Bill Text

PDF |Add To My Favorites |Track Bill | print page

AB-2276 Motor vehicle insurance: auto body repair.(2017-2018)

SHARE THIS:share this bill in Facebookshare this bill in Twitter
Date Published: 02/13/2018 09:00 PM
AB2276:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill No. 2276


Introduced by Assembly Member Burke
(Coauthors: Assembly Members Bigelow, Chen, Chu, Daly, Grayson, Mayes, and Voepel)

February 13, 2018


An act to amend Section 758 of, and to add Section 758.1 to, the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 2276, as introduced, Burke. Motor vehicle insurance: auto body repair.
Existing law makes certain business practices in insurance unlawful, including, but not limited to, an insurer requiring an auto body repair shop, as a condition of participation in the insurer’s direct repair program, to pay for the cost of an insured’s rental vehicle that is replacing an insured vehicle damaged in an accident, or to pay for the towing charges of the insured with respect to that accident. Existing law also requires any insurer that conducts an auto body repair labor rate survey to determine and set a specified prevailing auto body repair labor rate in a specific geographic area to report the results of that survey to the Department of Insurance, which is required to make the information available upon request.
This bill would delete the above-described provisions regarding an auto body repair labor rate survey and instead would require an insurer that conducts or uses a survey that establishes a prevailing auto body repair labor rate in a specific geographic area to report the results of the survey to the department at least every 12 months and would require an auto body repair shop participating in the survey to declare specified information, including, among other things, that it meets specified equipment requirements and has proof of insurance, as specified. The bill would require an auto body repair labor rate survey to meet specified standards, including surveying a minimum of 30 auto body repair shops or 30% of auto body repair shops, whichever is greater, in a geographical area, as defined. The bill would require the survey to ask specified questions, including what is the regular hourly rate an auto body repair shop charges for repair work, as specified. The bill would permit an insurer or auto body repair shop to negotiate a labor rate that is higher or lower than the prevailing auto body repair labor rate, and permit an insurer to adjust the labor rate in a written estimate provided by a claimant’s chosen repair shop if specified criteria are met.
This bill would also clarify its intent to supplement, and not to supersede, Department of Insurance regulations regarding methods for an insurer to conduct an auto body repair labor rate survey.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares that it is the intent of this act to provide another method for an insurer to conduct an auto body repair labor rate survey in addition to methods permitted under regulations promulgated by the Department of Insurance. The intent of this act is not to supersede those regulations.

SEC. 2.

 Section 758 of the Insurance Code is amended to read:

758.
 (a) It is unlawful for an insurer to require an auto body repair shop registered pursuant to Sections 9884 and 9889.52 of the Business and Professions Code, as a condition of participation in the insurer’s direct repair program, to pay for the cost of an insured’s rental vehicle that is replacing an insured vehicle damaged in an accident, or to pay for the towing charges of the insured with respect to that accident. However, the insurer and the auto body repair shop may agree in writing to terms and conditions under which the rental vehicle charges become the responsibility of the auto body repair shop when the shop fails to complete work within the agreed-upon time for repair of the damaged vehicle.
(b) A registered auto body repair shop that is denied participation in an insurer’s direct repair program may report a denial to the department, which shall maintain a record of all those denials for the purposes of gathering market conduct information. An insurer, upon the request of the department, shall disclose the fact that a denial was made.

(c)Any insurer that conducts an auto body repair labor rate survey to determine and set a specified prevailing auto body rate in a specific geographic area shall report the results of that survey to the department, which shall make the information available upon request. The survey information shall include the names and addresses of the auto body repair shops and the total number of shops surveyed.

SEC. 3.

 Section 758.1 is added to the Insurance Code, to read:

758.1.
 (a) This section or any other law shall not be construed to require an insurer to conduct or use an auto body repair labor rate survey. An insurer that conducts an auto body repair labor rate survey to determine and set a specified prevailing auto body repair labor rate in a specific geographic area shall report the results of that survey to the department, which shall make the information available upon request. Nothing in this section precludes an insurer from determining the prevailing auto body repair labor rate using other methods that reasonably consider market conditions in a specific geographic area.
(b) An insurer that conducts or uses an auto body repair labor rate survey that establishes a prevailing auto body repair labor rate in a specific geographic area shall report the results of that survey to the department at least every 12 months for as long as the insurer continues to use that survey. An insurer may use the auto body repair labor rate survey results for an additional 12 months if the labor rate information has been adjusted using the Consumer Price Index for All Urban Consumers for California calculated by the Department of Finance for the same period. A prevailing auto body repair labor rate shall be calculated as the labor rate at or which a simple majority of the surveyed auto body repair shops charge in a specific geographic area, as defined in subdivision (d). Only survey responses from auto body repair shops that meet the standards in subdivision (c) shall be included for the purposes of calculating the prevailing auto body repair labor rate.
(c) An auto body repair shop that participates in an auto body repair labor rate survey shall declare in its response to the survey whether it meets the following standards:
(1) Meets equipment requirements for auto body repair shops, as required by the Bureau of Automotive Repair and as described in Section 3351.5 of Title 16 of the California Code of Regulations, including any amendments.
(2) Has proof of garage keepers liability and workers’ compensation insurance or its equivalent.
(3) Has electrical or hydraulic equipment capable of making multiple simultaneous body or structural pulls.
(4) Has a spray booth that meets current federal, state, and local requirements.
(5) Has the ability to complete and verify four-wheel alignment through a computer printout using either of the following:
(A) An in-house alignment system with at least one technician who is certified or qualified.
(B) A qualified sublet provider.
(6) Has the ability to do either of the following:
(A) Remove and reinstall frame, suspension, engine, and drivetrain components.
(B) Use a qualified sublet provider to remove and reinstall frame, suspension, engine, and drivetrain components.
(7) Has the ability to evacuate, reclaim, and recharge a vehicle air conditioning system using either of the following:
(A) EPA-compliant in-house equipment and certified technicians.
(B) A qualified sublet provider.
(8) Subscribes to a provider of structural specifications with periodic updates covering the vehicle structure for the make, model, and year of the vehicle or vehicles being repaired and wheel alignment specifications for the vehicle structure for the make, model, and year of the vehicle or vehicles being repaired.
(d) An auto body repair labor rate survey may cover any of the following geographic areas:
(1) An Assembly district established by the Citizens Redistricting Commission pursuant to Section 2 of Article XXI of the California Constitution.
(2) A geographic area, as defined in paragraph (8) of subdivision (d) of Section 2695.81 of Title 10 of the California Code of Regulations.
(3) Contiguous ZIP Codes within the boundaries of local workforce development areas established by the Employment Development Department that include a minimum of 30 auto body repair shops.
(e) An auto body repair labor rate survey shall survey at random a minimum of 30 auto body repair shops or 30 percent of shops, whichever is greater, in a geographic area, as defined in subdivision (d). If a geographic area does not include 30 auto body repair shops, then all auto body repair shops in the geographic area shall be surveyed. This subdivision shall not preclude the commissioner, using existing authorities, from ensuring the methodology used by an insurer in an auto body repair labor rate survey achieves randomness in the selection of shops surveyed. Surveys shall not be sent to auto body repair shops that are not registered with or licensed by the Bureau of Automotive Repair.
(f) (1) An auto body repair labor rate survey shall ask the questions and subquestions set forth in paragraph (2). The auto body repair labor rate survey questions shall be the only information used to determine the prevailing labor rate in a geographic area, as defined in subdivision (d). The survey shall not use a labor rate that includes a discounted rate negotiated or contracted for under a direct repair program, as defined in Section 2698.90 of Title 10 of the California Code of Regulations.
(2) An auto body repair labor rate survey shall include, but is not limited to, the following questions and subquestions printed in no less than 10-point type:

“Is your shop duly registered or licensed as an auto body shop, paint shop, or both with or by the Bureau of Automotive Repair, and does your shop meet the standards in Insurance Code Section 758.1(c)(1) to (8), inclusive?
YES ____
NO ____
If you answered YES to this question, please provide your license number with the California Bureau of Automotive Repair.
If you answered NO to this question, stop here and return the survey questionnaire to us.
What is your regular hourly rate charged for repair work, excluding discounted direct repair work, for the following?
(1) Auto Body/Sheet Metal Labor Rate: ____ per hour.
(2) Structural Labor Rate: ____ per hour.
(3) Frame Labor Rate: ____ per hour.
(4) Mechanical Labor Rate: ____ per hour.
(5) Refinish Labor Rate: ____ per hour.”

(3) An auto body repair labor rate survey may add subquestions about different types of repair work to the question in paragraph (2) if the subquestions are in the same format set forth in paragraph (2).
(4) An auto body repair labor rate survey may add additional questions if they are in the same format set forth in paragraph (2).
(g) Specialty repair rates shall be handled on an individual basis.
(h) This section shall not be construed to require an insurer to include in the calculation of the prevailing auto body repair labor rate a survey response that exceeds the posted labor rate for the work performed. An insurer may request additional information to substantiate responses received from the survey.
(i) This section shall not be construed to prohibit an insurer from paying a labor rate lower than the prevailing auto body repair labor rate if the auto body repair shop chosen by the claimant to perform the repairs charges a labor rate lower than the prevailing auto body repair labor rate.
(j) This section shall not preclude an insurer or an auto body repair shop from negotiating a labor rate that is higher or lower than the prevailing auto body repair labor rate established by the auto body repair labor rate survey. The prevailing auto body repair labor rate shall not be presumed to be a maximum or minimum that shall be paid to settle a specific claim.
(k) Insurers are not required to maintain an open, rolling survey process. If an insurer maintains an open, rolling survey process on its Internet Web site that auto body repair shops may complete at any time, the insurer shall annually send a participation reminder to, and verify the accuracy of survey information with, an auto body repair shop that has not completed the survey within the last 12 months. Information that has not been updated by an auto body repair shop within 12 months of the previous survey shall not be used to calculate the prevailing auto body repair labor rate.
(l) (1) An insurer may use an auto body repair labor rate survey as a basis to reasonably adjust the labor rate in a written estimate provided by a claimant’s chosen auto body repair shop if the insurer can demonstrate the labor rate charged or quoted by the repair shop for a specific type of labor on a particular claim is higher than the labor rate charged by that auto body repair shop for that type of labor during the 120 calendar days immediately preceding the day that labor rate was quoted or charged by that auto body repair shop on the claim in question. The insurer may then adjust the labor rate in the estimate to the lower of:
(A) The labor rate charged by the auto body repair shop for repairs completed by that auto body repair shop during the immediately preceding 120 calendar days.
(B) The prevailing auto body repair labor rate as determined by the survey.
(2) To apply the provisions of this subdivision, the insurer must have on file at least three repair invoices issued by the auto body repair shop that show the labor rate charged for repairs completed during the immediately preceding 120 calendar days. If not all of the repair invoices the insurer relies on show the same lower rate was charged, the insurer shall only adjust the labor rate on the claim in question to the highest of the rates indicated among the invoices or other documents the insurer is relying on to adjust the labor rate pursuant to this subdivision.
(3) For the purposes of this subdivision, only repair invoices that show labor rates charged in connection with a nondirect repair program or other nondiscounted auto body repair work may be used.