Stating that the bill would increase costs “without adding commensurate benefits to consumers,” Democratic Governor of Rhode Island Dan McKee on Friday vetoed legislation backed by the auto body repair industry.
Bill 6324 and the practically identical Senate Bill 870 ruled that insurers could not refuse surcharges and other costs related to the costs of painting and equipment and subleasing body shops. They also asked insurers to alert customers when carriers total vehicles but don’t want to keep them.
The Senate adopted SB 870 in a 28-9 vote on June 24. The house has passed HB 6324 with a margin of 47-18 on July 1 and SB 870 in agreement, 67-0. The Senate adopted HB 6324 itself on July 1, 30-7. The votes suggest that enough support may exist to override McKee’s veto.
“While I recognize that the stated intention of this bill is to protect consumers, and that there are parts of this legislation that I could support, overall the legislation will add costs without adding additional costs. ‘proportional benefits to consumers. ” McKee wrote to lawmakers on Friday.
“… According to the National Association of Insurance Commissioners, Rhode Island ranks 7th in the country for highest auto insurance premiums. As we seek to restart our economy after the pandemic, we cannot implement measures that could result in even higher costs for consumers and small businesses. Our goal must be to reduce costs to help our economy grow.
“Now is the time to identify what accounts for the rise in auto body repair costs and insurance premiums in Rhode Island, including the role insurance companies can play in lowering rates. “
The veto message illustrates a paradoxical stumbling block that repairers seeking to advocate for such legislation must overcome: officials easily express concern at the prospect of consumers paying higher premiums. But there is little discussion of the risk that consumers will be forced to pay higher fees if insurers arbitrarily deny appropriate fees.
However, McKee expressed concern that the markup and sublet terms discussed in the bill were too vague. His implication here seemed to be the possibility that body shops would abuse their ability to get those costs reimbursed.
“The legislation would add two types of costs (‘tagging’ and ‘sublease services’) that insurers would be required to pay to body shops when repairing an insured vehicle,” McKee wrote. “None of these terms are defined and there are no clear limits on when these costs might be appropriate.”
HB 6324 and SB 870 would have prohibited an insurer from ignoring markup found in paint, bodywork and finishing materials calculation software.
“An insurer should not discount documented costs by not using an entire system, including an industry standard markup,” says an SB 870 passage reportedly added to Rhode Island Unfair Claims Practices Act, General Laws 27-9.1-4.
Another clause in the bill would add whole new language related to subletting. It would be an unfair claim practice if insurers were found to “refuse to pay an auto body repair shop for the necessary documented sublease services paid to sellers or incurred by the body repair shop, for specialized services or repairs performed in the overall repair process, including the costs and labor incurred to research, coordinate, administer or facilitate the necessary sublease service, and automotive industry standard markup. Examples of sublease services include, but are not limited to, towing, hauling, suspension, alignments, electronic calibrations, diagnostic work, mechanical work, and fees paid to release a vehicle.
The main national insurers generally reimburse the increase in subleases, based on the responses of a few hundred stores questioned during the January 2020 edition of “Who pays for what?” »Survey carried out by Collision Advice and CRASH Network.
As noted above, McKee has said he can support parts of the bill.
“I am open to working with lawmakers on language that would resolve remaining issues in legislation such as industry software and the vehicle recovery process,” he wrote.
Current Rhode Island law 27-9.1-4 states that an insurer who does not want to keep a car totaled “must notify the owner of the vehicle in writing of the requirements for obtaining both a salvage title and a reconstructed title “. This implies that the carrier does not keep the vehicle, but it does not specify this fact.
SB 870 would add a requirement that an insurer “must obtain, in writing, the owner’s consent and acknowledgment that the insurer is not retaining clawback and include a statement of the owner’s obligation and potential costs to dispose of or keep recovery.
McKee’s reference to “industry software” also refers to paint, bodywork, and refinish calculators.
The Unfair Complaints Practices Act already states that insurers must “compensate an auto body shop for documented costs identified by software programs or industry-recognized systems for paint, body and body materials. finishing in auto body repair claims ”.
Under SB 870, this wording would indicate that an insurer must “compensate an auto body shop for their documented charges as identified by the most recent version of the automobile industry recognized software programs or systems for paint, bodywork and finishing materials in auto body repair claims, including, but not limited to, programs such as Mitchell’s RMC, PMC Logic, Paint, Micromix, or the programs of a paint manufacturer. An insurer should not discount documented costs by not using an entire system, including an industry standard markup.. “(Emphasis added to show text added by the bill.)
It’s unclear how much of this extra language McKee supported (obviously we know he disagreed with the markup reference). But based on comments from supporters of the bill at a House Societies Committee hearing on May 20, the no-markup reviews could also have value for repairers and consumers.
Randy Bottella, owner and operator of Reliable Collision, said the list was necessary because many insurers recognize only one material system – which calculates a weighted average rather than reflecting the actual items used in the repair.
Representative Robert Craven Sr., D-North Kingstown, reported that body shops have “general frustration” with carriers and described the practice of insurers of trying to evade auto insurance law with nitpicking.
The legislature requires insurers to cover paints authorized for repair, according to Craven. He asked lawmakers to consider a situation in which an insurer agrees, “Yes, we’ll pay you for the paint,” but refuses to reimburse the tape. When criticized that the tape was part of a paint job, the insurer retorts: “No, that’s not what the General Assembly said. “
The Rhode Islanders are lucky repairers often pay the costs, but “it’s not fair” and it was “irritating to see people get ripped off by this sort of nit-picking practice.”
The body shop and the legislature are describing what is needed, and insurers are “starting to cut around the edges,” Craven said. He said it was time to tell insurers to stop.
That wasn’t a problem with all of the insurers, “just some of them,” Craven said.
Maryellen Goodwin, Senate Majority Whip SB 870, D-Providence, has yet to respond to an email late Monday afternoon seeking comment on the veto and its prospects of being overturned by the Legislature . Neither Craven nor the representative of Bill’s sponsor William O’Brien, D-North Providence, have yet responded to similar emails early Monday evening. Keep checking Repairer Driven News for updates.
Democratic Governor of Rhode Island Dan McKee. (Provided by the Office of the Governor of Rhode Island)
Rhode Island State Representative Robert Craven Sr., D-North Kingstown spoke in favor of HB 6324 at a House Corporations Committee hearing on May 20, 2021. (Capture of Rhode Island Legislature Capitol TV screen)
In 2016, only 19% of repairers answered the question “Who pays for what?” Question said they billed the materials with a calculator / invoice method. When researchers asked the same question in January 2020, 27.5% of responding stores said they used a billing system rather than multiplying repair hours by a labor rate. (Provided by Collision Advice and CRASH Network)
A summer 2020 “Who pays for what? A study by Collision Advice and CRASH Network found that many body shops charge a 25% markup on subleases. (Provided by Collision Advice and CRASH Network)