszell Gadson said, “Repairers participate in Select Service® on a voluntary basis. Parts Trader is a company that provides an electronic
parts ordering platform to repairers nationwide. State Farm guidelines for the use of parts and part types have not changed due to electronic parts ordering. Estimates are written and part types are chosen by repairers based on consistent guidelines,” said State Farm’s public affairs representative Roszell Gadson. Barry Lewis of Ridgeland, MS, and owner of European Coachworks, says participating in the lawsuit was simple common sense for his business. “I’m just trying to cover us for the future,” says Lewis, “because eventually it’s going to affect us whether you’re in the program or not.” The “program” to which Lewis is referring is also a company doing business as Parts Trader LLC, which was named in the lawsuit as well. While Parts Trader’s website states that the repairer has the final say in which part they should use, the MCRA maintains that State Farm insists their insured drivers receive the cheapest parts available in order to cut repair and replacement costs. State Farm neither confirmed nor denied whether parts purchased See Suit Against PartsTrader, Page 18
www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 17
Continued from Page 16
Suit Against PartsTrader through the Parts Trader service were inferior to those the repair shops claim to use. “There are thousands of examples where inferior parts led to injury,” Eaves Jr. said, citing his considerable experience as a trial lawyer. “This
PartsTrader program is the first time this has been implemented. Most of the cheaper parts will be made in countries where quality is not as important,” he continued. But State Farm says the suit is without merit and that the Parts Trader system is not yet a reality for Mississippi. Preventing it from being implemented in Mississippi is, of course, the point of the suit.
are not upheld to the same standards of safety as are American-made parts. But the PartsTrader website states unequivocally that it does not recommend specific parts or manufacturers. “Collision parts suppliers providing pricing within PartsTrader must be nominated by repairers like you before we invite them to participate in this market,” says the PartsTrader website.
“State Farm recently received notice of a lawsuit in Hinds County, Mississippi, related to our electronic parts ordering initiative and our Select Service® program. We believe the suit is without merit. We intend to vigorously defend the suit,” said Roszell. “The Parts Trader program has not yet even been implemented in Mississippi.” MCRA President Mosley argues that parts ordered from off-shore sites
The 1963 Federal Consent Decree (www.ican2000.com/documents/1963/)
Collision repairers and their representatives have come up with numerous different legal theories about why insurers shouldn’t be allowed to create networks. One of them is based on the now littleknown Consent Decree. In November 1963, the U.S. Justice Department settled a class action suit that it brought against the associations representing some 265 insurance companies, which resulted in their officers signing a “Federal Antitrust Consent Order,” known as the Consent Decree. A consent decree in general is a written agreement in which a company or organization under investigation by a governmental agency agree to
do or not do something in the future – without admitting any past wrong-doing. In this case it settled the class action suit without trial. The signers, three insurance trade associations and their members agreed to forever refrain from several practices, including setting prices and steering. They admitted no wrongdoing but agreed to abide by its terms in perpetuity, meaning it’s still binding on its signatories today. The DOJ filed an action against the associations alleging that they had formulated an “Independent Appraisal Plan” in 1947 “to depress and control automobile material damage repair cost.” The heart of the plan was a scheme to control the work
of independent appraisers who prepared estimates of repair costs and got body shops to agree to them. The Government’s case focused on an insurance industry invention called the Combined Claims Committee (CCC) which was established to control collision repair prices. Basically, each CCC member-insurer selected one favored appraiser or appraisal firm in each market area, to the exclusion of others, to receive all of the participating insurer’s adjusting work, as long as this adjuster worked within the guidelines that the CCC established and controlled. Under the plan, committees appointed by the trade groups would spon-
sor individuals or partnerships to act as appraisers in assigned territories for all association members. In return for the insurers’ agreement to use them exclusively, the appraisers would agree to depress and control repair costs by arranging (when possible) for shops to agree to estimates before they had examined the damaged vehicles, by “establish[ing] strict labor time allowances,” and by “obtain[ing] the lowest possible hourly labor rate.” The DOJ alleged that the plan violated the Sherman Act. In November 1963 (less than a week after John F. Kennedy’s assassination) the Government’s case was See Consent Decree, Page 24
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www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 21
22 OCTOBER 2013 AUTOBODY NEWS | www.autobodynews.com
See Snapshot of Industry, Page 34
www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 23
The 1963 Federal Consent Decree (continued from p. 18)
dismissed, pursuant to an agreed order under which the defendant associations were enjoined from pursuing any program that had the purpose or effect of “exercising any control over the activities of any appraiser.” The Independent Appraisal Plan has never been revived, nor has any program or practice which favors chosen damage appraisers or excludes others. In the words of Silvie Licitra, wellrespected collision industry writer and a collision repairer at the time, resultant payoffs and corruption were rampant because the selected appraiser fixed the labor rates, required arbitrary discounts on parts, and held firm to the labor times published in a guide. These appraisers also had shops with which they had unwritten agreements that their estimates would be accepted, sight unseen. “Those appraisers all had their hands out and if you didn’t pay them off, they’d write lousy estimates (creating) a take-it-or-leave-it situation, the shop being faced with losing the job if they didn’t play ball (with insurers).”
Frank Stepanek, chairman of the National Body Shop Committee of the Independent Garage Owners (IGO) of America (precursor to the Automotive Service Association), was quoted in a November 1963 industry publication: “It’s no longer legal for many insurance companies to demand discounts, set the hourly rates, boycott repair shops [and] use specific appraisers.” A number of trade associations were targeted in the years following the signing of the Consent Decree. In March of 1964, Allstate Insurance Company filed suit against 109 members of the Central Jersey Auto Body Association (CJABA), charging them with antitrust violations, conspiracy and price fixing. In July of that year, a judge ordered the association members to sign a consent decree of their own. The embittered members reluctantly settled with Allstate, citing lack of funds to finance a protracted legal battle with the company. In support of the CJABA, an association of central New York body shop owners set up a legal defense fund for the CJABA.
