“LKQ” and “OEM Recommended”

Every industry has its own “terms of art,” that is, words or phrases that have a precise, specialized meaning within a particular field or profession. The collision repair industry is no different.

Two particular issues that have generated controversy between repair shops and insurers over the past several years are what is meant by the term “like kind and quality” (or “LKQ”) and what is meant when an original equipment manufacturer “recommends” that particular procedures be used in the repair of a vehicle. It is important to know what these terms mean when repairing a vehicle – and when negotiating with an insurer – because knowing their meaning could mean the difference in making a quality repair, or it could even mean the difference between life or death for your customer.

LKQ Parts: When repairing a damaged vehicle, a repairer must know what type of parts should be used in making the repair. If a part cannot be repaired, then, by regulation in Massachusetts, an insurer generally is supposed to pay for “a rebuilt, aftermarket or used part of like kind and quality” to effectuate the repair.

But what does the term “like kind and quality” mean? Significantly, the same regulation says, “A part is of like kind and quality when it is of equal or better condition than the preaccident part.” So, unless a replacement part is at least as good as the original part, it is NOT of like kind and quality. A part that is almost as good does NOT meet the requirement of the regulation.

How many rebuilt, aftermarket or used parts can really meet that definition? It is suggested that many do not – no matter what an insurer tries to tell you. Perhaps if a part has been properly rebuilt, and if it is an OEM part from a vehicle of the same year, make and model of the damaged vehicle, then it may be as good as the part it is replacing, and it may meet the regulatory standard.

The same sometimes may be said of a used part. Is it an OEM part? Did it come from a car of the same (or later) year, make and model? Is it undamaged? Can it be used without being reconditioned? If so, it may meet the test.

But a part from an older model usually will not be of like kind and quality. A part in a different color that needs to be stripped and repainted is not of like kind and quality. A part from a car that has been driven many more miles or which has been subjected to more extreme driving conditions is likely not of like kind and quality. A part that needs to have a dent or a nick repaired is not of like kind and quality, nor is a part with a rust spot or some other defect, no matter how minor. If the car that you are repairing is in better condition – no matter how old it is – perhaps there is no available used part that is actually of like kind and quality to the part it is replacing.

It is also suggested that it would be extremely rare for an aftermarket part to meet the definition. To begin with, it can never be known if an aftermarket part truly can be equal to or better than an OEM part. Particularly with today’s cars, where almost every part that goes into a vehicle is engineered to protect the safety of the vehicle’s passengers, it is unlikely that an aftermarket part will meet the standard of the regulation. Aftermarket parts may have a different weight, may be made of different materials, may be of a different thickness, may have a different tensile strength and may be manufactured using a very different process than the OEM part that it is replacing. These parts have never been safety tested in the way OEM parts have, and they were not the parts that the OEM engineers specified when they made their calculations as to how the part will react if the car is in an accident.

Even if a part is merely cosmetic (if that’s actually true of any of today’s parts), a replacement aftermarket part may not have quite the same appearance of the OEM part or may not wear the same way. And does an aftermarket part come with the same or a better warranty than an OEM part? Almost certainly not.

It is also important to recognize that the governing regulation does NOT allow for use of a rebuilt, used or aftermarket part under several specified exceptions to the general rule: continued on pg. 38

(i) If the operational safety of a vehicle may be impaired by the use of such a part, then it should not be used. Again, can you ever be sure that use of certain parts, particularly certain aftermarket parts, won’t make a car less safe? Will an aftermarket hood or fender react the same way in an accident? You won’t know unless the car actually is in a subsequent accident, and your customer could suffer horrific injuries or death if it doesn’t properly react.

(ii) If “the overall cost of repair” will be less if a new OEM part is used, then a rebuilt, used or aftermarket part should not be used. NOTE: It is not just the cost of the part itself; it is the OVERALL cost of repair! It does not matter if the part is free if its use will mean significant additional cost to make the repair.

How much will it actually cost to recondition a used part or to prepare an aftermarket part so that it will fit? How many more labor hours will need to be spent to get the part into shape for use in the repair? How much more in rental car costs will the insurer – or your customer – need to spend while you wait for a used part to arrive from the other side of the country? Does the replacement part need to be primed and repainted? How long will that take, and what will be the additional paint, materials and labor costs? And then, will the paint adhere as well as it would to a new OEM factory primed replacement part? Think long and hard about the true cost of using a part that an insurance appraiser specifies if it is not a new OEM part, and make sure that the insurance appraiser also understands what is involved.

(iii) If a car has been used for fewer than 20,000 miles, no matter how old it is, a new OEM part is supposed to be used in its repairs, unless the vehicle is otherwise in poor condition.

(iv) If a used, rebuilt or aftermarket part cannot be found after “reasonable and diligent efforts,” then a new OEM part should be used. AND, under the regulation, it is the insurer that needs to find that replacement part – not you. Additionally, never forget that, when the part comes in, it still must be equal to or better than the part it is replacing.