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AB-1679 Motor vehicle insurance: auto body repair.(2017-2018)

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Date Published: 04/07/2017 04:00 AM
AB1679:v97#DOCUMENT

Amended  IN  Assembly  April 06, 2017
Amended  IN  Assembly  March 23, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill
No. 1679

Introduced by Assembly Member Burke

February 17, 2017

An act to amend Section 12921.1 of Sections 758 and 758.5 of, and to add Section 758.1 to, the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 1679, as amended, Burke. Insurance Commissioner: complaint investigation. 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 24 months and would require the survey results to contain specified information, including, among other things, the name and physical address of each auto body repair shop surveyed, the total number of auto body repair shops surveyed, and a description of the geographic area covered. The bill would authorize the department to have access to all labor rate survey responses, a list of surveyed auto repair shops, the method for selecting surveyed shops, and the information used by the insurer to determine the geographic area for the survey and would require the department to keep all that information confidential, as specified. The bill would provide that a survey that complies with specified standards and requirements be accorded the status of 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 or an adjustment of the labor rate component of a written estimate provided by a claimant.
Existing law prohibits insurers from requiring that an automobile be repaired at a specific automotive repair dealer, as defined. Under existing law, an insurer may suggest or recommend a specific automotive repair dealer under specified circumstances, including when a referral is expressly requested by the claimant. Existing law authorizes an insurer to provide a claimant with specific truthful and nondeceptive information regarding the services and benefits available to the claimant during the claims process.
This bill would authorize an insurer to provide the claimant, at any time, with specific, truthful, and nondeceptive information including, among other things, a description of the insurer’s direct repair program and information identifying available participating direct repair program repair shops and information about the types of parts that may be used in making the necessary repairs to the damaged motor vehicle.
Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.

Existing law requires the Insurance Commissioner to establish a program to investigate complaints and respond to inquiries received regarding the handling of insurance claims and, when warranted, to bring enforcement actions against insurers or production agencies. Existing law requires the commissioner to adopt a regulation that sets forth the criteria that the department shall apply to determine if a complaint is deemed to be justified prior to the public release of a complaint against a specifically named insurer or production agency. The commissioner is authorized to establish an Internet-accessible complaint response system to distribute and receive complaint information, as specified.

This bill would require the commissioner, on or before January 1, 2019, to submit a report to the Governor and to the committees of the Senate and the Assembly having jurisdiction over insurance regarding the impact and implementation of the Internet-accessible complaints response system.

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 all of the following:
(a) It is the intent of the Legislature in enacting the amendments to Section 758.5 of the Insurance Code in Assembly Bill 1679 of the 2017–18 Regular Session to supersede, in their entirety, the amendments to subdivision (e) of Section 2695.8 of Title 10 of the California Code of Regulations adopted on November 9, 2016, and to supersede any provision of that regulation in effect prior to November 9, 2016, that is in conflict with Section 758.5 of the Insurance Code.
(b) It is the further intent of the Legislature that the amendments to Section 758.5 enacted pursuant to Assembly Bill 1679 of the 2017–18 Regular Session are intended to occupy the field with respect to the rules governing insurer communications with claimants concerning the repair of motor vehicles.
(c) That, because of the relative infrequency that consumers need vehicle repair services, both first-party and third-party claimants often do not know about the full range of options available for the repair of their motor vehicles and benefit from auto repair process information provided by insurers during the claims adjusting process.

