Bill S1517-2009

Prohibits insurers from limiting payment on claims based on pricing caps and from recommending a particular repair facility, and requires notice to insureds

Prohibits insurers from limiting payment on claims for damage to motor vehicles based on pricing caps for labor, parts, paint or repair materials; prohibits insurers from recommending a particular repair facility; and requires insurers to provide and retain a signed notice to claimants in relation to insured's right to have a vehicle repaired in the shop of his/her choice.

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  • Jan 6, 2010: REFERRED TO INSURANCE
  • Feb 2, 2009: REFERRED TO INSURANCE

Memo

 BILL NUMBER:  S1517

TITLE OF BILL : An act to amend the insurance law, in relation to collision or comprehensive coverage on motor vehicles

PURPOSE : The bill would protect the rights of insured motorists to have their vehicles repaired at the shop of their choice. It does this by requiring insurance companies to inform the insured of their rights under the law. It also prohibits insurers from refusing to pay on claims, based on any system of price caps or ceilings developed by the insurer.

SUMMARY OF PROVISIONS : Amends Section 2610 of the Insurance Law to prohibit insurers from establishing price caps for labor, parts, paint or repair materials; requires that all elements of a claim shall be negotiated with the insured or his/her designated representative by a duly licensed appraiser; requires insurers to restore a damaged vehicle to pre-accident condition; requires insurers to maintain in its files a statement signed by the claimant showing that the claimant is aware of the provisions of this section of law.

JUSTIFICATION : An economic impact report prepared in 2006 by Frederic B. Jennings, Jr., Ph.D. for the New York State Auto Collision Technicians Association, Inc., provides evidence that automobile insurance companies in New York State are artificially suppressing payment for labor rates paid to auto body repair shops, and are thereby jeopardizing the safety of drivers on New York roads. The report argues that suppression of labor rates has reduced the quality of repairs completed in many auto body repair shops, and therefore, has jeopardized driver safety.

In an effort to reduce costs, automobile insurance companies enter into "preferred" shop agreements with auto body repair shops, such that the preferred shop provides a discount to individuals insured by that insurance company. Automobile insurance companies may then refer claimants to those shops when asked for a referral. Under current law, insurance companies are permitted to pay the lowest price estimate on repairs, as long as the repairs restore the vehicle to pre-accident condition.

The president of the Auto Collision Technicians Association asserts that member shops regularly see customers in need of re-repairs for a poor job done by another body shop, generally the "preferred shop" recommended by the insurance company. In most instances, the insurance company must pay for the cost of the re-repair after significant hassle and legal negotiation on the part of the consumer. The Association estimates that this need for regular re-repairs to fix poor initial repair jobs actually has the effect of increasing auto insurance premiums, despite the claims of auto insurance companies that suppression of labor rates reduces monthly premiums to customers.

Preferred shops establish relationships with the insurers by agreeing to complete repair work within the price guidelines set by the insurance companies. This practice of establishing rigid price guidelines or caps goes beyond the legitimate right of the insurer to negotiate the price of repair. It has the effect of limiting consumer choices by dividing repair shops into two groups: the cut-rate shops preferred by the insurers, and independent shops which can be effectively blacklisted by insurance company policies and procedures.

The proposed legislation would require insurers to inform customers of their right to select a repair shop and to make decisions regarding the type of repair done to their vehicle. The bill would further strengthen the power of the consumer by prohibiting the use of arbitrary price caps set by insurers to limit the cost of repair. While the insurer may negotiate with the repair shop as to the cost of repair, they may not refuse to pay claims where the repair shop's estimate exceeds the insurer's guidelines.

LEGISLATIVE HISTORY : A.7650 of 2005-2006 S.3763-A/A.392-A of 2007-2008

FISCAL IMPLICATIONS : None.

EFFECTIVE DATE : January 1, 2010.

Text

STATE OF NEW YORK ________________________________________________________________________ 1517 2009-2010 Regular Sessions IN SENATE February 2, 2009 ___________
Introduced by Sens. DeFRANCISCO, GOLDEN, GRIFFO, LAVALLE, MAZIARZ, MORA- HAN, VOLKER -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance AN ACT to amend the insurance law, in relation to collision or compre- hensive coverage on motor vehicles THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 2610 of the insurance law is amended by adding a new subsection (c) to read as follows: (C)(1) NO INSURER IN PROCESSING ANY SUCH CLAIM, SHALL LIMIT THE PAYMENT OF SUCH CLAIM FOR DAMAGE TO A MOTOR VEHICLE REPAIR BASED ON PRICING CAPS FOR LABOR, PARTS, PAINT OR REPAIR MATERIALS. ALL ELEMENTS OF SUCH A CLAIM FOR DAMAGES SHALL BE NEGOTIATED WITH THE INSURED, OR HIS OR HER DESIGNATED REPRESENTATIVE, BY A DULY LICENSED APPRAISER. (2) IF A RECOMMENDATION OR SUGGESTION OF AN AUTOMOTIVE REPAIR FACILITY IS MADE BY THE INSURER, AND ACCEPTED BY THE CLAIMANT, THE INSURER SHALL CAUSE THE DAMAGED VEHICLE TO BE RESTORED TO ITS CONDITION IMMEDIATELY PRIOR TO THE LOSS AT NO ADDITIONAL COST TO THE CLAIMANT OTHER THAN DEDUCTIONS STATED IN THE POLICY. SHOULD THE INSURER FAIL TO RESTORE THE VEHICLE TO ITS CONDITION IMMEDIATELY PRIOR TO THE LOSS, THE INSURER SHALL AT NO ADDITIONAL EXPENSE TO THE CLAIMANT CAUSE THE VEHICLE TO BE RESTORED TO ITS CONDITION IMMEDIATELY PRIOR TO THE LOSS AT A SHOP OF THE CLAIMANT'S CHOICE. THE INSURER SHALL MAINTAIN IN ITS FILE, A STATEMENT, SIGNED BY THE CLAIMANT, PLAINLY PRINTED IN NO LESS THAN 10 POINT TYPE: "PURSUANT TO SECTION 2610 OF THE INSURANCE LAW, AN INSURANCE COMPANY MAY NOT LIMIT PAYMENT BASED ON PRICING CAPS FOR LABOR, PARTS, PAINT OR REPAIR MATERIALS. AN INSURER CANNOT REQUIRE THAT REPAIRS BE MADE TO A MOTOR VEHICLE IN A PARTICULAR PLACE OR REPAIR SHOP. YOU HAVE THE RIGHT TO HAVE YOUR VEHICLE REPAIRED IN THE SHOP OF YOUR CHOICE". S 2. This act shall take effect on the first of January next succeed- ing the date on which it shall have become a law and shall apply to all
policies and contracts issued, renewed, modified, altered or amended on or after such effective date; provided, however, that effective imme- diately, the addition, amendment and/or repeal of any rule or regulation necessary for the implementation of this act on its effective date are authorized and directed to be made and completed on or before such effective date.

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