24 OCTOBER 2013 AUTOBODY NEWS | www.autobodynews.com
Their spokesman was quoted as saying: “It’s with deep regret that this spirit was not nationwide. I strongly urge every body shop or garageman who looks forward to freedom in his business to alert himself and seek remedies that will maintain our rights and freedoms in the industry.” The legal wrangling went back and forth until the summer of 1967, when a congressional committee called for an investigation into the auto insurance business. U.S. Sen. Philip Hart of Michigan proposed federal oversight of the industry and an amendment to the 1945 McCarran-Ferguson Act as a way to curb insurance domination of the collision repair industry. McCarran-Ferguson effectively shielded the insurance industry from federal antitrust laws by granting states the primary responsibility for regulating insurance. Sen. Warren Magnuson, chairman of the Senate Commerce Committee, made additional calls for investigative probes and even threatened to launch an independent investigation by a special counsel.
Between congressional pressures and Transportation Secretary Don Boyd’s insistence the matter be studied by his department, the White House was prompted to step in. In a message to Congress in early 1968, President Lyndon Johnson called for a thorough investigation into the auto insurance business. “The Consent Decree was like a BandAid,” said Dick Hogg, a suburban Philadelphia body shop owner who remembered the ‘63 action, as well as the business conditions that led to its signing. Hogg also remembers that its signing didn’t usher in a golden age for body shops. “It only gave us temporary relief because like some other laws, there was no enforcement. The terms of the Consent Decree were diluted by the state regulations that are, for the most part, unenforced. The insurance departments give the benefit of the doubt to the insurers.” Since insurance companies hedged their bets with their chosen appraisal firm, they had control. No auto damage claims were settled unless they passed through See Consent Decree, Page 32
www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 25
Social Media for Shops
Ed Attanasio is an automotive journalist based in San Francisco, California. He can be reached at era39@aol.com.
Is Radio Advertising a Sound Decision For Body Shops? with Ed Attanasio
Even thought the Internet is continuing to explode and cable TV advertising is flourishing, radio is still alive and well and more body shops are using it, according to people who know—such as: advertising agencies, media buying companies radio stations and body shops themselves. According to Kantar Media, there are nearly 5,000 AM stations and roughly 9,000 FM stations in this country and last year radio advertising dollars increased by 8 percent at the national level and 3 percent locally. While the collision industry is always looking for new forms of advertising and marketing, the word out on the street is that good old broadcast radio is still a viable form for body shops, both MSOs and independents. Phil D’Angelo is a sales manager for three radio stations in northern California (KUIC, KKIQ and KKDV) and has seen how radio advertising has worked well for body shops in his
regions. “We currently have five body shops advertising on KUIC in Vacaville, CA, and they’re happy with the results,” D’Angelo said. “Radio is more popular now, because it offers so many options for companies of all sizes. For regional companies, you’re going to get more bang for your buck with radio, as opposed to other forms of advertising or marketing. People wake up in the morning with the radio; drive to work with the radio and listen to the radio all day at work, so radio travels everywhere and some people listen to it 8–10 hours and more every day. Also, we’ve discovered that the Internet and broadcast radio work hand-in-hand, because radio creates demand and the Internet fulfills that demand. If they hear you on the radio and then see you online, there’s a good chance you’ll get them as a customer.” D’Angelo had to learn the collision game in order to better serve his body
shop clients, he explained. “When we started working with body shops, we discovered that their business model is unique, because from what they’ve told us, 80% of all the work comes through the insurance companies. So, the advertising we’ve designed for them conveys a specific message, but branding is also a big part of it. We want the body shop’s name to be in the listener’s head. In the radio business, we call it the consumer’s ‘top-of-mind awareness,’ and it’s very important in the collision repair industry, because getting your car fixed is not an impulse buy. So, when people do get in an accident, they’ve already heard the shop’s name over and over on one of our stations and that’s who they will mention it to their insurance agent.” Chuck Jessen is the owner of PreFab Ads in San Francisco, a company that licenses professionally-produced TV spots to body shops on an
exclusive-by-market basis. These commercials have appeared on 260 local television markets throughout the country and several have won international advertising awards and have been featured on such national TV programs as “Reel TV” and “World’s Funniest.” Jessen is currently producing a series of radio ads to add to his menu of offerings, because his clients are asking more and more for 30 and 60second spots they want to air on local stations. “Some body shops are switching from TV to radio, so that they can target their customers more specifically,” Jessen said. “In the bigger markets, the cost of TV advertising is prohibitive for many independent body shops with modest advertising budgets. If you’re paying to advertise to a certain market and a large majority of it is out of your area, it doesn’t make sense for any regional business to advertise outside
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that area. With radio, body shops can get more saturation and coverage in smaller to mid-size markets, so it’s ideal for body shops that draw customers from no more than 10 miles away.” Radio has a captive audience and Jessen knows from his 30 years of experience what types of radio ads will work in any market, he said. “People are in their cars a lot and commuters aren’t going away any time soon. We’re producing several different types of radio ad, including humorous and instructional. With our TV ads, we already know humor works and community service type themes are always well-suited for the collision industry. We produced a radio ad that conveys an anti-texting message and it gets good reviews, because it’s a warm and fuzzy type of ad that listeners will find useful.” Sharon Wicks is the president of Silicon Valley Media Consulting in San Jose, CA and has seen a recent spike in her clients’ interest in buying more radio advertising time, she said. “Radio is thriving, because it just makes sense for regional businesses that can’t afford a heavy television advertising schedule. Radio has gone