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 any insurer to conduct or use a prevailing auto body repair labor rate survey.
(b) An insurer that conducts or uses a survey that establishes a prevailing auto body repair labor rate in a specific geographic area shall report the results of the survey to the department at least every 24 months for as long as the insurer continues to use that prevailing auto body repair labor rate survey. The survey results reported to the department shall include all of the following information, which the department shall make available upon request:
(1) The name and physical address of each auto body repair shop surveyed.
(2) The total number of auto body repair shops surveyed.
(3) The prevailing auto body repair labor rate established for each geographic area surveyed.
(4) A description of the specific geographic area covered by the prevailing auto body repair labor rate reported.
(5) A general description of the method used to calculate or determine the specific prevailing auto body repair labor rate reported for each specific geographic area.
(c) (1) Upon request, the department shall have access to all survey responses, a list of surveyed auto body repair shops, the method for selecting those shops, and information used by the insurer to determine the geographic area for the prevailing auto body repair labor rate survey.
(2) Excluding the information required to be reported to the department in subdivision (b), this information shall be held confidential by the department and treated as a trade secret and shall not be produced or otherwise disclosed, except when the department is required to produce the data or information by a valid subpoena, court order, or other applicable law.
(3) If the department determines that it is required to produce the data or information pursuant to this subdivision, the department shall first advise the insurer and any other source of the data in order to give the insurer or other source an opportunity to protect the proprietary and confidential nature of the data.
(d) Notwithstanding any other law or regulation, a prevailing auto body repair labor rate survey that complies with all of the following standards and requirements shall be accorded the same status as a survey that complies with all of the standards and requirements set forth in subdivision (d) of Section 2695.81 of Title 10 of the California Code of Regulations for purposes of satisfying the requirements of subdivision (c) of Section 2695.81 of Title 10 of the California Code of Regulations:
(1) The survey does not use labor rate information older than 24 months except for a survey that is continuously available for updating by auto body repair shops or if the labor rate information has been adjusted for inflation, deflation, or cost of living by a statistically valid method within the last 24 months.
(2) (A) The sample size is equal to or greater than 20 percent of the total auto body repair shops registered with, or licensed by, the Bureau of Automotive Repair as an auto body shop or paint shop, surveyed at random subject to paragraph (3), for each geographic region.
(B) This paragraph shall not be construed to require an insurer to verify the registration or license status of surveyed auto body repair shops with the Bureau of Automotive Repair.
(3) The survey may exclude shops that do not meet the specific standards of subparagraph (A) of paragraph (4) of subdivision (d) of Section 2695.81 of Title 10 of the California Code of Regulations, but does not exclude consideration of any auto body repair shop on the basis of the shop’s labor rate or on the basis of its participation or nonparticipation in the direct repair program of the surveying insurer or any other insurer.
(4) The survey’s methodology does not require an auto body repair shop to respond to the survey in any of the following manners:
(A) Electronic format.
(B) Less than 30 calendar days after the survey questionnaire was mailed or electronically transmitted to the shop.
(C) By providing its discounted rate for the direct repair program of the surveying insurer or any other insurer.
(5) The survey calculates the prevailing auto body repair labor rate as the median rate charged by the surveyed auto body repair shops in a specific geographic area, without any weighting other than weighting based on repair volume capacity.
(6) The survey data is compiled from one or more of the following sources:
(A) Direct responses provided by an auto body repair shop.
(B) Any paid repair invoices, including those paid by the insurer or another insurer.
(C) Third-party automobile collision repair estimating software used by the insurer to prepare estimates.
(7) The survey uses any reasonable, contiguous geographic area to establish a prevailing auto body repair labor rate, including cities, counties, and Core Based Statistical Areas as defined by the federal Office of Management and Budget for use by federal statistical agencies, as long as the geographic area chosen has at least six auto body repair shops whose labor rate information is included in the survey.
(e) This section shall not be construed to require an insurer to include in the calculation of the prevailing auto body repair labor rate any survey responses that exceed the posted labor rate for the work performed. An insurer may request additional information to substantiate responses received from the survey.
(f) 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.
(g) 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.

SEC. 4.

 Section 758.5 of the Insurance Code is amended to read:

758.5.
 (a) No An insurer shall not require that an automobile be repaired at a specific automotive repair dealer, as defined in Section 9880.1 of the Business and Professions Code.
(b) (1) No An insurer shall not suggest or recommend that an automobile be repaired at a specific automotive repair dealer unless either of the following applies:
(A) A referral is expressly requested by the claimant.
(B) The claimant has been informed in writing of the right to select the automotive repair dealer.

(2)An insurer may provide the claimant with specific truthful and nondeceptive information regarding the services and benefits available to the claimant during the claims process. This may include, but is not limited to, information about the repair warranties offered, the type of replacement parts to be used, the anticipated time to repair the damaged vehicle, and the quality of the workmanship available to the claimant.

