Contents
DECEMBER 2021
on the
cover
Official publication of the Auto Body Association of Texas
TDI ASLEEP AT THE WHEEL:
ABAT BOARD OF DIRECTORS
ABAT Issues Challenge to Protect Consumers from Under-Indemnification
14
by Chasidy Rae Sisk
President Burl Richards Burl's Collision Center burl@burlscollision.com (903) 657-8082
Vice President Eric McKenzie Park Place Dealerships emckenzie@parkplace.com (214) 443-8250
Chairman of the Board Corey Pigg S&W Expert Collision Repair coreyp@swcollision.com (936) 634-8361
Treasurer David Osburn Paint Works davidosburn@paintworkstyler.com (817) 648-5797
Executive Director Jill Tuggle jill@abat.us (817) 899-0554
ABAT BOARD MEMBERS
DEPARTMENTS
4
PRESIDENT’S MESSAGE by Burl Richards The Gloves are Off!
6 8 10
EXECUTIVE DIRECTOR’S MESSAGE by Jill Tuggle Coming Out Ahead NATIONAL NEWS by Chasidy Rae Sisk SEMA 2021: Robert McDorman Explains Right to Appraisal ABAT FEATURE ABAT Renews Consumer Complaint Drive in Battle with TDI
Bobby Beason DeMontrond Collision Center bobby.beason@demontrond.com (936) 577-2747
Robert McDorman Auto Claim Specialists rmcdorman@autoclaimspecialists.com (817) 756-5482
Larry Cernosek Deer Park Paint & Body lcwrecker@comcast.net (281) 930-1539
Chad Neal Innovative Collision Equipment Chadwneal@yahoo.com (817) 527-2143
Kevin Ellison Westway Ford kellison@vtaig.com (972) 584-9033
Logan Payne Payne & Sons Paint & Body logan@paynescollision.com (214) 321-4362
Chad Kiffe Berli's Body & Fine Finishes chadk@berlisbody.com (512) 251-6136
Manuel Rubio Miracle Body & Paint manuelr@miraclebp.com (210) 843-9564
John Kopriva Kopriva Body Works jtkopriva@gmail.com (713) 923-4412
Darrell Smith McDaniel’s Quality Body Works Inc darrell-mcdaniels@sbcglobal.net (903) 753-5391
Greg Luther Helfman Collision gluther@helfman.com (713) 574-5060
Mike Williams All Star Collision Center sales@allstarcollision.us (903) 589-3160
Published by: Thomas Greco Publishing, Inc. 244 Chestnut Street, Suite 202, Nutley, NJ 07110 Corporate: (973) 667-6922 / FAX: (973) 235-1963
16 18
JUST FOR FUN What Do You Want for Christmas This Year? ASK THE EXPERT by Robert L. McDorman How To Define Loss Associated with a Total Loss
SALES DIRECTOR Alicia Figurelli / alicia@grecopublishing.com
20
AROUND THE INDUSTRY Women’s Industry Network Accepting Nominations for 2022 Most Influential Women
MANAGING EDITOR Chasidy Rae Sisk / chasidy@grecopublishing.com
PUBLISHER Thomas Greco / thomas@grecopublishing.com
EDITORIAL/CREATIVE COORDINATOR Alana Bonillo / alana@grecopublishing.com
PRODUCTION COORDINATOR Joe Greco / joe@grecopublishing.com OFFICE MANAGER Donna Greco / donna@grecopublishing.com SPECIAL CONTRIBUTORS Burl Richards/Jill Tuggle/Robert L. McDorman/ MIke Anderson/Jacquelyn Bauman
ADVERTISERS’ INDEX 300 Advantage..................................................... 21
Paint Works Dallas............................................... IFC
Auto Claim Specialists........................................ 19
PPG.......................................................................... 9
Beacon Equipment Resources......................... 21
Reliable Automotive Equipment....................... 12-13
CAR-O-LINER Southwest................................... 11
Spanesi................................................................... 22
Charles Maund Toytota...................................... 7
Tasco Auto Color................................................. 7
Ecotech................................................................... IBC
USI............................................................................ 17
FindPigtails.com.................................................... 9
Valspar Refinish.................................................... OBC 3 DECEMBER 2021 Texas Automotive
www.grecopublishing.com TEXAS AUTOMOTIVE is published monthly and is sent to ABAT members free of charge. Subscriptions are $24 per year. TEXAS AUTOMOTIVE is published by Thomas Greco Publishing Inc., 244 Chestnut St., Nutley, NJ 07110. The editorial contents of TEXAS AUTOMOTIVE are copyright © 2021 by Thomas Greco Publishing Inc. and may not be reproduced in any manner, either in whole or in part, without written permission from the publisher and/or editor. Articles in this publication do not necessarily reflect the opinions of Thomas Greco Publishing Inc. Stock Images courtesy of www. istockphoto.com. Cover by Lisa Garrison.
President’s Message
THE GLOVES ARE OFF!