full circle and now it’s back in a big way, especially for companies that value a highly targeted approach.” Wicks has seen more and more of her clients asking about Pandora Internet Radio, an automated music recommendation service that plays musical selections of a certain genre based on the user’s artist selections. The user then provides positive or negative feedback for songs chosen by the service, which are taken into account when Pandora selects future songs. “Advertisers like Pandora, because it is more targeted than conventional radio,” Wicks said. “Pandora has specific demographic information about every one of its users, so you’re getting exactly who you want to reach. When your ad runs, it appears in a pop-up banner-type ad with audio that can be either 15 or 30 seconds in length. Either way, it’s less invasive than a 60-second radio ad and of course, it’s paired with a visual, which gives it more impact.” Rich Villanueva is the marketing manager at Michael J’s Body Shop, Inc., with three very busy locations in San Jose, CA. After much planning and research, Villanueva decided that
radio was the best plan for this burgeoning regional MSO, for several reasons. “We found a local FM station (KEZR) that offered a package we were very comfortable with, so we hired an advertising agency (Kilburg & Associates) that does ads for the San Jose Sharks NHL hockey team,” Villanueva said. “We decided to go with humorous ads and almost immediately we received a lot of positive feedback. We’re basically doing branding with these radio spots, rather than doing promotions. Since this is our first radio schedule, we want to get the name out there and connect the dots with our audience.” Michael J’s had their agency produce seven different ads to run in rotation on KEZR and is now going to create more ads to leverage the fact that one of their owners is a woman. “We’re targeting women with these new commercials, because they represent a large portion of our customer base,” Villanueva said. “Jamie Ryan is one of our co-owners and she’s a great spokesperson for what we’re trying to do. In these ads, we position her as an expert and an advocate, especially for our female market. The message is we
will treat our customers well from beginning to end, by providing them with a stress-free, non-threatening environment when they bring their car to Michael J’s.”
New SRS Checklist Available
Airbag Solutions recently released a new Supplemental Restraints Systems (SRS) estimating checklist designed to allow damage appraisers to more easily identify each of the components required to remain in compliance with OEM service requirements surrounding restraint systems. The free SRS service checklist is available online as a fillin PDF or as a printed download. Douglas Gan, COO of Airbag Solutions, said this brings the company one step closer to its goal of offering a standardized, one-step source for critical OEM requirements to the collision industry. “With the use of this checklist [and our database], appraisers are now able to address each of the critical questions needed to ensure a proper and timely repair. Knowing the answers to SRS related questions before the repair has begun will help to eliminate supplements, reduce cycle times and follow OEM procedures.” See Airbag Solutions at: www.airbagsolutions.com.
www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 27
Continued from Cover
More on PartsTrader
quotes,” Sailer said. More details on rating system. Vendors and shops using PartsTrader rate one another using a feedback system. Shops answer five questions to rate a supplier based on parts and service quality; vendors answer four questions to rate shops in terms of payment practices, return rates, etc. Sailer said users of the system can expect to spend about one minute per day responding to feedback rating questions about companies with which they have conducted parts transactions. Participating in the anonymous feedback rating system is mandatory, he said, because a rating given to a vendor by a shop, for example, is weighted based on how much business that shop does with that vendor. “If you represent 50 percent of somebody’s business, your feedback has to be worth 50 percent of their ratings,” Sailer said. “So as a supplier, if a shop has only ordered from you once, and he didn’t like you and trashes you in the feedback, that’s
only one piece of feedback. He can’t be 50 percent of your feedback because he’s not that relevant to your business.” Feedback is not required on every purchase, however, and the number of surveys a shop or vendor must complete may vary day-to-day but should take an average of about five minutes a week, Sailer said. Users can request to provide feedback on a transaction even if not asked, he said. Only a company’s star-based rating is visible to users of the system, Sailer said, but any additional comments that are made about a shop or vendor are batched and sent to that shop or vendor. Bad ratings cannot be challenged, he said, but someone giving you a bad review isn’t likely to continue to do business with you, so the review won’t be weighted as heavily in your overall rating as feedback from those doing more business with you. Customers don’t have to wait. Select Service shops don’t have to wait the half-hour to receive quotes if a customer wants an estimate right away, State Farm’s George Avery said. “There’s no problem with writing
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your estimate like you do today and giving it to them,” he said. “In the event you’re awarded the job, you can take that estimate and do your direct buy, or you may choose to put it out for some quotes. But we certainly understand there are times when a customer just wants an estimate.” Buying from non-participating vendors. Occasionally, Avery acknowledged, a shop may need to use a parts vendor who is not on PartsTrader, such as when an uncommon custom wheel or flare is needed. “If it’s a guy down the street who you buy from once or twice a year, just an odd part, you’re more than welcome to buy that part from him,” Avery said. Because that part will be shown as not having gone through the system, it will be flagged as an order not in compliance with Select Service guidelines, Avery said, but local management will have leeway to decide how far from 100 percent compliance is acceptable for shops on the program. Getting vendors on the system. The only way a vendor can participate in PartsTrader is if they are “nominated” by a shop using the sys-
tem. Avery said during the initial testing of the system in five markets, a shop complained that a vendor from Florida – where PartsTrader hasn’t been rolled-out – showed up on the system. Avery reiterated that only shops – not State Farm nor PartsTrader – control which vendors are on the system. “It turns out a repairer (on the system in another state) had a relationship with that vendor in Florida,” Avery said. If a shop nominates a vendor, then is unhappy with that vendor, can the nomination be rescinded? Sailer said no. “Two reasons: First, the odds are pretty darn good that someone else nominated them as well,” Sailer said. “And let’s say no one else did, but somebody else started using them. The last thing I’m going to do is say to my users, ‘Well, because Joe doesn’t want to do business with that vendor, you can’t do business with them either.’ We’re not going to take away your choice if they’re already on there. But no one will make you do business with them.” Not part of a Select Service See More on PartsTrader, Page 32
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MD Shop Owners Prevail Against Short Pays—No DRP, No Problem within the market area. Mark’s Body Shop was holding a car while awaiting payment, but when State Farm settled with the car’s owner and took title, they refused to pay Schaech. The repair contract was the deciding fac-