(2) Notwithstanding paragraph (1), an insurer may provide the claimant, at any time, with specific, truthful, and nondeceptive information, including, but not limited to, any of the following:
(A) A description of the insurer’s direct repair program and information identifying available participating direct repair program repair shops.
(B) Information about the expected timeframes necessary to complete the repairs of the damaged motor vehicle at the repair shop selected by the claimant.
(C) Information about the differences in the claim adjustment and vehicle repair process between repair shops that participate in the insurer’s direct repair program and those repair shops that do not participate.
(D) Information about equipment or technical capabilities that a repair shop may need in order to accomplish the necessary repairs on the damaged motor vehicle.
(E) Information about the types of parts that may be used in making the necessary repairs to the damaged motor vehicle.
(F) Information about parts or workmanship warranties and the quality of workmanship that may be available from different repair shops.
(3) If an insurer’s recommendation of an automotive repair dealer is accepted by the claimant, the insurer shall cause the damaged vehicle to be restored to its condition prior to the loss at no additional cost to the claimant other than as stated in the policy or as is otherwise allowed by law. If the recommendation of an automotive repair dealer is done orally, and if the oral recommendation is accepted by the claimant, the insurer shall provide the information contained in this paragraph, as noted in the statement below, to the claimant at the time the recommendation is made. The insurer shall mail or provide the notice required by this paragraph within five calendar days from the acceptance of the recommendation. The written notice required by this paragraph shall include the following statement plainly printed in no less than 10-point type in a separate and freestanding document:
“WE ARE PROHIBITED BY LAW FROM REQUIRING THAT REPAIRS BE DONE AT A SPECIFIC AUTOMOTIVE REPAIR DEALER. YOU ARE ENTITLED TO SELECT THE AUTO BODY REPAIR SHOP TO REPAIR DAMAGE COVERED BY US. WE HAVE RECOMMENDED AN AUTOMOTIVE REPAIR DEALER THAT WILL REPAIR YOUR DAMAGED VEHICLE. WE RECOMMEND YOU CONTACT ANY OTHER AUTOMOTIVE REPAIR DEALER YOU ARE CONSIDERING TO CLARIFY ANY QUESTIONS YOU MAY HAVE REGARDING SERVICES AND BENEFITS. IF YOU AGREE TO USE OUR RECOMMENDED AUTOMOTIVE REPAIR DEALER, WE WILL CAUSE THE DAMAGED VEHICLE TO BE RESTORED TO ITS CONDITION PRIOR TO THE LOSS AT NO ADDITIONAL COST TO YOU OTHER THAN AS STATED IN THE INSURANCE POLICY OR AS OTHERWISE ALLOWED BY LAW. IF YOU EXPERIENCE A PROBLEM WITH THE REPAIR OF YOUR VEHICLE, PLEASE CONTACT US IMMEDIATELY FOR ASSISTANCE.”
(c) Except as provided in subparagraph (A) of paragraph (1) of subdivision (b), or as to information of the kind authorized by paragraph (2) of subdivision (b), after the claimant has chosen an automotive repair dealer, the insurer shall not suggest or recommend that the claimant select a different automotive repair dealer.
(d) Any insurer that, by the insurance contract, suggests or recommends that an automobile be repaired at a particular automotive repair dealer shall also do both of the following:
(1) Prominently disclose the contractual provision in writing to the insured at the time the insurance is applied for and at the time the claim is acknowledged by the insurer.
(2) If the claimant elects to have the vehicle repaired at the shop of his or her choice, the insurer shall not limit or discount the reasonable repair costs based on charges that would have been incurred had the vehicle been repaired by the insurer’s chosen shop.
(e) For purposes of this section, “claimant” means a first-party claimant or insured, or a third-party claimant who asserts a right of recovery for automotive repairs under an insurance policy.
(f) The powers of the commissioner to enforce this section shall include those granted in Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1.

(g)The changes to this section made by the act enacted during the 2009–10 Regular Session that amended this section shall only apply to actions filed on or after January 1, 2010.

SEC. 5.

 The Legislature finds and declares that Section 3 of this act, which adds Section 758.1 to the Insurance Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:
In order to protect insurer proprietary information, it is necessary to enact legislation that limits the public’s right of access to proprietary information that may be collected in connection with insurance auto body repair labor rate surveys reported pursuant to Section 758.1 of the Insurance Code.
SECTION 1.Section 12921.1 of the Insurance Code is amended to read:
12921.1.

(a)The commissioner shall establish a program on or before July 1, 1991, to investigate complaints and respond to inquiries received pursuant to Section 12921.3, to comply with Section 12921.4, and, when warranted, to bring enforcement actions against insurers or production agencies, as those terms are defined in subdivision (a) of Section 1748.5. The program shall include, but not be limited to, the following:

(1)A toll-free telephone number published in telephone books throughout the state, dedicated to the handling of complaints and inquiries.

(2)Public service announcements to inform consumers of the toll-free telephone number and how to register a complaint or make an inquiry to the department.

