BILL ANALYSIS Ó
-----------------------------------------------------------------------
|Hearing Date:April 16, 2012 |Bill No:SB |
| |1460 |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 1460Author:Yee
As Introduced: February 24, 2012 Fiscal:Yes
SUBJECT: Automotive repair: replacement parts.
SUMMARY: Revises and recasts the motor vehicle replacement parts law,
defining certain terms related to crash parts; specifies that
certified new non-OEM crash parts shall be presumed sufficient to
return the motor vehicle to its pre-loss condition; requires a
supplier who supplies a certified new non-OEM crash part to provide a
written consumer warranty, as specified; requires crash parts to have
an identification number and an electronic tracking system; revises
the invoice and estimate requirements for automotive repair dealers.
Existing law:
1)Establishes specific provisions relative to motor vehicle
replacement parts (Chapter 20.1, of Division 2 of the Business
and Professions Code (BPC), commencing with
§ 9875), including:
a) Defines the following terms: (BPC § 9875)
i) "Insurer" to include an insurance company and any
person authorized to represent the insurer regarding a
claim.
ii) "Aftermarket crash part" is a replacement for any of
the non-mechanical sheet metal or plastic parts which
generally constitute the exterior of a motor vehicle,
including inner and outer panels.
iii) "Non-original equipment manufacturer (Non-OEM)
SB 1460
Page 2
aftermarket crash part" means aftermarket crash parts not
made for or by the manufacturer of the motor vehicle.
b) Prohibits an insurer from requiring the use of Non-OEM
aftermarket crash parts in a motor vehicle repair unless the
consumer is advised in a written estimate of the use of
Non-OEM aftermarket crash parts before repairs are made.
(BPC § 9875.1)
c) Requires where Non-OEM aftermarket crash parts are
intended for use by an insurer:
i) The written estimate must clearly identify each such
part with the name of its non-original equipment
manufacturer or distributor. (BPC § 9875.1 (a))
ii) A disclosure document must be given to the insured
stating the following in
10-point type or larger attached to the estimate: (BPC §
9875.1 (b))
"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."
2)Licenses and regulates more than 35,000 automotive repair
dealers (ARDs) under the Automotive Repair Act (Act) by the
Bureau of Automotive Repair (BAR) within the Department of
Consumer Affairs (DCA).
3)Defines certain terms in the Act, including ARD, to mean a
person who, for compensation, engages in the business of
repairing or diagnosing malfunctions of motor vehicles. (BPC §
9880.1)
4)Requires all work done by an ARD to be recorded on an itemized
invoice that describes all service work done and parts supplied,
and requires the invoice to contain specified information. (BPC
§ 9884.8)
5)Requires an ARD to provide a customer with an itemized written
estimate for parts and labor and to obtain authorization from
the customer before performing work or charging for any work on
SB 1460
Page 3
the customer's vehicle. (BPC § 9884.9)
6)Prohibits an ARD from charging a customer for work done or parts
supplied in excess of the written estimate without first
obtaining a customer's oral or written authorization. (BPC §
9884.9 (a))
7)Requires an ARD performing auto body or collision repair work to
identify whether each part is new, used, rebuilt, or
reconditioned on the written estimate. The written estimate
must also identify whether a crash part is an original equipment
manufacturer (OEM) or non-original equipment (non-OEM)
manufacturer crash part. (BPC § 9884.9 (c))
8)Defines "auto body repair shop" as a place of business operated
by an automotive repair dealer where automotive collision repair
or reconstruction of automobile or truck bodies is performed.
(BPC § 9889.51)
Existing law, Department of Insurance Regulations (California Code
of Regulations Title 10 Chapter 5, Subchapter 7.5, Section 2695.8
(g)):
1)Provides that no insurer shall require the use of Non-OEM
replacement crash parts in the repair of an automobile unless:
a) The parts are at least equal to the original equipment
manufacturer parts in terms of kind, quality, safety, fit,
and performance;
b) Insurers specifying the use of non-original equipment
manufacturer replacement crash parts shall pay the cost of
any modifications to the parts which may become necessary to
effect the repair;
c) Insurers specifying the use of non-original equipment
manufacture replacement crash parts warrant that such parts
are of like kind, quality, safety, fit, and performance as
original equipment manufacturer replacement crash parts;
d) All original and non-original manufacture replacement
crash parts, when supplied by repair shops shall carry
sufficient permanent, non-removable identification so as to
identify the manufacturer. The identification must be
accessible to the greatest extent possible after
installation.