by Chasidy Rae Sisk
Anyone who has been involved with the collision repair industry for any amount of time knows how frustrating it can be when insurers refuse to pay the full amount billed for a repair. Many repairers count their losses and move on to the next vehicle, but Mark Schaech Jr., co-owner of Mark’s Body Shop in Baltimore, MD, refuses to take this insult lying down. While he and his partner, his father, would prefer to avoid the necessity of taking legal action, he’s definitely “not taking it anymore!” Schaech knows this is a common problem that shop owners face, so he’s glad to share his experience and advice with collision repairers across the nation. In May 2013, Schaech won his first short-pay lawsuit against GEICO for $392.95. Since then, Schaech won a case against State Farm when the insurer filed a replevin lawsuit (replevin is a legal remedy for a person to recover goods unlawfully withheld from his or her possession) against him, claiming his charges for storage were unreasonable and not competitive
Mark Schaech Sr. with his son Mark, Jr.
tor in Schaech’s victory, playing a huge role “like it does in any other case,” according to Schaech, who added that “it is so important that your documents are in line.” In addition to being paid the full amount owed, Schaech was also reimbursed for his attorney’s fees. He feels the victory was very important since a loss would have given State Farm, and possibly other insurers, precedent for refusal to pay on total losses.
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Schaech credits the CCRE (Coalition for Collision Repair Excellence) for his knowledge of such legal actions, noting that “the first time I heard of a shop taking control of their business was at a CCRE meeting.” He followed that up by hiring an industry consultant, Barrett Smith, of Auto Damage Experts and a good Maryland attorney, Anthony DiPaula to support his efforts to take control of his own business. He is also grateful to all of the “attorneys fighting a successful fight.” His next case involved an assignment of proceeds, ammunition he obtained from industry lawyer Erica Eversman, but it doesn’t stop there! Schaech is currently pursuing numerous lawsuits, including one involving an older claim of two short-pays from GEICO and a similar suit against State Farm. The lawsuits that Schaech is currently pursuing are older claims since he has not had any recent problems with GEICO, which he attributes to his successful case in May. Most insurers are paying his operation costs, though labor rates with insurers refusing to pay his full labor rate continue to be a problem. The one exception he
notes is State Farm who always leaves a short-pay, but for now, the customers are paying the difference. Schaech is not taking any additional assignments of proceeds at this time as he has several in progress. Schaech notes, “I would say that 90% of the time, insurers in our market refuse to reimburse our customer for their entire repair bill. These short pays are for reasonable and necessary rates and procedures required to repair our customers’ vehicles to pre-loss condition to the best of human ability. It seems that the larger the carrier, the worse the behavior. It seems like as opposed to fairly paying claims, these carriers would prefer to spend those dollars on advertising campaigns.” Regarding what may cause him to hesitate before filing a lawsuit, Schaech admits that it can be expensive and time-consuming to sue an insurance carrier, especially when the short-pays are small amounts, but one way to combat that is to pile several claims into one case, making it more efficient. His ultimate goal is to handle these cases on his own; as he attends the trials, he is educating himself via his attorney in
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hopes of being able to handle future suits in small claims court on his own. “All I will have to spend is time which I’m more than willing to do in order to ensure my customers are being taken care of,” Schaech notes. The short-pay lawsuit in May was the first that Schaech actually pursued to trial. Because these types of cases are new to the Maryland court system, “it takes a bit of educating the courts that we are contracted by our customers to provide a proper and safe repair and do not have any contract with any insurance companies. But the misconception is that, because the insurance company is paying the bill, they have a right to inject themselves into the repair process when this is simply not the case. Because we are the experts, we carry all of the liability associated with the repair. We are the ones who have to provide a warranty to our customers and stand behind the repairs. We are the ones who know our cost of doing business. Therefore, only a shop can know what to charge for a given repair. The duty of the insurance company, by contract, is to make the customer whole, not to control the price or dictate the repair methodology, all while not sharing in
the liability for those repairs.” Though most insurance companies insist that they don’t pay for certain operations or that a shop is overcharging, Schaech insists, “the collision repair community knows that these are word tracks that insurance adjusters have been trained to use for years, and in most cases, these carriers do pay for that, and the shops that are asking to be compensated are not the only ones asking for these operations and rates.” Schaech was happy when the judge ruled in his favor: “It felt good that the Judge got it. I also feel confident that the courts will continue to find in our favor as courts are in many other states all over the country. It takes a close look at the law and the insurance policies to realize that determining the cost of repairs and the repair methodology is not the business of insurance. In many policies, the insurance company has the option to take the customer’s vehicle and repair it themselves, but if they chose that option, they would have to accept all of the liability that goes along with the repair which is why they do not select that option.” As a proud member of CCRE and SCRS, Schaech strongly encourages
other collision repair experts to stand up for their rights. “I would encourage other shop owners to know their state laws and get a good attorney to work with. There are many shop owners across the country who have been forced to go legal, and these repairers have been an inspiration and have always made time to answer my questions and lend advice. There is unbelievable support available to those who want to learn.” Schaech’s desire to become more involved has also led him to become involved with the Washington Metropolitan Auto Body Association (WMABA) where he sits on the Board of Directors. Schaech also assures other shop owners that the trial itself was not very difficult. “It was easy for us to explain who the expert repair professional is and who decides what the Final Bill should be, and the judge agreed that because GEICO doesn’t know our costs, they cannot possibly determine what we are able to charge.” It is also important to note that Schaech’s lawsuit has not really affected his relationship with GEICO or any other insurers. His problem isn’t with the individuals that he deals with but the company’s policies on handling claims.