Burl Richards ABAT President
D
Dear TDI, are you reading this? I hope so because I’m fired up and fed up with the continued hypocrisy at the Texas Department of Insurance (TDI)! TDI’s job is to protect Texas consumers; however, they permit insurance policies to include language that gives them the right to under-indemnify and harm consumers! Insurance companies constantly refuse to indemnify Texas consumers for prevailing processes and procedures, and although ABAT has brought this to TDI’s attention repeatedly, nothing has been done. Well, it’s time to do something, and we’re starting by calling TDI out for its inaction. Be sure to read this month’s cover story on page 14. For the past seven years, ABAT has met with TDI officials in an attempt to get a clear answer on why insurers aren’t required to completely indemnify consumers for safe and proper repairs on today’s complex vehicles. TDI confirmed that shops set their own Labor Rates; however, insurers only have to pay what’s “fair and reasonable.” Well, TDI also says that “fair and reasonable” is decided by a “finder of fact,” like a court of law, not by the insurance company. Still, insurers like State Farm write policies (approved by TDI), which indicate that they determine rates based on a survey the insurer conducts. Even more concerning? TDI doesn’t even review or approve those surveys! If insurers are permitted to set prevailing rates based on their own survey, TDI should require them to be transparent with the survey and how it’s used to determine a market’s prevailing processes, procedures and rates. My inquiries for additional information unfailingly result in TDI’s request for “evidence of the allegation.” Since TDI tells us to gather the facts and consumer complaints, we do exactly that – we’ve collected nearly 500 complaints in 2021 alone, proving consumers are just as fed up with this situation as the body shops are! The department supposedly reacts to complaints by conducting investigations, yet their “investigations” only consist of questioning the insurance company, getting one side of the story. Why don’t they talk to the consumer – you know, the person who’s actually impacted by the under-indemnification? Given the way they approach the situation, it’s not the least bit surprising that TDI responds to every complaint with “No issue found.” During one meeting, TDI suggested that under-indemnified consumers should utilize the Right to Appraisal (RTA) to receive
compensation for processes and procedures. Well, that’s laughable when it comes to State Farm since TDI allows their policy to include verbiage preventing RTA on repair procedures. And even when RTA is used for total loss discrepancies, the process can take weeks, leaving the customer without their vehicle for the duration! I don’t know about you, but I’m sick of the doubletalk. We’ve had these same conversations for entirely too long, and we’re nowhere closer to helping our customers than when we started. It’s time to put the pressure on and insist that TDI does its job: Regulate insurers and protect consumers! Insurance companies need to change their ethics, but that’s never going to happen unless TDI starts protecting Texas consumers instead of sitting back and allowing insurers to underindemnify their losses. TDI continues to say that they have no authority, and I call bull$#!t. Legislators need to tell the department what authority it has, and if TDI truly doesn’t have any authority to regulate insurers (to do the job it was created to do), it needs to be fixed so that TDI CAN do what it’s supposed to do. From where I’m sitting, it seems like TDI is little more than a lapdog for the insurance industry, leaving insurers free to operate as they wish with no oversight. The department has a responsibility to Texas consumers, and it’s time to demand answers and hold TDI accountable. To get started, I’ve submitted an official open records request with TDI in regard to when and which market (if any) where TDI has looked at State Farm’s survey, but that’s just the first step unless something changes soon. TDI: Stop speaking out of both sides of your mouth – either you regulate insurance companies to ensure consumers receive a safe and proper repair…or you don’t. And if TDI isn’t willing to do their job, the department should be abolished. If ABAT’s perception of TDI is inaccurate, we invite you to prove us wrong by doing your job. Platitudes are no longer enough; actions speak louder than words, and it’s time for action.
4 DECEMBER 2021 Texas Automotive
burl@burlscollision.com
TXA
5 DECEMBER 2021 Texas Automotive
Executive Director’s Message
Coming Out ahead Jill Tuggle
ABAT Executive Director
A
As I began to write my final message of the year, my first draft of an opening line was this: “Dear 2021, you dumpster fire of a year… You were SUPPOSED to be better than your sister, 2020. You have the worst case of middle child syndrome I have ever seen and I’m ready to say ‘sayonara’ to you.” However, I was feeling less than satisfied with my lashing, so I decided to take a more practical approach and look back at what I had hoped this year would be like and go from there. Back in January, I was full of plans and dreams for this year. I was ready to bound into 2021 with hopeful trepidation as I wrote in my January message: “I think I have decided to go into 2021 with very low expectations, because hopefully things can only go up from here, right?” Well, WRONG… mostly. I wouldn’t say it went “up” necessarily, but I was pleasantly surprised to find that we did accomplish many of the goals that I had laid out for 2021. As I look back, I see that the association was active, effective and more resilient than ever. Goal number one was our legislative efforts. We were warned in the beginning of the 87th legislature that it would be extremely difficult to pass any legislation that didn’t contain the words “COVID-19”, “freeze,” “energy crisis,” “disaster relief” and towards the end, “vaccine.” Our bills contained nothing even close to those topics, and combined with the redistricting planned for this session, we knew we didn’t stand a chance. BUT isn’t that who ABAT is? An organization that fights for the little guy even when told we don’t stand a chance? You bet your britches we are! And to everyone’s astonishment, we almost passed that darn bill. We made it farther than ever, gaining a majority vote in the House as we raced a clock that has taken the lives of many, many bills. The clock ultimately won, but as we learn how to play this political game, we realize that progress is almost a win. It’s winning a battle in the
The fortunate thing about being an association during troubling times is that associations exist to help their members overcome adversity.