SB 1460
Page 4
This bill:
1)Revises and recasts the motor vehicle replacement parts law, and
defines certain terms, including:
a) "Certified new non-OEM crash part" means a new non-OEM
replacement crash part that:
i) Has been certified by an American National Standards
Institute (ANSI) accredited standards developer that develops
and maintains a consensus of quality standards for competitive
crash repair parts.
ii) Is identified by a unique serial number or production lot
number that enables full traceability through the certifying
entity.
b) "Replacement crash part" means a nonmechanical part made of
sheet metal, aluminum, plastic, fiberglass, or a similar material
generally used in crashed vehicle repair. This includes outer
panels, hoods, fenders, doors, trunk lids, bumper parts
(excluding bumper covers), and radiator supports, but does not
include glass, wheel covers, or grilles.
c) "Insurer" means an insurance company or any person authorized
to represent the insurer.
d) "New non-OEM crash part" means a replacement crash part
manufactured or sold by an entity other than the OEM.
e) "Original equipment manufacturer (OEM) crash part" means a
replacement crash part manufactured or commissioned by a car
company, for motor vehicles that the car company manufactures or
distributes.
f) "Recycled crash part" means a crash part removed from a
vehicle.
g) "Remanufactured or reconditioned crash part" means a recycled
crash part that has been refurbished or restored to its original
condition or appearance for use on another vehicle.
2)Prohibits the use of recycled, remanufactured or reconditioned OEM,
new non-OEM, or certified new non-OEM crash parts in determining
what an insurer will pay to repair a vehicle unless:
SB 1460
Page 5
a) The insurer discloses in writing that parts other than OEM
crash parts may be used to determine the amount to be paid to
repair a vehicle in a manner sufficient to restore the vehicle to
its pre-loss condition.
b) The auto body repair shop discloses whether the replacement
crash part to be used in the repair is:
i) A recycled, remanufactured, or reconditioned OEM or
certified new non-OEM crash part.
ii) An OEM crash part.
iii) A certified new non-OEM crash part.
3)Specifies that certified new non-OEM crash parts shall be presumed
sufficient to return the motor vehicle to its pre-loss condition.
4)Requires a supplier who supplies a certified new non-OEM crash part
to:
a) Provide a written consumer warranty that equals or exceeds the
car company's warranty provided for the OEM crash part.
b) Use an electronic tracking system that tracks the manufacturer
part number, lot number, and repair shop license number for
recall purposes.
c) Analyze any crash part returned as defective and report the
defective part number, lot number, and nature of the defect to
the manufacturer and to the certifying entity.
d) Report annually to the BAR defect rates greater than 5 percent
for certified new non-OEM crash parts, as specified.
e) Provide the auto body repair shop with a service guarantee on
any defective certified new non-OEM crash part which includes a
full refund within 60 days.
5)Includes auto body repair shop in the definition of an ARD.
6)Requires the final invoice that the ARD presents to the customer to:
a) Itemize each replacement crash part as an OEM, new non-OEM,
certified new non-OEM, recycled, remanufactured, or reconditioned
SB 1460
Page 6
crash part.
b) Identify the supplier providing the warranty for each
certified new non-OEM crash part, and the tracking information.
c) Include the disclosure language set forth in subdivision (c)
of Section 9884.9.
d) List the unique identification information for any installed
certified new non-OEM crash part.
7)When a certified new non-OEM crash part is installed, requires the
ARD to transmit the tracking information to the entity that
certified part in order to enable traceability.
8)Requires the written estimate to identify whether a replacement
crash part is an OEM, certified new non-OEM, new non-OEM, recycled,
remanufactured, or reconditioned crash part.
