The December 8, 2022 Division of Standards Notice –

What’s It All About?

On December 8, 2022, the Massachusetts Division of Standards (DOS) sent out a notice to all registered motor vehicle repair shops and all registered motor vehicle glass repair shops in Massachusetts, regarding “repair rates.” In the following days, I was contacted by worried and perplexed collision repair shops, all wondering what the notice was about, what prompted it and whether it had been directed to them personally – and if so, WHY? In my experience, and in my opinion, the notice was one of the more bizarre communications that I have ever seen issued by any Massachusetts or federal regulatory agency.

The thrust of the notice was that repair shops should be careful as to what they tell their customers about what they are entitled to collect from their insurers for repairs to their cars. As stated in the notice, “the Division has become aware” that “some repair shops have suggested to customers or potential customers that if a customer pays the repair shop for the difference between the repair shop’s charges and the amount the insurer pays for the repair work, the claimant is entitled to compensation for this difference from the insurer.” The DOS, which regulates all motor vehicle repair and glass repair shops in the state, then threatened (and I think “threatened” is very much the correct term), “Repair shops should be aware that such a suggestion might be false and might subject the repair shop to penalties.”

It appeared to me that the true intent of the notice was to have a chilling effect on any communication that a repair shop has with its customers about their insurers’ obligations regarding repair costs. And, based on the calls and emails that I received, the notice had exactly that effect – even if it was completely uncalled for.

Let’s get a few things straight:

First, yes, it is improper for a repair shop to tell a customer that an insurer MUST pay for all amounts that the shop is charging, whether or not the customer pays the shop the full amount. But, quite frankly, I am unaware of any repair shop that is doing this. No one that I have spoken to in the repair industry is aware of any shop that is doing this, and neither I nor any one that I spoke to is aware of complaints (even false ones) having been made by any customer against any repair shop for doing this – which leads me question how the DOS “has become aware” that any such problem exists.

If a repair shop is making the types of statements alleged in the DOS notice, then shame on that shop, and, indeed, the shop could be subject to discipline if they are doing it. It is true that the amount that an insurer must pay is governed by various statutes and regulations, as well as the actual insurance policy applicable to the claim, all as referenced in the notice, and nowhere is there any language that requires an insurer to pay in all circumstances all charges of any kind being made by a repair shop. But, doesn’t every repair shop in the state already know that?

Second, it is NOT improper for a repair shop to tell a customer that their insurer MIGHT be required to pay for all amounts that the shop is charging, even if the insurer disputes those amounts. In fact, in some instances, an insurer could be found to be engaging in unfair claims settlement practices if they fail to pay everything that a repair shop is charging for repairs. And if that happens, the insurer could be liable not only for all of the shop’s charges, but also for three times the amount of those charges, as well as the customer’s attorney’s fees incurred for getting the insurer to pay. There actually IS a Massachusetts statute that says that. continued on pg. 38

The final paragraph of the DOS notice warns that “any suggestion to a repair shop’s customer or potential customer that an insurer has a legal obligation to pay for repair work at whatever rate charged[…] by the repair shop may constitute a false or fraudulent statement.” The same paragraph repeats this warning with regard to claims that “an insurer will or must reimburse the customer for all or a part of the customer’s payment to the repair shop.” All of this is true. But a shop CAN legitimately say that the insurer MIGHT have an obligation to pay for repairs at the shop’s hourly rate, or that the insurer MIGHT have an obligation to reimburse the customer for all or a portion of the shop’s charges. Indeed, that is why there are statutes and regulations which specifically allow a claimant to challenge an insurer’s offer of payment and which specify methods of doing so.

Third, it is NOT improper for a repair shop to bill to, and collect from a customer directly, all of its charges, and to suggest to the customer that they try to get their insurer to pay them the difference between the shop’s charges and the lesser amount that the insurer has offered. In order to do so, as has been explained in detail in my prior Legal Perspective columns in New England Automotive Report, the shop must notify its customer in advance of what it is charging and have the customer agree to those charges. But once that happens, so long as the shop is open and honest about what it is charging, in a manner that the customer understands, then there is a binding and enforceable contract between the shop and its customer for the customer to pay those charges. Not only is the shop then entitled to collect the full amount from their customer, but the shop also will have a statutory garage keeper’s lien on the vehicle they are repairing for collection of those charges.

Fourth, it is improper for an INSURER to suggest to their insureds or to third-party claimants that it is not required to pay the difference between what a repair shop charges and what it has offered. While I have heard numerous allegations of this happening over many years, I am unaware of any notice being issued by any regulatory agency to Massachusetts insurers that they should stop making such statements. As noted in the DOS notice, there are methods for challenging an insurer’s repair payment as being inadequate, whether by arbitration, court proceedings or otherwise – and I am certainly aware of several instances of claimants successfully challenging lowball payments by insurers. Further, similar to the potential punishments that may be meted out for repair shops making misrepresentations and false statements, there are statutes, regulations and established case law that set punishments for insurers making misrepresentations and false statements.