war that you can keep fighting as long as you have it in you – and MAN, our members have some serious stamina! Goal number two was to have a statewide meeting. Did we do it? Yes, we did. Texas opened up enough and infection rates were low enough that we held our first meeting in over a year on June 15. It was hugely successful and felt so good to be back to doing what we do best – educating and uniting shops across Texas. We heard from Tim Ronak on the topic of “Overcoming Objections to Payment for Needed Repair Procedures.” Little did we know that we would soon face tighter squeezes from bill-payers on the horizon of the largest spike in inflation in 30 years. Last month, we hosted a Zoom call with nearly 100 attendees who were hungry for more information on how to battle the Labor Rate suppression in a market like we are seeing today with everincreasing material costs and a labor shortage that is driving wages and “hiring bonuses” upwards at an alarming rate. Our most lofty goal for 2021 was to host the Texas Auto Body Trade Show once again. The show not only happened; it turned out to be one of our best yet. We added new aspects to the show with the “Big Shots” competition but maintained the tried and true educational segments which kept attendees on their feet, headed to the next thing the show had to offer. Heads were on a swivel as many exhibitors dusted off equipment that they hadn’t been able to showcase in 18-plus months. Everyone was happy with the turnout and results, and talk was buzzing on the last day with plans for the 2022 show. So, was 2021 still a dumpster fire? Yes. Will next year be just as bad? Probably. But we have become quite skilled in rolling with the punches and coming out ahead - even if by millimeters. The fortunate thing about being an association during troubling times is that associations exist to help their members overcome adversity. There is no shortage of adversity in the times we live, and we are keeping a keen ear to the ground, listening to what our members need the most and leading the charge for change.
6 DECEMBER 2021 Texas Automotive
jill@abat.com
TXA
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7 DECEMBER 2021 Texas Automotive
National News
by Chasidy Rae Sisk
SEMA 2021: Robert McDorman Explains Right to Appraisal As part of the Society of Collision Repair Specialists’ (SCRS) Repairer Driven Education (RDE) series, held during the 2021 SEMA Show in Las Vegas, ABAT Board Member Robert McDorman (Auto Claim Specialists) delivered an informative presentation designed to provide a “Complete Understanding of the Right to Appraisal.” Identifying the “various and shifting total loss processes of insurance carriers” as “one of the most puzzling and unmanageable facets of the collision industry,” McDorman explained that his role, as a public insurance adjuster, is to assess the loss and hold the carrier accountable for what the policy says. “The consumer’s policy dictates what responsibilities the carrier has. If the policy says they need to fix the car, why aren’t they fixing it? We need to hold the insurers accountable. The policy dictates what happens in the claim – ALWAYS.” Auto body shops are often placed in the position of writing off losses due to low repair costs - or being forced to sacrifice the quality of their work. Low valuations by insurers often result in vehicles being declared total losses when they could have been repaired. More importantly, the insurers’ refusal to adhere to their policy leads to the under-indemnification of consumers, costing them money, time and peace of mind. Utilizing the Right to Appraisal allows the insured to be properly indemnified for their loss and achieve a safe and proper repair when the shop and insurer cannot agree on the proper repair methodology. Each party then hires competent appraisers who will separately identify the actual cash value and the amount of the loss; if the two appraisers disagree, they will submit their differences to an umpire who will make the final decision. That decision will be binding. “The insurance carrier is contractually obligated to comply with the appraisal process and to pay the amount determined to be the lesser of the actual cash value of the damaged property or the amount necessary to repair the property. The spirit of the Appraisal Clause is to resolve loss disputes fairly and to do so in a timely and costeffective manner.” McDorman also explored what constitutes a total loss as well as the impact of incorrect valuations on body shops, pointing out that many vehicles are declared total losses inaccurately, hurting shops and consumers since those cars cannot be repaired. “If the policy says they owe the actual cash value, they can’t use the total loss formula,” he clarified. “If the policy says, ‘Fix the car,’ they should be fixing the car, so why aren’t they? The insurance carriers want to take as much in premiums as possible and pay out the least amount possible. We need to look at the data because the data doesn’t lie.” Invoking the Right to Appraisal yields an average increase of 90 percent, McDorman noted, recommending shops educate clients. 8 DECEMBER 2021 Texas Automotive
“Right to Appraisal is the mousetrap that we use to penalize a carrier,” Robert McDorman told attendees during his presentation.
