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

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Date Published: 07/03/2018 09:00 PM
AB2276:v97#DOCUMENT

Amended  IN  Senate  July 03, 2018
Amended  IN  Assembly  May 25, 2018

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 Sections 758.1 and 758.2 to, the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 2276, as amended, 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 require an auto body repair shop participating in an auto body repair labor rate 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 that it randomly surveys the number of shops necessary to obtain responses that achieve a minimum confidence level of 90% and a standard error of no more than 10%, and would provide for 10%. The bill would eliminate a rebuttable presumption that the insurer has attempted, in good faith, to effectuate a fair and equitable labor rate, rate or adjustment of the labor rate component of a written estimate, as specified, if the survey complies with the requirements of the bill. specified regulations. 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.
This bill would 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. The bill would also clarify that an insurer is not required to conduct an auto body repair labor rate survey, and that an insurer may use other methodologies to determine a prevailing auto body repair labor rate, as specified.
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. or take precedence over those regulations, except as specified.

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.

SEC. 3.

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

758.1.
 (a) An insurer that conducts or uses an auto body repair labor rate survey pursuant to this section shall comply with currentness standards, consistent with subdivision (d) of Section 2695.81 of Title 10 of the California Code of Regulations. A survey that complies with the standards and requirements set forth in this section shall or Section 2695.81 of Title 10 of the California Code of Regulations shall not create a rebuttable presumption by the commissioner that the insurer has attempted, in good faith, to effectuate a fair and equitable labor rate component of a claim settlement. settlement or adjustment of the labor rate component of a written estimate provided by a claimant.
(b) A prevailing auto body repair labor rate shall be calculated as the labor rate at or below 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. An auto body repair labor rate survey conducted pursuant to this section shall be required to be statistically valid pursuant to subdivision (e), and the insurer shall reasonably consider market conditions in a specific geographic area. For purposes of this section, “market conditions” means various local economic factors, including, but not limited to, labor costs, rent, land prices, and local laws and regulations.
(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 conducted pursuant to this section shall cover the boundaries of local workforce development areas established by the Employment Development Department. It is the intent of the Legislature to further refine local workforce development area boundaries. Department that are in effect on January 1 of the surveyed year, but a geographic area for this purpose shall not be larger than a county.
(e) An auto body repair labor rate survey conducted pursuant to this section shall randomly survey the number of shops necessary to obtain the number of qualified responses required to achieve a minimum confidence level of 90 percent and standard error of no more than 10 percent. 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 is statistically valid and 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 conducted pursuant to this section 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 auto body repair 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 with members of an insurer’s direct repair program, or any other 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 conducted pursuant to this section shall contain the following questions and subquestions, and, if printed, shall be 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 labor 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 shall contain the name of the person who answered the survey, his or her title, the name of the auto body repair shop, and the date.
(g) Specialty repair rates shall be handled on an individual basis. may be negotiated on an individual basis by considering evidence of regularly charged rates, degree of specialty, training, equipment, local market, and other relevant factors.
(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. performed, provided the insurer has evidence on file showing the auto body repair shop’s posted labor rate. An insurer may request additional reasonable information to substantiate responses received from the survey. The insurer shall notify the auto body repair shop if a response is not included in the calculation, and shall include an explanation for the exclusion.
(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, consistent with the requirements of this section, 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 or verified by the insurer within 12 months of the previous survey shall not be used to calculate the prevailing auto body repair labor rate.

SEC. 4.

 Section 758.2 is added to the Insurance Code, to read:

758.2.
 (a) This section section, Section 758.1, 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 to the public upon request. The survey information shall include the names and addresses of the auto body repair shops and the total number of shops surveyed.
(b) This section shall not preclude an insurer from determining the a prevailing auto body repair labor rate in a specific geographic area using methods other than the auto body repair labor rate survey methodology authorized by Section 758.1, or other than the methodology in Section 2695.81 of Title 10 of the California Code of Regulations, that reasonably consider market conditions in a specific geographic area. The department may use existing authorities to examine whether or not these other methods effectuates settlement offers that are fair and equitable, and that are consistent with an insurer’s contractual obligations to its policyholders.
(c) The department may examine or investigate whether or not the prevailing auto body repair labor rates, as determined by an auto body repair labor rate survey conducted pursuant to Section 758.1, 758.1 or by other methods permitted by subdivision (b), effectuate good faith and prompt, fair, and equitable settlement offers and are consistent with an insurer’s contractual obligations to its policyholders.