BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
SB 350 (Yee) Hearing Date: April 15, 2009
As Amended March 31, 2009
Fiscal: No
Urgency: No
SUMMARY This measure, by placing provisions of a current
Department of Insurance regulation into the Business and
Professions Code, prohibits an insurer from requiring the use of
nonoriginal equipment manufacturer (Non-OEM) aftermarket crash
parts in the repair of an automobile unless specified standards
are met and specified disclosures are made.
DIGEST
Existing law
California statutory law defines "Aftermarket crash part" to
mean a replacement for any of the nonmechanical sheet metal or
plastic parts which generally constitute the exterior of a motor
vehicle, including inner and outer panels.
This law defines "Nonoriginal equipment manufacturer (Non-OEM)
aftermarket crash part" to mean aftermarket crash parts not made
for or by the manufacturer of the motor vehicle.
Pursuant to a California Department of Insurance regulation
which is now in effect, no insurer shall require the use of
Non-OEM replacement crash parts in the repair of an automobile
unless:
1) the parts are at least equal to the OEM parts in terms
of kind, quality, safety, fit, and performance;
2) insurers specifying the use of Non-OEM replacement crash
parts shall pay the cost of any modifications to the parts
which may become necessary to effect the repair; and,
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3) insurers specifying the use of Non-OEM replacement crash
parts warrant that such parts are of like kind, quality,
safety, fit, and performance as OEM replacement crash
parts; and,
4) all OEM and Non-OEM replacement crash parts,
manufactured after the effective date of this subchapter,
when supplied by repair shops shall carry sufficient
permanent, non-removable identification so as to identify
the manufacturer. Such identification is required to be
accessible to the greatest extent possible after
installation; and,
5) the use of Non-OEM replacement crash parts is disclosed
to the insured in accordance with Business and Professions
Code Section 9875 et seq.
Pursuant to the cited Business and Professions Code, no
insurer shall require the use of Non-OEM aftermarket crash
parts in the repair of an insured's motor vehicle, unless the
consumer is advised in a written estimate of the use of
Non-OEM aftermarket crash parts before repairs are made.
In all instances where Non-OEM aftermarket crash parts are
intended for use by an insurer, the written estimate must
clearly identify each such part with the name of its
nonoriginal equipment manufacturer or distributor and the
consumer must be provided a disclosure document (in 10-point
type or larger type and attached to the insured's copy of the
estimate) which state's "This estimate has been prepared based
on the use of crash parts supplied by a source other than the
manufacturer of your motor vehicle. Any warranties applicable
to these replacement parts are provided by the manufacturer or
distributor of the parts, rather than by the original
manufacturer of your vehicle."
This bill
1. Would codify provisions now found in Department of
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Insurance regulation into the Business and Professions Code
to expressly prohibit an insurer from requiring the use of
nonoriginal equipment manufacturer aftermarket crash parts
in the repair of an automobile unless the insurer:
a. warrants that the Non-OEM aftermarket crash parts
are at least equal to the OEM parts in terms of kind,
quality, safety fit and performance, and
b. shall pay the cost of any modifications of those
parts necessary to effect repairs, and
c. advises the consumer in a written estimate of the
use of nonoriginal equipment manufacturer aftermarket
crash parts before repairs are made.
1. Specifies all OEM and Non-OEM replacement crash parts,
manufactured after the effective date of this subchapter,
when supplied by repair shops shall carry sufficient
permanent, non-removable identification so as to identify
the manufacturer and specifies such identification shall be
accessible to the greatest extent possible after
installation.
COMMENTS
1. Purpose of the bill While an existing Department of
Insurance regulation requires insurers to provide a warranty
regarding any Non-OEM parts that they require to be used,
this requirement is not reflected in California's statutory
law. This bill will codify the regulation. Of additional
interest to the author, the warranty which an insurer is
required to make when requiring the use of Non-OEM parts is
not supported by any standard which governs the
manufacturing process or standards applicable to such parts.
The author intends that this codification bill can provide a
vehicle for identifying such a standard applicable to the
manufacture of Non-OEM parts.
As reflected by the support for this bill, SB 350 enhances
California law generally by making current rules and
obligations in this area statutory. This will be a
worthwhile outcome, whether or not discussions can yield
agreement on a means for establishing a standard for the
manufacture of Non-OEM parts which is a secondary objective
SB 350, Page 4
of interest to the author and sponsors.
2. Background "Crash parts," or "body parts," are parts
generally made of sheet metal, plastic, or glass that
constitute the exterior of a motor vehicle and tend to serve
a cosmetic function. Examples of crash parts include bumper
reinforcements and absorbers, hoods, fenders, door shells,
rear outer panels, deck and trunk lids, quarter panels,
truck beds and box sides, body side panels, tailgates, and
lift gates.
OEM crash parts are made by the manufacturer of a given
motor vehicle for use on that vehicle (e.g., a hood made by
Ford for a Ford vehicle). Non-OEM parts, on the other hand,
are imitation auto parts made by an independent manufacturer
that is generally not affiliated with the manufacturer of
the motor vehicle for which the part is intended.
Non-OEM manufacturers must "reverse-engineer" the
replacement parts because they do not have access to the OEM
manufacturer's specifications for a given part (because this
information is proprietary). Non-OEM crash parts typically
cost 20% to 65% less than OEM crash parts.
3. Support The Certified Auto Parts Association, which is the
bill's sponsor, states that SB 350 is part of an ongoing
effort to protect consumers from poor quality automobile
aftermarket collision parts. CAPA's letter states it "is a
non-profit organization which oversees a testing and
inspection program that certifies the quality of parts used
in collision repair". CAPA states SB 350 moves the market
closer to ensuring crash repair quality parts by recognizing
not all aftermarket parts are quality parts and by requiring
insurers to use parts that are at least equal to the
original equipment manufacturer parts in terms of kind,
quality, safety, fit and performance.
Public Citizen states this bill "will further the effort to
achieve competitively priced and better quality replacement
crash parts as well as a reduction in the number of vehicles
totaled by insurers because of the high cost of collision
repair".
The Alliance of Automobile Manufacturers supports SB 350 in
part because it requires insurance companies to warrant
Non-OEM parts as "at least equal" to the original part "in
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terms of kind, quality, safety, fit and performance".
The Association of California Insurance Companies states it
"supports the competitive influence of the aftermarket crash
part industry" in lowering repair costs and supports as well
the current regulation which SB 350 will codify.
4. Opposition None received
5. Interest The Consumer Attorneys of California are interested
in the disclosure provisions of the bill and their adequacy
but do not have a specific suggested amendment to offer the
author at this time.
The Collision Repair Association of California has withdrawn
opposition to the bill but requests that its provisions be
placed in the Insurance Code rather than the Business and
Professions Code "for purposes of continuity and clarity of
enforcement", specifically Section 758, pertaining to
insurer relationships with body shops, not specifically the
use of OEM or Non-OEM parts.
6. Prior Legislation None
POSITIONS
Support
Certified Auto Parts Association
Public Citizen
Alliance of Automobile Manufacturers
Association of California Insurance Companies
Oppose
None
Interest
Collision Repair Association of California
Consumer Attorneys of California
Consultant: Kenneth Cooley (916) 651-4772