“We need to get together to help the consumer and hold the insurance carriers accountable. If we, as an industry, are rowing the same boat, we can move in the right direction – we can fix more cars, run successful businesses, take care of our employees and take care of our customers. When we take care of customers, they take care of us in turn, but you have to be committed to it and make it part of your business model. There’s only one way to fix cars – and that’s the right way!” TXA
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ABAT Feature
ABAT Renews Consumer Complaint Drive in Battle with TDI ABAT’s virtual meeting on November 16 attracted nearly 100 collision industry professionals from all over the country, including industry headliners like Aaron Schulenburg (SCRS), Mike Anderson (Collision Advice) and Tim Ronak (AkzoNobel). What was all the buzz about? ABAT’s latest battle with the Texas Department of Insurance (TDI) and renewed efforts to collect consumer complaints were at the forefront of the conversation as the association strives to protect body shops and their customers from third-party interference in safely repairing vehicles. Since its inception seven years ago, ABAT has raised concerns with the TDI related to who sets the prevailing rate, how it is determined and what needs to be accomplished to ensure that consumers are properly indemnified when vehicle repairs are needed. “The TDI made it very clear that shops determine their posted rates, and it’s up to a finder of fact to decide if those rates are fair and reasonable,” ABAT President Burl Richards said. “Yet in the policy language, they allow many insurance companies to determine the prevailing rates based on a survey they won’t let
Download the Consumer Complaint form at bit.ly/ABATvTDI.
anyone see. We’re looking for transparency because shops and consumers deserve for there to be a fair system in place; it’s time to get something done!” One thing ABAT will be doing immediately is renewing efforts to submit consumer complaints to the TDI, which indicated that it’s more interested in hearing from the consumer than from shops. The association started this initiative earlier in 2021 and has collected nearly 450 forms so far. “The secret to making this work is educating the customer on the front end,” Richards explained. “Don’t be embarrassed to tell your customer that you’ve done something to return them to their safely repaired vehicle. This isn’t just about prices; these concerns go hand-in-hand with labor procedures, and we need to gather these complaints to support our next legislative initiatives which will be geared toward insisting that insurers properly indemnify consumers.” “Consumer forms help level the playing field for all of us because the TDI and legislators take these complaints more seriously when the concerns come from their constituents,” agreed Jill Tuggle, executive director for ABAT. “If half of ABAT’s members commit to just two forms per week, we can hit our goal of 1,000 by the end of the year. We challenge all our members to make that commitment.” The association is soliciting complaints from all over the state in hopes of sharing these with a greater number of legislators to generate future support when bills are introduced. “Everything we do is all about safety; it’s really about people’s lives,” ABAT Lobbyist Jacob Smith noted. “We need to take a stand and fight for this industry and for our customers. If we stay on top of this, we can make a huge impact. We cannot allow insurance companies to dictate Labor Rates, and we’re not going to let the TDI get away with continuing to kick the can down the road.” “We’ve got something to cure the problem, but it’s going to take everyone’s participation,” Richards stressed. “Less than one percent of shops in this state are ABAT members, but look at what we’ve been able to accomplish with that number. Can you imagine if three or four percent of Texas shops joined us? At the end of the day, it’s up to each shop to take just a little time to make a big difference. We need to educate folks about what’s going on in this industry because the TDI battle is just beginning.” TXA
10 DECEMBER 2021 Texas Automotive
11 DECEMBER 2021 Texas Automotive
Cover Story
TDI Asleep at the Wheel:
ABAT Issues Challenge to Protect Consumers from Under-Indemnification The Texas Department of Insurance (TDI) is responsible for regulating the state’s insurance industry and protecting consumers, yet insurance companies’ abuses run rampant in the Lone Star State. Since ABAT was founded in 2014, association leadership has frequently contacted TDI to discuss how those abuses impact Texas consumers in hopes of correcting the situation. “TDI’s job is to protect Texas consumers, but they’re not doing that as far as I can see,” says ABAT President Burl Richards. “TDI continues to say they have no authority while they sit back and allow insurance companies to under-indemnify consumers.” “Insurers have manipulated consumer protection laws,” ABAT Lobbyist Jacob Smith contributes. “The only avenue that shops and consumers have is TDI, which does nothing because they claim they don’t have the authority to do much.” Fair and proper indemnification of insured and claimants has been one of the largest sources of contention. ABAT believes that proper indemnification includes all necessary repair processes, operations and rates, which collectively ensure that the consumer receives a safe and proper repair. “Texas families need to know auto repairs are done the right way when their vehicle is returned to them,” explains Ware Wendell, executive director of consumer advocacy group Texas Watch. “Prevailing rate is where the rubber meets the road because it determines whether professionals can get paid enough to do the repair the right way. Can shops afford to train their personnel? Buy the proper equipment? Spend the time necessary to follow all safety procedures in making the repair? These are the questions that matter for protecting lives on the road. “Insurance carriers need to properly investigate claims and then pay policy benefits,” Wendell continues. “Enough with the games. They shouldn’t be able to strong arm folks and essentially steer them to preferred shops with suppressed rates where corners may be cut.” When these issues are raised, the opposition often focuses