Schaech also takes issue with his state’s laws regarding insurance companies breaching contracts and how this affects consumers’ rights. “If a Maryland Insurance Company breaches their contract with the policy holder, and the consumer wants to hold them accountable in a court of law, the consumer is not able to recover attorney’s fees in our state. This really inhibits consumers from taking action, even when it is obvious that they are in the right… I wish the carrier would spend some of those billions of dollars they spend on marketing to properly compensate consumers for quality and safe repairs. I see a lot of poor repairs that have been completed in shops who were not properly compensated for repairs, and this is a consumer problem, especially as it relates to consumers’ safety and the value of their vehicles.” When asked what measures should be enforced to prevent the necessity of short-pay lawsuits, Schaech notes, “If insurers would get back to the business of insurance, selling policies and paying claims, and stay out of the collision business, we would not have to go this route. The reality is that, by law, consumers have the right See MD Short Pays, Page 37
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The 1963 Federal Consent Decree (from p. 24)
The Plan’s sieve, and as you might expect, the dollars that passed through were only those deemed allowable by the insurance industry at large. The typical labor rate for collision repair was between $5 and $6 per hour. Essentially, the selected appraiser fixed the labor rates, required arbitrary discounts on parts and held firm to the labor times published in a guide. In addition, the appraiser had shops with which one had unwritten agreements to accept their estimates sight unseen. According to Silvie Licitra, a well-known collision industry writer whose experience dates from that era, payoffs and corruption were rampant at that time. “It was a real crazy business back then,” wroteLicitra. “Those appraisers all had their hands out, and they were taking money like crazy. If you didn’t pay them off, they’d write lousy estimates. It was a take it or leave it situation because a body shop was faced with losing the job if they didn’t play ball.” In question, however, is the specificity of the Consent Decree to individual insur-
ance companies today. The Decree was signed by representatives of the three major insurance associations at the time: Association of Casualty and Surety Companies (ACSC); American Mutual Insurance Alliance (AMIA); and National Association of Mutual Casualty Companies (NAMCC), all of which are now defunct. Also, despite their seniority in business the majority of the dominant companies today are not on the list of signatories so represented. State Farm (1922), Farmers (1928) and GEICO (1936) do not, for example, appear on the list of companies represented. In addition, communication from the DOJ’s Antitrust Division claims that the consent decree cannot be enforced against individual insurance companies, since the companies themselves were not signatories to the decree. Read the 1963 Consent Decree http://www.ican2000.com/documents/1963/ Content herein draws upon articles published by Charlie Barone and John Yoswick.
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Continued from Page 28
More on PartsTrader
reduction. Some shops in several markets have dropped out of the Select Service program rather than use PartsTrader. But Avery said the program is not part of any plan to reduce the number of shops on the program or shift work toward large MSOs. “That could happen, but this is not an effort to drive the number of Select Service repairers we have,” Avery said. He also noted that more than 50 percent of Select Service shops are independent single-location businesses, a higher percentage than any other large insurer’s program. “That’s not a signal to me that I’m trying to dump the independents,” Avery said. “They are great business partners.” Lawsuit filed. PartsTrader hasn’t rolled into Mississippi yet, but repairers and parts vendors there have already filed suit in an effort to prevent shops from having to use it. The Mississippi Collision Repair Association and more than two dozen body shops, dealers and other parts suppliers al-
lege in the suit, filed in Hinds County Chancery Court, that State Farm’s implementation of PartsTrader tortiously interferes with existing business relationships that shops have with their parts vendors. In addition to an injunction halting State Farm’s implementation of PartsTrader, the suit seeks a ruling that State Farm is violating the terms of the 1963 Consent Decree, which placed limits on more than 260 insurer’s activities related to auto insurance and claims. The suit also seeks to prevent State Farm from interfering in the relationship between a shop and its customers by delaying payments or appraisals, or by placing limitations on the use of rental vehicles. State Farm said the case is without merit and that it will vigorously defend against it. See related story this issue. John Yoswick, a freelance writer based in Portland, Oregon, who has been writing about the automotive industry since 1988, is also the editor of the weekly CRASH Network (for a free 4week trial subscription, visit www.CrashNetwork.com). He can be contacted by email at jyoswick@ SpiritOne.com.
