Thursday April 19, 2001
Body shop owners say
legislation doesn't go far enough
By SCOTT MOONEYHAM, Associated Press Writer
RALEIGH —Body shop owners say legislation which cleared a House committee Wednesday is a start but doesn't go far enough to prevent insurers from steering policyholders to "preferred shops."
The bill, filed by Rep. Wilma Sherrill, R-Buncombe, is intended to make sure insurers don't coerce policyholders into taking their damaged cars to body shops that have contractual agreements with insurers.
The legislation, recommended for approval in the House Insurance Committee, will require that policyholders receive notice each year informing them that they free to go to the body shop of their choice. The notice will include language to show that insurers are responsible for covering the cost of the repairs, no matter the shop used.
Still, many body shop owners wanted a requirement that the notice be given when a policyholder makes a claim, making sure that it isn't lost in the back of a policy renewal notice.
"They make it hard for you to choose, for the consumer to choose," said Ronnie Pack, a Belmont body shop owner. "This law in here today basically did nothing."
The preferred shop programs encourage consumers to take their damaged cars to body shops that have contractual arrangements with insurers.
North Carolina law allows insurers to recommend body shops but not without "clearly informing the claimant that the claimant is under no obligation to use the recommended repair service."
It is the difference between encouraging and "steering" that is at the heart of the debate between the independent body shop owners and insurers.
Independent body shop owners say the programs violate a long-standing federal order and promote the use of inferior aftermarket parts.
But insurers say the preferred shop arrangements hold down costs for consumers.
Susan Valauri, a lobbyist for Nationwide Insurance, said many of the body shop owners are being outcompeted, much like small hardware stores that are losing business to Lowe's and Home Depot.
"There is no doubt in my mind that there are people who feel like they are losing business because they are not in the preferred vendor programs," Valauri said. "I think it's a marketplace issue."
She went on to say that any insurer involved in steering should be sanctioned.
But the body shop owners, dozens of them packing legislative committee meetings in recent weeks, said the real effect of preferred shop programs is to discourage business from coming their way.
Pack, who has filed a lawsuit against Nationwide, cites incidents where his customers have been told by insurance claims agents not to go to his shop.
"It happens to me everyday. What I want is a level playing field," Pack said.
William Williford, who runs an auto glass repair business, said some insurers provide policyholders with 1-800 numbers for glass claims that go directly to preferred repair businesses.
"The 1-800 numbers are a tactic the insurance companies use to steer customers in a direction they want them to go," Williford said.
Sherill admitted her bill was largely just a clarification of existing law. It does, though, call for a legislative study committee to look further into the contractual arrangements.
"It's kind of like eating an elephant — one bite at a time," Sherill said. "I think that what this bill will do is raise the level of awareness."
Further complicating the issue is a 1963 federal consent decree which appears contrary to North Carolina law.
The agreement, signed by then-U.S. Attorney General Robert F. Kennedy and 265 insurance companies, prohibits insurers from putting plans into place which involve "directing, advising or otherwise suggesting" people with claims go to a specified repair shop.
The order was perpetual, having no expiration date, but recent efforts by body shop owners to have the Justice Department enforce it have so far been unsuccessful.