exclusively on the Labor Rate portion of the conversation, neglecting to acknowledge that ABAT’s primary focus lies in the need to elevate prevailing processes and procedures, ensuring that the customer’s vehicle is safe to drive. Collision repair facilities that follow the instructions of the vehicle manufacturer to ensure the vehicle has been restored to its pre-accident condition and that all components, including safety features, operate as intended are often told, “We don’t pay for that” by insurers. “This is about so much more than my paycheck,” Richards emphasizes. “This is mostly about processes and procedures. Due to the lack of proper indemnification, corners are routinely cut during the repair process, and this is directly related to the fact that insurers are allowed to write policies/contracts on behalf of Texas consumers with seemingly no oversight or accountability. “In a conversation with ABAT, TDI admitted that of approximately 1,100 TDI employees, NOT ONE individual understands what constitutes a safe and proper repair!” Richards adds, “When insurers refuse to recognize safe and proper repair processes and procedures, the consumer suffers harm – financially due to the depreciation of their vehicle, but even worse, they face possible physical harm in the event of a subsequent accident. And the harm the customer faces is directly related to the underindemnification of the loss which is permitted per the policy language.” On numerous occasions, ABAT representatives have met with TDI to explore how prevailing rates are established. Although TDI claims that body shops set their own Labor Rates, insurers are only required to pay what’s “fair and reasonable,” which is determined by a “finder of fact” (which means the court system). “As I’ve been told repeatedly, both in writing and verbally, TDI doesn’t determine what’s fair and reasonable, but the agency permits policy language which indicates that the insurer determines rates,” Richards points out. “TDI is allowing State Farm and other
14 DECEMBER 2021 Texas Automotive
by Chasidy Rae Sisk insurers to dictate how vehicles are repaired with very little or no oversight, and the policy language (which is approved by TDI) allows the insurers to do it. I’ve filed numerous complaints with TDI in regard to State Farm’s refusal to indemnify insureds and claimants, but they respond to every single complaint with NO issue found.” Most recently, Richards reached out to TDI regarding verbiage in State Farm’s policy which states, “The prevailing competitive price means prices charged by a majority of the repair market in the area where the covered vehicle is to be repaired as determined by a survey made by us.” With that verbiage contained in the policy, it is not illegal for State Farm to determine and set rates. “Insurance policies are based on contract law,” Robert McDorman (Auto Claims Specialists) describes the situation. “Because the policy says they can set the prevailing competitive price based on a survey ‘by us,’ they contractually have the right to do that.” Yet, ABAT takes issue with the lack of information available about the survey. “State Farm’s policy doesn’t define the survey parameters, which opens up a lot of questions and subjectivity about how they’re determining what they call ‘prevailing competitive price,’” McDorman notes. “Their survey could use greater data points from DRP shops (repair facilities under contract with State Farm) and non-OEM-certified collision facilities, rather than the OEM-certified collision facilities that only perform repairs per manufacturer guidelines, to determine the prevailing practices and rate. If they then only indemnify insureds based on that amount, that leaves the consumer responsible for the difference between the substandard collision repair facility and the OEM-certified collision repair facility. That’s straight up under-indemnification.” In fact, the survey specifies, “Please indicate your prices/charges for State Farm customers” (emphasis added), suggesting that DRP shops are expected to complete the survey with contract rates, skewing the data collected. Richards believes that shops should only be included in any Labor Rate survey if they are “equipped with the necessary tools, equipment and training required to adhere to published OEM repair procedures, but insurance companies love body shops that haven’t invested in training, equipment and processes, because it keeps the rates down; however, it also keeps the prevailing procedures below acceptable standards which creates safety concerns. In the decades that I’ve owned a shop, I have NEVER seen an insurance company survey ask whether the shop performs certain processes and procedures or adheres to OEM requirements.” Although State has informed Richards that his market’s prevailing rate is just $65, LaborRateHero.com, an industry tool created by National AutoBody Research, indicates an average rate of approximately $73.38 in Richards’ market. Of the 13 shops in his area, only one non-OEM-certified shop charges $65, while nine other local collision repair facilities have a posted Labor Rate of $75. After Richards asked if TDI would request a copy of the State Farm survey results, he received an email in response: “While the Texas Insurance Code does not authorize the department to employ a specific process for determining prevailing rates, TDI monitors insurer claim processes through complaints
and market conduct exams. If you believe State Farm’s method of determining Labor Rates constitutes an unfair claims practice, please send us a complaint with sufficient evidence to demonstrate your allegation, and we will take appropriate action.” In response to Texas Automotive’s email inquiry about this issue, the response from State Farm was uninformative. “While we appreciate your inquiry, if repair facilities have a specific question around prevailing rates, we encourage them to reach out to State Farm via their local channels,” wrote Benjamin Palmer, public affairs specialist for the insurer. TDI also offered a non-committal response related to TDI’s willingness to request a copy of State Farm’s survey: “The Texas Insurance Code does not require insurance companies to specify how they determine Labor Rates on auto claims,” according to Ben Gonzalez, media relations at TDI. “The Texas Department of Insurance (TDI) does not review or approve those rates. Some, not all, insurance policies say that they’ll pay auto claims based on a prevailing rate, the prevailing competitive labor rate or a competitive price. Some policies define the term ‘prevailing rate,’” but it varies by company. To the extent companies use surveys to determine the prevailing rate, they are not required to file them for review or approval with TDI.” Referencing legislation proposed in 2019 and 2021 which was designed to define the term “prevailing rate,” Gonzalez’s email offered the observation, “Neither bill passed.” ABAT has actually proposed three pieces of related legislation since its inception: House Bill 3804 in 2017, House Bill 1348 in 2019 and House Bill 1131 in 2021, all sponsored by Representative Travis Clardy (R-Nacogdoches); each bill also contained attempts to prevent insurers from mandating the use of non-OEM parts. The 2017 and 2021 iterations stalled in committee, while House Bill 1348 was defeated by the clock. “Insurers cannot dictate a shop’s Labor Rates, but no one is holding them accountable,” Smith says. “Repair facilities are stuck between a rock and a hard place as they try their best to pay living