Sarat

Balise

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WHERE IS THE NOTICE FROM THE DIVISION OF INSURANCE, OR THE ATTORNEY GENERAL’S CONSUMER PROTECTION DIVISION, OR THE AUTO DAMAGE

APPRAISER LICENSING BOARD (ADALB) TO INSURERS, WARNING THEM AND THEIR APPRAISERS NOT TO ENGAGE IN SUCH CONDUCT? Maybe it is time for some regulatory agency to issue such a notice and to inflict a chilling effect on the insurance industry regarding this type of conduct.

Fifth, there are many things that a repair shop can represent to their customers that may affect what the customer decides to do with regard to payment for repairs, so long as those things are true.

What are some examples – again, if true? (1) “Most other insurers agree to pay the labor rate that we charge (or for this repair or manner of repair), but your insurer does not.” (2) “Your car’s manufacturer has issued a written standard for repair of your vehicle that requires [fill in whatever it is] in order to properly [and safely] repair your car. Most other insurers will pay for that, but your insurer will not.” (3) “In my opinion, it is necessary to [again, fill in whatever it is] in order to make a repair that will make your car safe to drive, but your insurer refuses to pay for it.” (4) “We believe that we perform high quality repairs and that our work is superior to many other repair shops, and we provide a lifetime guarantee of our work. You paid a lot for your car. We may charge a bit more, but we believe that you will be protecting your investment better if you have us repair it.” (5) “In our experience, we have had difficulty negotiating the cost of repair with your insurer, even though we do not have the same problems with most other insurers. If you want us to fix your car, you may need to pay us out of your own pocket for some of our charges and you may need to argue with your insurer to try to get reimbursed.” (6) Any other true statement that you can think of.

Conclusion

The December 8, 2022 notice from the DOS seems to be quite bizarre from my perspective. What prompted it? Have any repair shops actually engaged in the conduct of which the DOS “has become aware”? If so, where are they? What is the real incentive or purpose for the notice?

Despite the potential chilling nature of the notice, be aware of what conduct you actually can engage in and what conduct you are engaging in – as well as what conduct insurers cannot engage in and what conduct they are engaging in. Also, after having read this column, take a closer look at the notice and realize how many times the DOS steps back its allegations by using qualifying phrases such as shops “may be” engaging in certain improper conduct, without actually saying that they are. Act appropriately when making representations to your customers, but do not be afraid to be honest with them – no matter what their insurers may be telling them.

EXECUTIVE DIRECTOR'S MESSAGE

continued from pg. 8 addition, there are other members of the BOD holding the title of affiliate directors. These individuals will be participating and gaining experience to become the future leaders of the Alliance as we continue to grow in number and influence. Affiliate directors will work side by side with fellow BOD members, and will participate in committee work as well as working to promote the importance of the Alliance to prospective shops and encouraging them to join. Please look on page 6 for the list of BOD and Affiliates from your area. Feel free to communicate with them and have your voice heard!

We still have a lot of work ahead of us. We have a great foundation upon which to build. It is a strong foundation which can support you and the entire collision repair industry here in Massachusetts. You have a decision to make. You can sit on the sidelines and watch it happen, or you can JOIN THE “ALLIANCE” and put your foot on the accelerator with the rest of us and MAKE IT HAPPEN. Please see the application on page 7, or go to aaspma.org and click on the green “JOIN NOW” button on the home page.

It’s all part of “BREAKING FREE IN ‘23!” or lucky@aaspma.org.

[LOCAL] NEWS

continued from pg. 16 skills necessary to perform certain tasks well. Nobody enters the shop, immediately gets cut loose and is expected to fix things.”

That mentality applies to new hires at the shop as well. “For the past three years, we’ve also had a full-blown mentoring program for anyone we bring on board. Delni Peralta has over 20 years’ experience and does a great job of taking brand-new employees, teaching them all about our culture and the way we do business and turning them into body techs that integrate seamlessly into our team.”

“Mentorship of any variety is absolutely an investment, and it’s not cheap,” Ricci acknowledges. “But it’s necessary if we want to employ students and help bring the next generation into our shops… It’s imperative to show these kids that we’re willing to help them learn more because if no one is willing to help them or invest in them, a lot of them will simply give up. And our industry needs them.”

Ricci’s attitude about students comes from a shift that Body and Paint Center made in shop culture years ago. “We realized that it’s about having the right attitude, and these students and graduates fit the bill. They have great outlooks, so we look past the lack of skills they have at this point in their lives. It’s more important that they fit into our culture because that’s the foundation for them wanting to do the job and really stick with it. They all love working on cars, and we’ve realized that we can train for aptitude if we hire someone with the right attitude. We just had to learn to take the right attitude ourselves…and just look at the benefits already: three years of great new hires and a detail-oriented co-op student that will hopefully continue our good fortune!”