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Tesla Motors Surges, Only Two ‘Galleries’ in Texas Where Legacy of Franchises Holds Tesla has chosen to skip the middleman and open its own dealerships to sell its pricey Model S electric car. In states like Texas where manufacturerowned dealerships are not allowed, prospective Tesla customers must resort to buying the car online. StateImpact Texas explains the reason that law has not changed boils down to money and a powerful automotive dealership lobby which outspent Tesla in Texas. According to the Tesla Motors website, the nearest Tesla dealership is in suburban Denver. Although you can't purchase a Tesla in Texas, you can have your Tesla serviced in Austin, Dallas, or Houston. Tesla Motors fought legislative franchise battles with dealers on a number of fronts this year, but Texas became the only state in which the electric vehicle maker mounted a vigorous challenge to existing franchise laws. Tesla lost its fight outright. Tesla Motors has two Texas showrooms for its luxury electric cars, one in Austin, the other in Houston, but you can’t call them stores. Texas law prohibits carmakers from selling directly to customers, as Tesla does
elsewhere. Instead, the companies must sell through franchise dealerships, something Tesla so far refuses to do. Tesla tried to get the state’s law changed, to no avail. So instead of stores, Tesla’s Texas facilities are “galleries,” where customers can examine the company’s $62,400-plus Model S sedan and talk with Tesla reps about the car’s features. And that’s about it. “They can’t tell you the price of the car, how to buy the car or give you a test drive,” said Diarmuid O’Connell, Tesla’s vice president of business development. “All they can really do is tell you about electric cars.” As Tesla expands across the country, the company has run into a dogged foe: the traditional auto dealership and its franchise model. Dealer associations in several states have tried to shut out Tesla with lawsuits and legislation, viewing the company’s direct-sales model as a challenge to their way of doing business. They aren’t necessarily worried about Tesla itself. The Palo Alto company delivered 5,150 cars in the second quarter against a forecast of 4,500 and turned a profit of 5 cents per share while analysts expected a loss of
QUALITY IS ALL WE THINK ABOUT. THAT AND QUALITY.
17 cents. It remains tiny by the auto industry’s standards, planning to sell just 21,000 cars worldwide this year. The car dealers don’t want other automakers to follow Tesla’s lead, opening company-run stores that would compete with franchisees. “They feel threatened by this, as they have when other companies have tried to do this in the past,” said Jack Nerad, editorial director and executive analyst at Kelley Blue Book. “Dealers are part of a well-developed supply chain, and they want to keep it that way.” To Tesla, the fight represents a classic Silicon Valley story—an innovative startup disrupts an established industry and faces resistance. The dealer associations, Tesla executives say, are trying to stifle change in a stodgy marketplace that could use a little shaking up. “They go to the legislature and say, ‘We need protection from innovation,’ “ O’Connell said. “There’s really a fundamental question here: Should the government be prescribing a business model for automotives? Apply that argument, and we’d still be riding
horses and delivering messages by hand.” To the dealer associations, direct sales could destroy a franchise system that they say works for manufacturers and consumers alike, even if many buyers don’t realize it. Texas, for example, has auto dealerships in 284 cities and towns, according to the Texas Automobile Dealers Association. Of those, 163 towns have fewer than 15,000 residents. If the auto industry switched to direct sales, the car companies wouldn’t maintain stores and service centers in the smaller communities, said the association’s president, Bill Wolters. “The manufacturers would do exactly like the big-box stores have done with all the other products—they would only be in the metropolitan areas and big cities,” Wolters said. “The franchise system provides a much broader network of dealers than you’d have if manufacturers controlled the outlets.” The ability to sell cars in the hinterlands was, in fact, one of the main reasons the auto industry adopted the franchise model.
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www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 33
Continued from Page 23
Snapshot of Industry
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www.autobodynews.com | OCTOBER 2013 AUTOBODY NEWS 35
Inside Insurance
The Insider is a corporate-level executive with a Top 10 auto insurer in the U.S.. Got a comment or question you’d like to see him address in a future column? Email him at Auto.Insurance.Insider@gmail.com
Eliminating the “Have Not” Shops Will Help the “Haves” with The Insurance Insider
It wasn’t so long ago that all shops To put it in proper perspective, some were created equal. If you had tools, shops would need to wet down the dirt four walls and a sign, you could be a floor before painting a car. It wasn’t withI should Chasidy Rae uncommon Sisk body shop. Actually, remove to see shops pulling full“four walls” from the list; there were frame vehicles with anything that was many “shops” repairing cars that did- stationary. And one of my personal fan’t have one wall, let alone four. vorites was watching the old-time At any rate, the qualifications to repair a car didn’t include with Chasidy Rae Sisk special equipment or training. Starting a body shop business required not much more than proclaiming that you were a body man. At that time, thankfully, direct repair programs were virtually non-existent. I can’t imagine what we would have done during that body men use a torch. A torch in the time period if direct repair programs late 1970s and early 1980s was about were prevalent. How would an insuras useful as duct tape. ance company identify which shops to The industry has changed dramatrefer their customers to? ically over the past few decades and the Even though shops have evolved unprofessional, uneducated