wages while repairing vehicles safely because they’re ultimately responsible for performing a safe repair, yet insurers hold all the cards and refuse to compensate the repairer, which means they’re failing to properly indemnify the consumer. “ABAT’s goal is to strengthen the insurance laws and codes on the books to clarify that gray area to explicitly indicate the shop determines its own Labor Rates,” he continues. “The People elect our legislators, the governor and TDI officials to work for them and protect them from predatory industries. If they don’t do their job of protecting consumers, who will? If legislators don’t start doing their jobs, their constituents aren’t going to continue voting for them.” At the end of the day, ABAT seeks to understand why TDI continues to allow insurers to under-indemnify consumers and even hazard their lives with potentially unsafe repairs. “TDI claims that insurers cannot set prevailing rates, yet their approved policy language in the insurer’s policy of insurance contradicts that,” McDorman insists. “There’s no consistency because the system is skewed and tainted by design – and that makes it impossible to hold the insurers accountable for the indemnification of a covered loss, also by design. The prevailing practice and prevailing rate scheme are used to under-indemnify the insured’s covered loss. The systematic use of the prevailing practice
15 DECEMBER 2021 Texas Automotive
continued on pg. 20
JUST FOR FUN
What Do You Want for Christmas This Year? I’d like for insurance companies to pay for safe and proper repairs and do the right thing. My wife also asks me that every year, and I don’t know how to answer her either.
For the Cowboys to win the damn Super Bowl! I would like some parts, so I can get these cars out on time.
A light-up emblem for the front of my car. The biggest present I could receive would be for insurance companies to change their mentality, treat us as repair professionals and be easier to work with.
A higher Labor Rate. More young trainees who are willing and eager to enter the collision field.
For Santa to just make COVID-19 to go away. Health, wealth and more time spent together with all my family and friends! More major insurance companies (all would truly be a Christmas miracle!) that care about doing the right thing: safe and proper repairs vs. saving money.
TXA 16 DECEMBER 2021 Texas Automotive
Russell & Smith Logging Big Paint Hours with USI Booths & Prep Station Buying a paint booth is a huge investment, and there are many factors to carefully consider before selecting one. Will the booth work well in a region where there’s a ton of humidity and with drastic changes in the weather? How long do you think the booth will last and will it require a lot of maintenance? Will your painters be comfortable using it every day and finally, will the company making the booth provide solid training and reliable customer service? To answer these questions before acquiring two Chronotech spray booths and a prep deck from USI ITALIA back in 2004, Collision Center Manager Kevin McIllveen at Russell & Smith Body Shop in Houston, TX spent six months studying the market. He was looking for the best booths that matched his needs to use in a brand-new 36,000 sq. ft. facility that the company built from the ground up. Mcllveen, age 56, entered the industry more than three decades ago as an estimator and has worked for Russell & Smith Body Shop since 1993. His goal with his new spray booths was to improve the efficiencies in his paint department and to accommodate his production, he said, while simultaneously saving time and energy if possible. The vetting process was arduous but worth it in the end. "We did our research so that we could make an educated decision," he said. "I went to NACE two years in a row and talked to literally everyone and asked a lot of questions. We knew that this was going to be a very significant investment, so we took the time to perform our due diligence to cover all our bases. We invested in their prep stations as well, which was another good decision, because my guys can work so much faster and effectively with five different places where we can spray. We put a curtain up in the prep booth that provides us two additional spaces that are heated and properly ventilated. So, when we are really jammed, we can handle the workload and maintain our cycle time without interrupting or slowing down our production." After using them for a very short time, Mcllveen could clearly see that his Chronotechs were more than capable as they quickly became a centerpiece in his new, high-end, modern shop. "We have four paint teams here, consisting of a painter and a painter’s helper and we consistently log approximately 600-700 paint hours weekly,” he said. “We switched to waterborne paint when we opened this facility because we want to provide a healthier climate for our employees and the community as a whole.” Why was Mcllveen able to improve his numbers by simply adding two USI booths? “In the end, it all comes down to their airflow because we never need blowers or additional air to cure these vehicles. The fans in these Chronotechs are exceptional because they feature variable speeds, so we can switch depending on the parameters of each job. Our painters are producing an impressive product day after day, so these booths are saving us both time and money. We paint an average of 400 cars every month, so
we push these booths and they never let us down.” Any issues that Russell & Smith Body Shop have encountered with their USI ITALIA booths have been rare and far between. But Mcllveen feels good knowing that if called upon, the company will respond and find solutions promptly. “If you do your scheduled maintenance and keep everything clean, these booths will last you 30 years and maybe even longer. The issues that we have encountered with the Chronotechs have been minor and quickly solved, which is impressive when you think that we have been using these booths daily for the last 16 years. I tell people that these booths will be here long after I’ve retired!” After training provided by USI ITALIA, Mcllveen’s painters were able to start spraying after one day, he said. "The Chronotechs are designed to work with waterborne paint, which makes it easier for our painters to do their work. After a very short time, all of our guys were comfortable and the results were consistently exceptional.” Mcllveen is also impressed by the Chronotech's sturdy construction and durability. "Some booths are just a box, but these are wellbuilt," he said. “I know, because I've seen them all and there isn't anything like a USI ITALIA booth." His career in collision repair industry has been a great experience and products like his USI ITALIA spray booths and prep station are a part of that, he said. “We haven’t had to furlough anybody here and that’s because we value our people and, in the end, our Chronotechs are part of the team.”
