Relates to insurer interests in certain motor vehicle repair shops

BILL NUMBER:S4733

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: Amends the vehicle and traffic law be adding a new section 398-j which prohibits an insurer from holding or acquiring any ownership interest in a motor vehicle repair shop, effective 9/1/11. Any insurer holding or acquiring any such ownership interest prior to 9/1/11 must divest themselves of such interest by such date. The bill also provides that prior to 9/1/11, any insurer that has such an interest must disclose to each insured, in writing and in a manner prescribed by the department of motor vehicles, that the insured has the right to use any motor vehicle repair shop selected by the insured. Such disclosure is to be made at the time the policy is delivered, issued for delivery or renewed; and when an accident claim covered by the policy is reported to the insurer by the insured.

Effects of present law which this bill would alter

None.

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, section 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-sterring consumer protection has been eroded by the use of Direct Repair Programs agreements where-by 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 anti-steering protections in 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

2009-10: A.686 - Referred to Assembly Transportation Committee. 2007-08: A.1063 - Referred to Assembly Transportation Committee.

Fiscal implications

None.

Effective date

This act shall take effect on the 120th 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 are authorized and directed to be made and completed on or before such effective date.