Requires insurers to provide and retain a signed notice to claimants in relation to insured's right to have a vehicle repaired in the shop of his/her choice

Title of bill

An act to amend the insurance law, in relation to collision or comprehensive coverage on motor vehicles

Purpose or general idea of bill

The bill would protect the rights of insured motorists to have their vehicles repaired at the shop of their choice. It does this by requiring insurance companies to inform the insured of their rights under the law.

Summary of specific provisions

Amends Section 2610 of the Insurance Law to require insurers to place in the repair estimate a statement informing the insured of their right to have their vehicle repaired at a shop of their choice.

Justification

An economic impact report prepared in 2006 by Frederic B. Jennings, Jr., Ph.D. for the NYS Auto Collision Technicians Association, Inc., provides evidence that automobile insurance companies in New York State are artificially suppressing payment for labor rates paid to auto body repair shops, and are thereby jeopardizing the safety of drivers on New York roads. The report argues that suppression of labor rates has reduced the quality of repairs completed in many auto body repair shops, and therefore has jeopardized driver safety.

In an effort to reduce costs, automobile insurance companies enter into "preferred" shop agreements with auto body repair shops, such that the preferred shop provides a discount to individuals insured by that insurance company. Automobile insurance companies may then refer claimants to those shops when asked for a referral. Under current law, insurance companies are permitted to pay the lowest price estimate on repairs, as long as the repairs restore the vehicle to pre-accident condition.

The President of the Auto Collision Technicians Association asserts that member shops regularly see customers in need of re-repairs for a poor job done by another body shop, generally the "preferred shop" recommended by the insurance company. In most instances, the insurance company must pay for the cost of the re-repair after significant hassle and legal negotiation on the part of the consumer. The Association estimates that this need for regular re-repairs to fix poor initial repair jobs actually has the effect of increasing auto insurance premiums, despite the claims of auto insurance companies that suppression of labor rates reduces monthly premiums to customers.

Preferred shops establish relationships with the insurers by agreeing to complete repair work within the price guidelines set by the insurance companies. This practice of establishing rigid price guidelines or caps goes beyond the legitimate right of the insurer to negotiate the price of repair. It has the effect of limiting consumer choices by dividing repair shops into two groups: the cut-rate shops preferred by the insurers, and independent shops which can be effectively black-listed by insurance company policies and procedures.

The proposed legislation would require insurers to inform customers of their right to select a repair shop and to make decisions regarding the type of repair done to their vehicle.

Prior legislative history

New bill. Similar to A.1537 of 2015.

Fiscal implications

None.

Effective date

180 days after becoming law.