shop owner significantly since that time, the same has been replaced. Professional, edudilemma exists for insurance compacated and astute operators have taken nies today: Which shops do we refer the industry to the next level. our customers to? Without having the Now customer service is reliintimate knowledge of your shop or giously the topic of conversation. Inyour competitors, finding the most surance executives are facing increased qualified shops in a market is as about scrutiny and pressure to improve cusas easy as developing a national health tomer service scores. Policyholder recare plan. tention is the lowest the industry has Why does an insurance company seen. Insurance has become a comcare where their insureds have the vemodity where price is the single most hicles fixed? There are a lot of reasons. motivating factor to consumers. There The cost of the repair is a motivating are intense battles happening between factor in finding the right shop, althe Top 10 carriers for policyholders, though it no longer is the most imporas evidenced by the marketing dollars tant. Back in the early 1980s when being spent. there were more than 70,000 shops in Ironically, our biggest challenge the United States, price was the biggest isn’t finding new customers; it’s keepconcern. Customer service wasn’t ing the ones we have. Retention is dieven on our radar. The quality of the rectly correlated to customer service. repair was assumed to be no better or Unfortunately, the collision repair faworse at one shop than at another cility and insurance company typidown the street. In fact, the biggest cally share a common fate relative to concern I had with a shop was detercustomer service. If the customer likes mining whether or not the dog in back the shop, more often than not, the cuslot was chained up so I could write my tomer will like the insurance comestimate. Everyone was assumed to be pany. Conversely, if they don’t like able to perform a proper repair. you, they don’t like us. Thus, the imFor the younger generation read- portance to us of finding the right ing this, it’s probably difficult for you shop to repair our insureds’ vehicles. to understand what I’m talking about. Repairing vehicles today poses a
Northeast News Shop Showcase
significant challenge to the collision repair industry as well as the insurance industry. Collision repair shops need to make significant investments in training to remain current with the latest technology and repair methodologies. We recognize that this is critically important to a safe and proper repair. There are still over 40,000 shops in the U.S. How do we find the shops that are the best trained and have invested in their people? The new and specialty equipment required to properly repair many of today’s vehicle should help foster a reduction in the number of shops in the industry. The days of opening up a shop with a tool box and a sign in front of the building are a distant “bad” memory. The challenge is eliminating those shops from the marketplace. We don’t want our insureds’ vehicles in shops that are ill-equipped. Collision repair shops need to work closely with insurance compa-
Mainstream Media
36 OCTOBER 2013 AUTOBODY NEWS | www.autobodynews.com
nies and state and national regulators to eliminate the “haves” from the “have-nots.” Those that have the equipment and training must survive while those that “have-not” should not. The insurance industry can’t do this alone. We need help identifying the “haves.” The industry continues to evolve and the upper class of the industry is growing exponentially. The middle and lower tier shops are shrinking. It would be our desire to increase the pace of this, with the thought that the surviving shops would be better trained and equipped. The sooner we eliminate the “have-nots,” the better it will be for everyone in the industry. The Insider is a corporate-level executive with a Top 10 auto insurer in the U.S.. Got a comment or question you’d like to see him address in a future column? Email him at Auto.Insurance.Insider@gmail.com.
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Attorney Spearheads Suit Against Carfax Bellavia Blatt announced today that as of Aug. 23, 2013, more than 420 plaintiffs, up from 120, have joined the mass action lawsuit filed against Carfax. The additional plaintiffs resulted in Carfax’s increased potential liability of more than $150 Million, up from $50 million previously. The lawsuit contends that Carfax’s exclusive contracts with industry insiders—among them, Cars.com and AutoTrader.com forced auto dealers to sign costly agreements for vehicle history reports. The alleged illegal, anticompetitive practices enabled Carfax to overcharge dealers. Establishing a monopolistic climate enabled Carfax to publish inaccurate and outdated reports. Customers’ demands for free Carfax reports, as advertised on television, compelled dealers to subscribe to Carfax’s service. Carfax’s anticompetitive practices increased costs to dealers, and ultimately consumers, by hundreds of millions of dollars. The lawsuit demands a jury trial and seeks treble (three times) damages, interest and attorney’s fees. Consequently, a small dealer would
potentially recover $105,000; a medium size dealer, $216,000; and a large dealer, $324,000; plus interest and attorney’s fees. Because of the potential gain, dealers are joining the lawsuit on a daily basis. The lawsuit’s key objectives are permitting competition and improving the accuracy of the reports. Leonard A. Bellavia of Mineola-based Bellavia Blatt is leading the lawsuit. Bellavia serves as general counsel to several national, state and regional dealer associations and represents many of the largest dealer groups in the country. The firm has extensive experience in auto-industry litigation and serves as co-lead counsel in a lawsuit against the federal government on behalf of 150 terminated Chrysler dealers. “Dealers may still join the lawsuit against Carfax,” Mr. Bellavia said. “However, they must act quickly.” To learn more about the lawsuit and to join it, call Bellavia Blatt at 516.873.3000, and ask for Brad Stern. For more information, visit DealerLaw.com. Carfax did not respond to a request for comment.
