Body shops and insurance companies are both very interested in three separate, yet connected cases, all of which could seriously affect how they work together for many years to come. While California auto body and insurance company representatives were weighing in on Insurance Commissioner Dave Jones’ proposed proposals to stop improper labor rate surveys and steering during the last week of April, an upcoming critical state Supreme Court decision could potentially hijack them both.
On April 27, a joint oversight hearing held by the Senate Committee on Insurance took place in the Capitol. The subject for debate was entitled Legislation, Regulation and Litigation: Enforcement of the Unfair Act Practices. In his introduction, Chairman Richard Roth, D-Riverside, the chairman of the Insurance Committee outlined the The Unfair Practices Act (UPA), which establishes a basic code of conduct for insurers to ensure that policyholders and claimants are treated fairly.
"Over the last decade or so, the insurance industry and the Department of Insurance (CDI) have engaged in several legal skirmishes over regulations adopted pursuant to UPA," Roth explained. "Some of the recent decisions and rulings have raised concerns about the enforceability of those regulations, as well as costs. One case is pending in front of the Supreme Court and may fundamentally alter the way the Commissioner uses that rulemaking authority. This hearing will examine that history and status of these cases and potential legislative solutions."
Roth was referring to California Supreme Court’s review of ACIC v. Jones, which questions the CDI's regulatory authority. The California Autobody Association (CAA) has warned that the insurance companies might try to sue on the grounds of regulatory overreach, according to CAA Lobbyist Jack Molodanof.
While shop owners are ecstatic about the fact that steering and unsubstantiated labor surveys are finally being dealt with by the CDI, insurance companies claim that both proposed regulations will cost them too much money and that the consumers will suffer in the end. Five property casualty insurance trade associations strongly oppose both regulations and representatives from each were on hand at the hearings.
The American Insurance Association (AIA), ACIC, the Property Casualty Insurers Association of American’s California voice, the National Association of Mutual Insurance Companies (NAMIC), the Pacific Association of Domestic Insurance Companies (PADIC) and the Personal Insurance Federation of California (PIFC) attended both hearings.
CAA Executive Director David McClune believes that ACIC v. Jones has no merit and is not concerned that it will pass. “The insurance companies are putting some pressure on the Head of the Insurance Committee, so they had this hearing and we believe that it backfired," McClune said. "If the Insurance Commissioner does not have authority in these matters, than why does the position even exist?"
Commissioner Jones was prepared at the hearing and answered everything clearly and succinctly, McClune said. "The fact that they're questioning his power just shows that the insurers are concerned about the proposed anti-steering and labor rate survey regulations. Jones has their attention and when that happens they start threatening civil suits, so maybe that's where we're headed."
After decades of inactivity and former insurance commissioners who did not see a need to act on anti-steering and sketchy labor rate surveys, McClune is hopeful. "Commissioner Jones has at least two more years left in this position, unless something unforeseen takes place," McClune said. "So, these proposed regulations are much-needed and something that should have taken place many years ago. The fact that the insurance companies are not pleased with these proposed regulations just shows that they are something we need in the collision repair industry. It's all about leveling the playing field, because all our body shops really want is the ability to charge fair rates based on the market and not have their customers steered to other shops."
CAA Lobbyist Jack Molodanof was encouraged about the hearings but also wary of what the insurance companies may do next. "The hearings went well and there wasn't anything unexpected," Molodanof said. "I testified at the anti-steering hearing and laid out CAA's stance and the thinking behind it. The insurance companies have become more and more clever about how to dissuade and discourage customers from taking their cars to the shops of their choice. We believe that the consumer should have the right to take their car to any shop they want to and misleading them is unfair and illegal."
As far as ACIC v. Jones, what does Molodanof think about the status and possible outcome of the case? "Attacking the commissioner's authority was going to happen at some point anyway, so we're not surprised," he said. "It could take 3-8 months to get the Supreme Court decision, but in the meantime, it's still business as usual."
Ed Attanasio