9)Requires the written estimate to disclose the replacement crash part
warranty provided by the supplier.
10)Makes technical, clarifying and conforming changes.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1.Purpose. This bill is sponsored by the Author who states:
"SB 1460 would take current law a step further to ensure quality
assurance, warranties and the ability to track crash parts;
disclosures in insurance policies or other notices of the types
of crash parts that may be used; disclosures in the estimate of
the actual parts to be used; and disclosure in the final invoice
of crash parts actually installed. Insurers specifying only
certified crash parts for certain parts ensures the use of
quality replacement parts at competitive prices.
"This bill would give low income consumers an affordable safe
alternative to expensive OEM parts. Consumers will also have
peace of mind that certified, quality replacement crash parts are
used when available, and that those parts are identifiable and
will be traceable. The warranty requirement ensures that new
SB 1460
Page 7
non-OEM crash part manufacturers and distributors are held to the
same warranty standards as the original equipment manufacturers."
According to the Author, the source of the bill is the Personal
Insurance Federation of California (PIF). Representing a number of
insurance companies (State Farm, Farmers, Liberty Mutual Group,
Progressive, Allstate, Mercury), PIF states that the bill does three
things: (1) provides incentive for insurance companies to pay for
higher-quality replacement parts; (2) encourages insurance companies
to pay for replacement car parts that are easier to track and
recall, which improves the accountability of replacement part
makers; (3) requires suppliers of Non-OEM replacement parts to
provide new consumer warranties, in addition to existing consumer
protections.
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 duplicate parts
made by an independent manufacturer that is generally not affiliated
with the motor vehicle manufacturer.
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. ANSI Accreditation. This bill defines "certified new non-OEM
crash part" as a new non-OEM replacement crash part that has
been certified by an ANSI accredited standards developer that
develops and maintains a consensus of quality standards for
competitive crash repair parts. The part is identified by a
unique serial number or production lot number enabling full
traceability through the certifying entity. The ANSI is a
private, non-profit organization that administers and
coordinates the U.S. voluntary standards and conformity
assessment system. ANSI is not itself a standards developing
organization, but rather ANSI oversees the creation,
SB 1460
Page 8
promulgation, and use of thousands of standards, guidelines,
and conformity assessment activities that directly impact
businesses and consumers in numerous industries and product
lines.
ANSI's role in the conformity assessment arena includes
accreditation of organizations that certify that products and
personnel meet recognized standards; accreditation of
organizations providing third-party validation or verification
to bodies engaged in the reduction and removal of greenhouse
gases; and accreditation of certificate programs for
organizations that issue education and training certificates to
U.S. workers.
ANSI accredited standards have been cited in California law
relating to a variety of specification standards, including
those for: carbon monoxide devices (Health and Safety Code
(HSC) § 13262); swimming pool antientrapment devices (HSC §
116064.2); pipe, pipe or plumbing fitting or fixture, solder,
or flux (HSC § 116875); garage door openers (HSC § 19890);
food handler safety standards (HSC § 113948); safety of
recreational vehicles (HSC § 18027.3); gas fired appliances
(HSC § 114301); hydrogen fuels for combustion engines (BPC §
13446).
If this bill were enacted, ANSI accredited organizations seeking
to certify new non-OEM parts might include: the Certified
Automotive Parts Association (CAPA), a non-profit organization
that certifies the quality of new non-OEM parts for use in
collision repairs; and NSF International , a not-for-profit
organization that provides standards development, product
certification, auditing, education and risk management relating
to public health and the environment, and which, according to
PIFC, also provides a certification system for new non-OEM
parts.
4. Related Legislation. There have been a number of Legislative
efforts involving a variety of issues with automobile crash
parts and repairs in recent years. Stakeholders including, the
insurance industry, automobile manufacturers, parts
manufacturers, parts certifiers, automobile dealers, the auto
body repair industry, and consumer safety organizations have
brought a divergent range of interests to the table. Some of
the significant bills have been the following:
AB 2505 (Ma, 2012) in the current legislative session, defines
SB 1460
Page 9
"certified aftermarket crash part" as a replacement crash part
that has been certified by an ANSI accredited standards
developer that develops and maintains quality standards for
competitive crash repair parts, and that is identified by a
unique serial number on the part that enables its full
traceability through the ANSI certifying entity. This bill is
awaiting hearing in the Assembly Business, Professions and
Consumer Protection Committee.
