Relates to insurer interests in certain motor vehicle repair shops

4 Co-sponsors

• Martin J. Golden
• Andrew J. Lanza
• Thomas P. Morahan
• Dale M. Volker

Title of bill

An act to amend the vehicle and traffic law, in relation to insurer interests in certain motor vehicle repair shops

Purpose

To prohibit an insurer from having an ownership interest in an auto body shop.

Summary of provisions

Section 1 -- Adds section 398-j to the Vehicle and Traffic Law. States that, effective on or after September 1, 2009, an insurer may not hold or acquire an interest in a motor vehicle repair shop. Defines for purposes of this section, the term "insurer."

Section 2 -- Effective date.

Justification

This bill reflects a movement across the nation (Texas, California and Virginia, to name a few states) to protect consumers from the inherent conflict of interest presented when an insurer that pays for the repair of a vehicle has that repair performed at a facility from which it derives income as an investor. Such an apparent conflict will lead to reduced oversight of auto body work by the insurer and fewer choices for consumers regarding where they may take their vehicles for auto body repairs. Currently, § 2610 of the Insurance Law provides that an insurance company cannot require that repairs be made to a motor vehicle in a particular place or repair shop. A consumer has the right to have their vehicle repaired in the shop of their choice. However, over the years, this anti-steering consumer protection has been eroded by the use of Direct Repair Programs -- agreements whereby insurers offer certain select repair shops an opportunity to increase business through insured direct referrals in exchange for the repair shops agreeing to fix the vehicle under conditions specified by the insured.

The current anti-steering protections in insurance law are too weak to withstand these operations. This bill will protect consumer interests by preventing insurers from institutionalizing through shop ownership those practices that undermine quality work.

Legislative history

2007-2008 - S/1822/A.1063 2005-2006 - S.5052/A.159 2003-2004 - S.2785/A.5487

Fiscal implications

None.

Effective date

This act shall take effect on the one hundred twentieth day after it shall have become a law, provided, however, that effective immediately, the addition, amendment and/or repeal of any rule or regulation necessary for the implementation of this act on its effective date is authorized and directed to be made and completed on or before such date.