USI of North America | 565 Commerce Street Franklin Lakes, NJ 07417 | 201-405-7761 | s.moretto@usius.com | www.usius.com 17 DECEMBER 2021 Texas Automotive
Ask The Expert
by Robert L. McDorman
How To Define Loss Associated with a Total Loss Dear Mr. McDorman: I attended your seminar at SEMA last week and found several of your key points on appraisal interesting and applicable to events we face in our shop on a monthly basis. Would you (for me and the other readers) expand on what you discussed about defining loss associated with a total loss? In your presentation, you mentioned the salvage value used by the carriers is also a factored value, similar to that of the adjusted vehicle values of the market valuation firms. As I understood, defining the salvage value, as well as the actual cash value, would define the loss associated with the vehicle once an accurate repair plan is written. Thank you for attending my seminar at SEMA. It was great to present to my peers and industry leaders at such a wonderful educational event. Yes, this is correct. Once the actual cash value and salvage value have been defined and an accurate repair plan has been written, this would define the loss associated with the vehicle. Please allow me to explain and provide an example of the two total loss methods: Economic, known as total loss formula, and Constructive, known as total loss threshold. The salvage value is a key component of the total loss formula and has no bearing on the total loss threshold. The result of each formula is used to calculate a damage ratio (percentage of loss to value), and a damage ratio greater than 100 percent is typically used to justify deeming a vehicle a total loss. The total loss formula method adds the total cost of the repair plus the salvage value of the vehicle. In the event that the two are greater than the actual cash value, the vehicle is eligible to be deemed a total loss. The total loss threshold method compares the actual cash value of the vehicle to the allowable repair cost. If the allowable repair cost is less than the actual cash value (and there are no missing or unrepairable components and the vehicle can be safely returned to its pre-loss OEM condition), the vehicle should be eligible for repair. The total loss formula almost always benefits the insurer by determining a safely repairable vehicle to be a total loss. To illustrate the difference in the carrier liability between the Economic and the Constructive total loss calculations, I will use the example from my presentation at SEMA. A carrier had deemed a vehicle a total loss, had offered a proposed perceived base value of $21,414 and had valued the salvage at $8,565. The complete OEM blueprint to safely return the vehicle to its OEM pre-loss condition was $14,998. The ultimate carrier liability for this claim was the base value of $21,414 plus sales tax of $1,338.37, less our client’s $250 deductible, plus storage, blueprint fee and other related charges. Based on the example and using the replacement loss type calculation, the final carrier liability would be $12,849 ($21,414 - $8,565) plus sales Robert is a recognized Public Insurance Adjuster and Certified Vehicle Value Expert specializing in motor vehicle-related insurance claim resolution. Robert can be reached at (800) 736-6816, (817) 756-5482 or via email at AskTheExpert@autoclaimspecialists.com.