Continued from Page 31
MD Short Pays
to choose the body shop that they feel will do the best job, and by contract, the insurance company is supposed to indemnify the policy holder when there is a loss. So, I say ‘just pay the bill Mr. Insurance Company.’” In 1975, Schaech’s father opened Mark’s Body Shop in a two-bay garage. After six years of refinishing cars through high school and college, Schaech managed the family business from 1999–2002 when they moved into their current 17,000 square foot facility. At that point, Schaech Jr. became his father’s partner. Though Mark’s Body Shop repairs approximately 1000 cars annually, grossing around $3 million in sales, they do not participate in any DRPs, but that wasn’t always the case. “There was a time when we participated in as many as five DRP programs, but over the years, these programs developed into bargain basement repair programs. We were asked to use more aftermarket and junk yard parts which we find to be a lower quality alternative to new OEM
parts. We were instructed to utilize remanufactured wheel and junkyard suspension components which we believe to put our customers in harm’s way. Finally, we were asked to work so cheaply that it became difficult to invest in new equipment and training which is imperative to repair today’s modern vehicles.” To shops that are currently facing difficulties obtaining full payment on repairs, Schaech offers the following advice: “There are numerous organizations and individuals in our industry who really care about consumers and repair facilities. These leaders are only a phone call or email way and willing to provide sound advice when a shop owner or consumer needs some sound advice.” “The reality is not all shops are the same; we all have different costs, different levels of quality, different equipment and training, different certifications, and different fixed costs. It just doesn’t make sense that we can all work for the same price.” Mark’s Body Shop 4025 Mortimer Ave. Baltimore, MD 21215 410-358-5155 www.marksbodyshop.com
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Mitchell International Sold to Asset Management firm KKR
San Diego-based Mitchell International, which makes software for the auto collision industry, that it’s being sold to private equity firm KKR & Co. of New York for an undisclosed price. However, Bloomberg News reported the deal valued Mitchell at about $1.1 billion. Bloomberg cited sources who requested anonymity. Mitchell’s current owner, Aurora Capital of Los Angeles, agreed to sell the company after several months of looking for a buyer. Aurora, also a private equity firm, acquired Mitchell in 2007 for more than $500 million. Aurora acquired Mitchell in from Hellman & Friedman LLC. A little over a year later, in April 2008, Mitchell and CCC Information Services announced an agreement to merge the two companies. The Federal Trade Commission filed suit to block the merger and in March 2009, a judge ruled in favor of the government and the companies terminated their agreement to merge. Mitchell employs about 900 workers in San Diego writing software that helps insurance companies and body shops manage vehicle re-
pairs. It also makes software for handling medical insurance claims from auto accidents. Finally, it has a product that helps workers’ compensation insurers spot claims abuses. Alex Sun, president and chief executive of Mitchell, said the ownership change will help the company expand globally and boost its product line. “The current management team will stay in place,” Sun said. “There really will be no change in the operations or strategy of the company.” Mitchell expects revenue of $350 million to $400 million this year, Sun said. Mitchell has annual earnings before interest, tax, depreciation and amortization (EBITDA) of about $90 million, other sources said. Three companies dominate the auto claims software business— Mitchell, Solera Holdings’ AudaExplore division in San Diego, and CCC Information Services of Chicago. In January, Leonard Green & Partners LP, another buyout firm, acquired CCC from Investcorp, one of the Middle East's largest private equity houses, for more than $550 million.
CARSTAR Auto Body Repair Experts shop owners gathered recently in Las Vegas to celebrate the company’s 24th anniversary and honor its top performers from across the U.S. Customer service is a foundation of the culture, and CARSTAR says it maintains an average customer satisfaction index (CSI) rating of 98 percent or better. Each year, CARSTAR honors the top stores in customer satisfaction in three tiered sales levels. The CSI ranking reflects the ongoing survey feedback received from customers based on their CARSTAR experiences. For level 1, the winner was City CARSTAR in Janesville, WI, owned by Michael Buggs. For level 2, the winner was Champion CARSTAR Collision in Hightstown, NJ, owned by Paul Edgecomb. For level 3, the winner was Utzig CARSTAR Collision Service in Janesville, WI, owned by Al Utzig. Said David James, vice president of marketing for CARSTAR, “Customer surveys and our own observations tell us the three store owners and their employees receiving these honors have generated an exceptional level of positive awareness in their communities and created repeat customers for CARSTAR.”
Gov. Pat Quinn signed a new bill into law that allows drivers to provide law enforcement officers with electronic proof of insurance on smartphones and other similar devices when prompted. Effective immediately, drivers will no longer be required to have the traditional paper proof of insurance to avoid a ticket. The option for digital proof of insurance is growing in popularity. More and more insurance companies offer apps for customers to download on electronic devices. The trend toward electronic insurance cards is seen throughout the nation. Illinois is one of 27 states to adopt the policy, according to the Property Casualty Insurers Association of America. Seventeen states have approved electronic proof in 2013. Missouri’s new law takes effect now and Texas’ rule will be implemented Sunday, Sept. 1. The Illinois law relieves law enforcement from any liability for damage to an electronic device when it’s presented as proof of insurance. However, law enforcement is prohibited from accessing any other information on the phone or device.
Three CARSTAR Stores Get Praise for Outstanding CSI
Illinois Newest State with Electronic Insurance Proof
38 OCTOBER 2013 AUTOBODY NEWS | www.autobodynews.com
The buyers face a consolidating auto collision repair market that’s seeing fewer accidents—thanks to backup cameras and other accident-avoidance technology. “That claims shrinkage isn’t over yet,” said Stephen Applebaum, senior analyst at industry consulting firm Aite Group. “So you have a lot of people in this business trying to figure out what they’re going to do next.” For Mitchell, the strategy involves expanding into additional areas of property and casualty insurance. That approach mirrors what Mitchell did over the past decade to break into the injury claims software business. The company also has growth potential overseas. Today, the bulk of its business is centered in North America. “There are some health care opportunities because that industry is changing rapidly, and Mitchell has some good expertise,” Applebaum said. “Then there is the international piece. Mitchell’s name is Mitchell International, but they are not really international.”
Mitchell has recently beefed up its international footprint through an investment in GT Motive, an auto claims software firm serving Spain and other parts of Europe. Mitchell International traces its roots in San Diego to 1946, when Glenn Mitchell managed a Chrysler motor parts distributorship and saw that body shops needed better parts information and pricing data. He founded Mitchell Manuals, an auto parts information publishing firm. Mitchell died in 1971. The company has been sold several times over the years, as it morphed from paper manuals to digital software and databases. Today, Mitchell employs about 1,700 people worldwide. KKR has $83.5 billion in assets under management and invests a significant chunk of its money in technology firms. The sale is expected to be completed this winter. KKR & Co LP and Warburg Pincus LLC were among the private equity firms competing for Mitchell. Advent International Corp and Blackstone Group LP also participated in the auction for Mitchell.
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