SB 350 (Yee, 2010) would have prohibited the use of Non-OEM crash
parts unless specified requirements are met, including that the
parts are at least equal to the OEM parts in terms of kind,
quality, safety, fit, and performance, and are warranted by the
insurer to do so; the insurer pays the cost of any part
modifications necessary for the repair; and all aftermarket
crash parts (both OEM and Non-OEM) contains a specified
identification when supplied by auto body repair shops. That
bill was ultimately withdrawn by the Author and died in the
Assembly Business, Professions and Consumer Protection
Committee.
SB 427 (Negrete McLeod, 2010) would have increased the penalty
from $1,000 to $5,000 for failing to repair an air bag; made it
a misdemeanor for an ARD who prepares a written estimate for
repairs that includes replacement of a deployed airbag and who
fails to repair and fully restore the airbag to original
operating condition. The bill was vetoed by the Governor
citing that the bill was largely duplicative of existing law
and provided consumers very little additional benefit.
SB 1371 (Correa, Chapter 526, Statutes of 2008) prohibited
insurers from engaging in "capping," defined as paying an
amount that is unrelated to a methodology used in determining
paint and materials charges that is accepted by automobile
repair shops and insurers.
AB 2825 (Carter, 2008) would have authorized a customer to receive
copies of invoices from the distributor, dealer or manufacturer
for all crash parts installed in excess of $50; required the
written estimate and the final invoice to include a notice
stating that installing parts other than those described on the
estimate without the customer's prior approval is unlawful; and
required copies of crash part invoices, if requested by the
consumer, to be attached to the final invoice. That bill was
vetoed by the Governor citing that the bill was duplicative of
existing law and therefore unnecessary.
SB 1460
Page 10
AB 1483 (Carter, 2007) would have required an ARD, once repairs
are completed, to provide a written affirmation to the customer
on the first page of the final invoice that the parts
identified on the estimate are the parts that were installed on
the vehicle during repair. That bill was vetoed by the
Governor citing that it was duplicative of existing law and
therefore unnecessary and that the provisions may lead to
increased expenses and decreased efficiency at automotive
repair dealers.
AB 1852 (Yee, 2006) would have established a "licensed certifier"
as an independent entity, licensed by the Department of
Consumer Affairs, to certify a part as a "certified collision
repair part," if it is of like kind and quality to a car
company collision repair part. That bill was referred to
Assembly Business and Professions Committee, but this language
was deleted from the bill and was amended into a different
subject matter before being heard by that Committee.
AB 1163 (Yee, 2005) would have provided that a "certified
aftermarket crash part," not manufactured by the original
equipment manufacturer (OEM) of the vehicle for which the
aftermarket crash part is being used to repair, is of like kind
and quality to an OEM aftermarket crash parts, and requires
manufacturers or distributors of the non-OEM parts, and
insurers, to warrant non-OEM certified aftermarket crash parts.
That bill died in Assembly Business and Professions Committee.
5. Arguments in Support. Writing in support of the bill, the Personal
Insurance Federation of California (PIF) indicates that one way to
reduce the cost of auto repairs is to use parts not made by the
original car-maker (Non-OEM parts). Using OEM parts can be much
more expensive than finding an "after- market" or "new non-OEM"
alternative. In fact, when body shops repair a car that is not
insured and which will be paid solely out of the customer's pocket,
they frequently provide a new non-OEM alternative to make the
repair affordable. Insurers make the same calculation and look for
appropriate opportunities to use new non-OEM parts, recognizing
there are many instances where OEM parts may be the best solution.