tax, storage, blueprint fee and other related charges, minus the deductible. The policy will always determine whether the total loss formula or the total loss threshold method should be used to arrive at repair or replace as the loss type. Based on the example above, the following are the calculations used for the total loss formula and the total loss threshold to determine the policy right to repair or replace. First, let’s look at the carrier loss under the total loss formula method. The cost to repair is $14,998, and the proposed perceived salvage value is $8,565. The sum of the two is $23,563. The proposed vehicle adjusted value is $21,414. Under the total loss formula, the vehicle is eligible ($23,563 > $21,414 = Economic Total Loss) to be deemed a total loss. The damage ratio is over 100 percent based on the carrier adjusted value of $21,414; however, defining the true actual cash value allows us to determine that the actual cash value as of the date of loss was actually $24,989. Based upon the true actual cash value, the vehicle is repairable ($23,563 < $24,989). Now, let’s look at the example of carrier loss using the total loss threshold method. The repair cost is $14,998. Texas allows the refinishing time, paint materials and sales tax to be deducted from the repair cost before the damage ratio calculation. The $14,998 repair cost included refinishing time ($2,350), paint materials ($1,750) and sales tax ($873). The allowable repair cost under the Texas Transportation Code is $10,025 ($14,998 - $2,350 - $1,750 - $873). With a proposed base value of $21,414 and an allowable repair cost of $10,025, the damage ratio is only 46 percent. As previously mentioned, Texas is a 100 percent total loss threshold state. As we can see using the total loss threshold method, the vehicle is repairable even at the low carrier adjusted value of $21,414. By using the total loss formula, based on the proposed adjusted vehicle value of $21,414, the carrier can deem the vehicle a total loss and lower its liability. As we see in this example, the final carrier liability is limited to just $12,849 plus sales tax, storage, blueprint fees and other related charges, allowing them to escape the OEM blueprint repair plan, rental expense and other costs associated with a safe repair. In the total loss threshold example, the ultimate carrier liability is for the $14,998 repair cost plus rental expense and the extremely likely addition of supplement charges. Under the total loss threshold method, the final carrier liability could easily exceed $16,500 in this scenario. continued on pg. 21
18 DECEMBER 2021 Texas Automotive
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Founder Robert McDorman
Around the Industry Cover Story Women’s Industry Network Accepting Nominations For 2022 Most Influential Women Do you know an influential woman in the collision repair industry? You probably know a few! Nominations are now open for the Women’s Industry Network’s (WIN) 2022 Most Influential Women (MIW) awards. Women working in any segment of the collision repair industry across the US and Canada can be nominated for the MIW award; nominees are not required to be WIN members to be eligible. Nominations will be accepted through Friday, January 14, 2022. Winners will be celebrated during WIN’s 2022 Annual Conference, scheduled for May 2-4, 2022. Established in 1999, the MIW award recognizes women whose leadership, vision and commitment to excellence have enriched the collision repair industry. Over 100 impressive women have been recognized to-date for their contributions. Make sure that amazing woman in your shop or other collision business gets the recognition she deserves by nominating her today! More information and a nomination form can be found online at bit.ly/2022MIWnominees. TXA
continued from pg. 15 and prevailing rate scheme, which insurance carriers are allowed to use, is the enemy of a safe and proper repair. The only way to fix this systematic sinister scheme is through transparency and oversight; allowing the fox to guard the henhouse has never worked.” “A market rate should actually reflect the entire market,” Wendell stresses. “It should be accurate. Insurers should not be able to cherry-pick rates in ways that only serve to boost their own profits. TDI needs to look under the hood to make sure insurance companies aren’t gaming the system through any inaccurate rate surveys. That is their job as the regulator. They are supposed to examine market conduct. We count on them to protect consumers and the public. “At the end of the day, the insurance company’s job is to pay legitimate claims, and that means paying shops fairly, so they can perform a safe repair. Safe repairs save lives!” Despite the inaction from TDI in the past, ABAT is currently collecting consumer complaint forms shops have obtained from customers to submit to TDI in another effort to demonstrate how insurers manipulate the law to under-indemnify consumers. Nearly 500 complaints have been collected year-to-date, proving that consumers are just as frustrated by TDI’s inaction. ABAT hopes to gather 1,000 complaints by the end of 2021. Texas body shops are encouraged to get involved by downloading the consumer complaint form, located at bit.ly/ABATvTDI. “There is no oversight,” Richards laments. “You give them the information they request, but they do nothing. We are sick of TDI’s doubletalk and hypocrisy. It’s past the time for talk; we want action! This situation has gone too far, and ABAT will not stop until something is done to protect our customers. If TDI is going to continue to exist, they need to look out for Texas consumers; they need to mandate that insurers properly indemnify insureds for the necessary processes and procedures that ensure their vehicles are safe to drive after an accident!” ABAT issues a challenge to TDI: “Do your job – regulate insurance companies and protect consumers!” TXA
20 DECEMBER 2021 Texas Automotive
Ask The Expert
The 300 Advantage™
continued from pg. 18 It’s easy to see why the carrier always pushes to use the total loss formula method when calculating a total loss. The greater the salvage value of the vehicle, the lower the assessed liability for the carrier and the greater the benefit of deeming a repairable vehicle to be a total loss. Most policies in Texas use the total loss threshold method to determine the repair or replacement loss type; however, please note that in either total loss calculation method, THE DETERMINATION OF THE ACTUAL CASH VALUE OF THE VEHICLE IS PARAMOUNT in defining the loss. Our subsidiary, Vehicle Value Experts, can help ensure that your client’s claim is being valued correctly. In most insurance policies, these types of loss disputes can be resolved through an appraisal process. Using the Appraisal Clause, loss disputes can be resolved relatively quickly, economically, equitably and amicably by unbiased, experienced and independent third-party appraisers instead of through costly and timely mediation, arbitration and litigation. Over the years, we have handled thousands of complex Appraisal Clause assignments. We have most insurance policies in our library. Please call me if you have any questions relating to the Appraisal Clause process. I thank you for your question and look forward to any followup questions that may arise.
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21 DECEMBER 2021 Texas Automotive
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