RI Legislature Passes Bill Providing Auto Repair Shops The Ability To Sue Insurers Directly For Claim Settlement Practices
The Rhode Island General Assembly recently approved a bill containing the Motor Vehicle Property Damage Claims Settlement Act (the Act). The Act, if signed by Governor Chaffee, will negatively impact P&C Insurers issuing auto policies to RI insured’s. Among other things, the Act grants auto body shops standing to sue insurers for money damages over claim settlement practices. The stated purpose of the Act is to ensure fair claims settlement practices and to set forth standards with regard to motor vehicle property damage claims. Opponents to the bill, however, argue the Act will allow auto repair shops to set inflated labor and repair prices, and coerce payment by insurers through threatening lawsuits. Insurers found violating The Act are also subject to fines not exceeding five thousand dollars ($5,000.00) by the department of business regulation. Notable provisions of the act are detailed below:
- Under section 27-10.4.3 it is improper for an insurer or any employee or agent of the insurer to coerce an insured to use a particular rental car company for motor vehicle replacement services or to refuse to honor a “direction to pay.” Nothing in this section prohibits an insurance company from providing an insured person with the names of rental car companies with which arrangements have been made with respect to replacement services. Nothing in this section prevents the insurance company’s ability to question or challenge the amount charged, in accordance with its policy provisions, and the requirements of the department of business regulation.
- Under section 27-10.4-4 it is improper for an insurer or any employee or agent of the insurer to require that repairs be made to an automobile at a specified auto body repair shop. Once the insured has selected a shop, the insurer cannot recommend another shop. If the insurer does recommend another shop, an auto body shop can file a complaint with the department of business regulation alleging a violation of this subdivision. If there is a reason to believe that a violation has occurred, the department of business regulation shall conduct an investigation.
- Under section 27-10.4-5 it is improper for an insurer or any employee or agent of the insurer to modify or refuse to compensate an auto body repair shop for documented charges as identified through industry-recognized software programs or systems. Nothing in this section shall be construed to interfere with an auto body repair shop’s contract with an insurance company. If an insurance company and auto body shop have contracted under a direct repair program or any similar program the provisions in this subdivision do not apply. If the insured elects to have the vehicle repaired at a shop for his or her choice, the insurer shall not limit the reasonable repair costs based upon charges that would have been incurred had the vehicle been repaired by the insurer’s chosen shop(s).
- Under section 27-10.4-6 it is improper for an insurer or any employee or agent of the insurer to deem a motor vehicle a total loss if the cost to rebuild or reconstruct the motor vehicle to its pre-accident condition is less than seventy-five percent (75%) of the “fair market value” of the motor vehicle immediately preceding the time it was damaged.
- “Fair market value” means the retail value of a motor vehicle as set forth in a current edition of a nationally recognized compilation of retail values commonly used by the automotive industry.
- Under section 27-10.4-8 every insurer or employee of the insurer must negotiate in good faith with the auto body shop chosen by the insured and reach an agreed-upon price on all aspects of the repair including but not limited to labor rates charged by the auto body shop.
- If the insurer and auto body shop do not reach an agreement the insurer cannot delay the claim and must promptly issue payment for the amount it determined.
- The auto body shop may assert a civil action against the insurer for all amounts in dispute and any other damages resulting therefrom for a failure to reach an agreed price pursuant to section 27-10.4-8.
- Any insured, claimant, or licensed auto body repair facility may bring an action for money damages against an insured as a result of the use of a practice declared unlawful by sections 27-10.4.3, 27-10.4-5, 27-10.4-6, and 27-10.4.8.