11 minute read
The Auto Damage Appraiser Licensing Law Where Is It after 40 Years?
In late 1981, the Massachusetts legislature enacted Massachusetts General Laws, Chapter 26, Section 8G, to take effect on January 1, 1982. The statute established the Auto Damage Appraiser Licensing Board (ADALB or “the Board”) within the Division of Insurance and authorized the Board “to license individuals to appraise damage to all motor vehicles arising out of motor vehicle damage claims.” These claims are defined by the statute to include, but not be restricted to “any set of circumstances for which claim may be made for damage to a motor vehicle under a motor vehicle policy of liability or physical damage coverage.” If an auto damage claim could be covered by insurance, then the statute applies; if the damage claim cannot be covered by insurance, then the law does not apply.
Prior to enactment of the ADALB statute, there were licensed auto damage appraisers in Massachusetts; however, their licenses were issued directly by the Division of Insurance itself, without testing or educational requirements, without direct input from either the insurance industry or the collision repair industry and without strict standards. The new ADALB statute grandfathered all persons who were licensed under the old law, so that they would not need to be tested or have any specific qualification to be licensed under the new law.
Despite the grandfathering of appraisers licensed by the Division of Insurance, the impetus for passage of the ADALB statute was to improve the quality of motor vehicle appraisals by establishing a separate government board having the function to license auto damage appraisers, establish standards for obtaining a license and establish standards for the conduct of appraisals. Further, the Board was to include two members from the insurance industry and two members from the auto body industry, thereby involving members who were expected to have expertise in being able to analyze motor vehicle damage. It was also to have a chairman appointed by the Commissioner of Insurance who could not be affiliated with either of those industries, thereby injecting a supposedly neutral point of view, as well as hopefully giving the insured Massachusetts consumer a voice. The statute also gave the Board the power to issue rules and regulations “in order to promote the public welfare and safety.”
Did the ADALB statute attain its goals?
In my opinion (and the remainder of this article is all my opinion – both good and bad), the answer to this question is a mixed bag.
In some respects, the statute did help professionalize the appraisal of motor vehicle damage in Massachusetts. The original grandfathered appraisers did not have formal training and did not need to pass a test of their skills, even though many of them may have developed a significant degree of expertise through years of experience. But there previously had been no formal requirements to obtain a license, and anybody who wanted to file an application and pay the fee could be licensed. The ADALB did establish both formal educational requirements and experience requirements to obtain a license, and the Board also issued regulations that set many clear (and some not-so-clear) standards of how auto damage appraisals should be conducted and what needs to be included in an auto damage appraisal. And, in my opinion, most of the members of the ADALB over the years have tried to act in a professional manner, no matter what their individual biases or points of view may be.
Further, the ADALB has issued regulations (as directed by the statute) and set up procedures that, at least on their face, provide for the consideration of complaints against licensed appraisers and assessment of penalties against appraisers who neglect to do what they are supposed to do. And parts of the ADALB regulations – again, at least on their face –have addressed appraisal issues that previously had been problematic, including, but not limited to: (i) setting time limits for assignment, preparation and delivery of appraisals; (ii) setting requirements for responding to requests for supplements, and then writing and delivering supplemental appraisals; (iii) setting standards for dealing with broken glass; (iv) setting requirements for utilization of proper documentation for writing for paint and materials; (v) and otherwise setting standards of what needs to go into an appraisal.
On the other hand, there are goals set by the statute that were never met, or which were initially met but then changed over the years. Just a few of those goals are:
Insurer referrals of claimants to repair shops. The statute says: “No appraiser or insurer shall request or suggest that repairs be made in a specified repair shop.” This language has never changed.
Initially, the ADALB, in its regulations, made the prohibition against referrals even stronger, saying: “No staff or independent appraiser, insurer, representative of insurer or employer of an independent appraiser shall refer the claimant to or away from any specific repair shop or require that repairs be made by a specific repair shop or individual.” The ADALB interpreted this to mean that no appraiser could request or suggest that repairs be made at any particular shop or list of repair shops. At the time, Massachusetts was the only state in the country that prohibited insurers from referring their claimants to their preferred shops. The idea was to give insured claimants as much choice as possible as to which repair shop they could use to repair their vehicle and also to encourage competition between
individual repair shops.
The prohibition was gradually reduced over the years, however. Initially, Allstate Insurance Company sued the ADALB seeking a declaratory judgment from the courts that, upon request, the insurer could give a claimant a list of at least five shops that it believed did quality work at competitive prices. The courts agreed with Allstate, as long as all of the requirements were met and if the insurer made it clear to the claimant that they would still have the right to have their car repaired at any shop of their choice.