(3)A simple, standardized complaint form designed to assure that complaints will be properly registered and tracked.

(4)Retention of records on complaints for at least three years after the complaint has been closed.

(5)Guidelines to disseminate complaint and enforcement information on individual insurers to the public, that shall include, but not be limited to, the following:

(A)License status.

(B)Number and type of complaints closed within the last full calendar year, with analogous statistics from the prior two years for comparison. The proportion of those complaints determined by the department to require that corrective action be taken against the insurer, or leading to insurer compromise, or other remedy for the complainant, as compared to those that are found to be without merit. This information shall be disseminated in a fashion that will facilitate identification of meritless complaints and discourage their consideration by consumers and others interested in the records of insurers.

(C)Number and type of violations found, by reference to the line of insurance and the law violated. For the purposes of this subparagraph, the department shall separately report this information for health insurers.

(D)Number and type of enforcement actions taken.

(E)Ratio of complaints received to total policies in force, or premium dollars paid in a given line, or both. Private passenger automobile insurance ratios shall be calculated as the number of complaints received to total car years earned in the period studied.

(F)Any other information the department deems is appropriate public information regarding the complaint record of the insurer that will assist the public in selecting an insurer. However, nothing in this section shall be construed to permit disclosure of information or documents in the possession of the department to the extent that the information and those documents are protected from disclosure under any other provision of law.

(6)Procedures and average processing times for each step of complaint mediation, investigation, and enforcement. These procedures shall be consistent with those in Article 6.5 (commencing with Section 790) of Chapter 1 of Part 2 of Division 1 for complaints within the purview of that article, consistent with those in Article 7 (commencing with Section 1858) of Chapter 9 of Part 2 of Division 1 for complaints within the purview of that article, and consistent with any other provisions of law requiring certain procedures to be followed by the department in investigating or prosecuting complaints against insurers or production agencies.

(7)A list of criteria to determine which violations should be pursued through enforcement action, and enforcement guidelines that set forth appropriate penalties for violations based on the nature, severity, and frequency of the violations.

(8)Referral of complaints not within the department’s jurisdiction to appropriate public and private agencies.

(9)Complaint handling goals that can be tested against surveys carried out pursuant to subdivision (a) of Section 12921.4.

(10)Inclusion in its annual report to the Governor, required by Section 12922, detailed information regarding the program required by this section, that shall include, but not be limited to: a description of the operation of the complaint handling process, listing civil, criminal, and administrative actions taken pursuant to complaints received; the percentage of the department’s personnel years devoted to the handling and resolution of complaints; and suggestions for legislation to improve the complaint handling apparatus and to increase the amount of enforcement action undertaken by the department pursuant to complaints if further enforcement is deemed necessary to ensure proper compliance by insurers or production agencies with the law.

(b)The commissioner shall adopt a regulation that sets forth the criteria that the department shall apply to determine if a complaint is deemed to be justified prior to the public release of a complaint against a specifically named insurer or production agency.

(c)The commissioner shall provide to the insurer or production agency a description of any complaint against the insurer or production agency that the commissioner has received and has deemed to be justified at least 30 days prior to public release of a report summarizing the information required by this section. This description shall include all of the following:

(1)The name of the complainant.

(2)The date the complaint was filed.

(3)A succinct description of the facts of the complaint.

(4)A statement of the department’s rationale for determining that the complaint was justified that applies the department’s criteria to the facts of the complaint.

(d)An insurer shall provide to the department the name, mailing address, telephone number, and facsimile number of a person whom the insurer designates as the recipient of all notices, correspondence, and other contacts from the department concerning complaints described in this section. The insurer may change the designation at any time by providing written notice to the Consumer Services Division of the department.

(e)(1)The commissioner may establish an Internet-accessible complaints response system to distribute and receive complaint information as described in subdivisions (a) and (c). Insurers shall be required to submit and receive complaint information, including, but not limited to, requested claim files, underwriting files, correspondence, and other supporting documents, using any system established by the commissioner pursuant to this subdivision.

(2)(A)On or before January 1, 2019, the commissioner shall submit a report to the Governor and to the committees of the Senate and the Assembly having jurisdiction over insurance regarding the impact and implementation of the Internet-accessible complaints response system as authorized by this section.

(B)The requirement for submitting a report imposed under this paragraph is inoperative on January 1, 2023, pursuant to Section 10231.5 of the Government Code.

(f)For the purposes of this section, notices, correspondence, and other contacts with the designated person shall be deemed contact with the insurer.