BILL NUMBER:A316

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

PURPOSE OR GENERAL IDEA OF BILL:
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 SPECIFIC 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 preaccident
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 NYS Auto Collision Technicians Association, Inc., provides
              

evidence that automobile insurance companies in New York State are arti-
ficially 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 there-
fore 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 insur-
ance 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" recom-
mended by the insurance company. In most instances, the insurance compa-
ny must pay for the cost of the re-repair after significant hassle and
legal negotiation on the part of the consumer.  The Association esti-
mates 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 black-listed 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 insur-
er's guidelines.

PRIOR LEGISLATIVE HISTORY:
2005-2006: A.7650.
2007-2008: A.392

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
January 1, 2010.