The prohibition was then significantly reduced more, when the Insurance Reform Act of 1988 was passed, and the Division of Insurance refined that statute in subsequent regulations. Now, insurers could file a plan for approval with the Commissioner of Insurance, allowing the insurers to pay claimants directly for their losses and mandating that the insurers give a claimant a list of every registered motor vehicle damage repair shop in their county, while highlighting those shops that had entered a referral agreement with the insurer, agreeing to repair referred cars at the price dictated by the insurer. Yet, it was still required that insurers disclose in writing to the claimant that they had a right to have their car fixed at any registered shop; and the insurer needed to list at least five referral repair shops that were geographically convenient to the insured.
About 10 years ago, things changed even more drastically when insurers – with the approval of the Commissioner of Insurance – began programs where claimants were directed on initial contact with an insurer to an individual “program” repair shop. And this openly continues unabated to this day. THIS OCCURS DESPITE THE ORIGINAL NON-REFERRAL LANGUAGE REMAINING IN THE ADALB STATUTE, AND DESPITE THERE BEING NO SUBSEQUENT STATUTE ENACTED OR REGULATION ADOPTED THAT ALLOWS THIS CONDUCT BY INSURERS.
Competitive estimates. The ADALB statute prohibits insurers from obtaining competitive repair estimates from other repair shops unless the other shop has inspected the damage: “If the appraiser and the repair shop fail to agree on a price for repairs, the appraiser shall not obtain a competitive estimate from another repair shop unless the owner of such other shop, or his authorized agent, either of which shall be a licensed appraiser, has inspected the vehicle and prepared an itemized estimate of repairs to be performed.” Further: “No such competitive estimates shall be obtained by the use of photographs, telephone calls or in any manner other than a personal inspection.”
This makes sense. After all, how can another repair shop know what it would charge for a repair unless it actually has inspected the damage. Yet, every time an insurer refers a claimant to a particular repair shop, or even a list of referral shops, it is
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representing that the referral shop will make repairs to the vehicle at the price that the insurer has written. In effect, the insurer is saying that it knows what the other shop will charge for the repair, even though the shop hasn’t seen the car – essentially saying that the other shop’s competitive estimate will be what the insurer has written. And this happens every day of the week with every claim for which a referral shop or list of referral shops is given to the claimant. And every day, jobs are stolen from honest repair shops that an insurance appraiser disagrees with and sends to another shop which may (and often does) end up getting supplements which wind up greatly exceeding what the original shop wrote. In my opinion, this is one of the most egregious offenses that an insurer can engage in when settling an auto damage claim. By doing this, the insurer can, through intimidation, force good independent repair shops (and even their own referral shops) to accept whatever ridiculous number the insurer may have written for repairs, thereby artificially depressing the legitimate cost of auto repairs by threatening to take business out of the original shop. Further, claimants are forced to abandon their repair shop of choice…or to take money out of their own pocket that should have been paid by their insurer.
Removing inspection stickers. In 1990, the ADALB statute was amended to mandate that, if an appraiser determines that a damaged vehicle “may” not meet the requirements for the Massachusetts annual safety and emissions inspection sticker, the appraiser “shall” remove the existing inspection sticker, and a new one cannot be issued until the vehicle is repaired and passes a safety and emissions inspection. There is no wiggle room in the statute; it is mandatory. The statute was enacted to protect the public from potentially being injured by vehicles that are unsafe to drive on Massachusetts roads. The Registrar of Motor Vehicles was directed by the statute to issue regulations for its enforcement, which he did issue. And the ADALB added language to their regulations requiring appraisers – all appraisers – to comply with the statute.
Initially, the statute was complied with, and the ADALB made it clear that all licensed appraisers were required to comply. But then insurance appraisers started to complain, either that they often couldn’t get access to the inside of a vehicle to remove an inspection sticker, or that they felt threatened by car owners when the owners realized that they would be removing the sticker. Perhaps more importantly, insurers realized that they now had to pay to have repaired vehicles go through a safety and emissions inspection, and they did not want to spend the money. Some insurers even tried to prorate what they would pay for the inspection based on the number of months left on the old inspection sticker. As time went on, the removal of inspection stickers became less and less common to the point where, according to my understanding, very few inspection stickers are ever removed.
Please understand that the requirement for removal of inspection stickers is still a statutory mandate, is still subject to the Registrar’s regulations and is still required of all appraisers by the ADLAB regulations. How many unsafe unrepaired vehicles are traveling down Massachusetts streets as a result of this, and how can the Commissioner of Insurance, the Registrar of Motor Vehicles and the ADALB continue to put the public in danger by ignoring and refusing to enforce this mandate? How many people will have to die before someone takes notice? Whatever happened to promoting “the public welfare and safety?”
Conclusion
The Auto Damage Appraiser Licensing Law has been on the books for 40 years now. Some good has come of it, but some of its goals have never been met or are not currently being met, including those listed in this article and others for which there is only so much time and space in this article to address. It certainly would be refreshing to see those government agencies tasked with enforcing the statute actually doing their job as intended.
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Attorney James Castleman is a managing member of Paster, Rice & Castleman, LLC in Quincy, MA. He can be reached at (617) 472-3424 or at jcastleman@prclawoffice.com.