PIF argues that this measure does not address safety parts used in
vehicle repairs but cosmetic crash parts which are non- mechanical,
non-safety parts used on the exterior of the vehicle, such as the
SB 1460
Page 11
outer panels, hoods, fenders, doors, trunk lids, and bumper parts.
PIF cites the Insurance Institute for Highway Safety 1987 Status
Report, stating these parts "don't affect vehicle strength in a
collision and are irrelevant to crash safety." Given the
non-safety nature of crash parts, consumers and insurers purchase
many new Non-OEM replacement parts with less concern than they
would if safety was involved, according to PIF.
According to PIF, in recent years several insurers have leaders in
efforts to provide a quality assurance process for new non-OEM
parts. PIF indicates its involvement in the Certified Automotive
Parts Association (CAPA), a non-profit organization that certifies
the quality of new non-OEM parts for use in collision repairs. PIF
indicates that CAPA, along with NSF International have developed
rigorous crash part manufacturing and testing standards.
PIF members believe that a robust certification system has improved
the quality of new non-OEM parts, and is a direct answer to
criticisms about "imitation" replacement parts. However, PIF
believes that more can be done to provide incentives to insurers to
pay for certified new non-OEM parts, which are typically more
expensive than non-certified parts.
Allstate Insurance Company (Allstate) supports the bill stating that
at the national level, Allstate has supported a certification
system to assure the quality of non-safety crash parts used to
repair insured vehicles, and supports this even more rigorous
system that provides for the tracking of any defective crash parts
used in automotive repair for greater accountability here in
California. In addition, the cost efficiencies resulting from the
use of certified after-market crash parts will result in more
vehicles being repaired, as opposed to being "totaled," according
to Allstate.
6. Arguments in Opposition. The California Autobody Association (CAA)
argues that the bill takes the wrong approach to addressing issues
surrounding non- OEM crash parts. CAA contends the bill would
eliminate the current Department of Insurance regulation (CCR §
2695.8 (g)) which requires insurers who compel consumers to accept
non-OEM crash parts to warrant the parts are of "like kind, quality
safety, fit and performance" as OEM crash parts. CAA sates that
the bill shifts all insurer warranty responsibility of non- OEM
crash parts to repair shops and third party suppliers. More
importantly, according to CAA, the bill creates a "new legal
presumption" that all certified crash parts are presumed sufficient
to return the motor vehicle to its pre-loss condition, even though
SB 1460
Page 12
the non-OEM certified crash part may not fit properly or is
defective. CAA indicates that the bill would also extend to third
party claimants, even though they may not have a contract with that
particular insurer.
CAA argues that the bill creates new crash part standards and
requirements but does not designate a consumer protection agency to
regulate, enforce and oversee this new program. CAA contends the
bill places unnecessary administrative burdens on auto body shops
by requiring that a repair shop identify each part's supplier and
provide each part supplier's warranty to its customers.
Furthermore, the bill requires that the repair shop transfer any
"unique identification information" to the final invoice for
tracking purposes and upon installation of the part, the repair
shop must submit such information to the certifying entity,
according to CAA.
California New Car Dealers Association (CNCDA) opposes the bill
stating the bill "provides a presumption that 'certified' imitation
crash parts are sufficient to restore a vehicle to pre-loss
condition despite the fact that such parts do not meet the same
standards as the parts originally installed on the vehicle
(automaker parts)." CNCDA questions how this statutory presumption
will affect existing Department of Insurance regulations which
prohibit manufacturers from requiring the use of non-OEM crash
parts if not of like kind, quality, safety, fit and performance as
automaker crash parts.
CNCDA argues the bill misleads consumers into believing that
"certified" parts are equivalent to automaker parts, despite the
contrary finding by BAR in a 2003 report, and the practical
experience of thousands of body shops in California. The bill
would outsource consumer protection to CAPA, which CNCDA contends
(according to ANSI's website) is the only entity certifying non-OEM
crash parts. "SB 1460 would deem CAPA certified parts sufficient
to return the vehicle to pre-loss condition even if the part is not
of like kind, quality, safety, fit or performance as the automaker
part."
CNCDA believes that by creating definitions for new categories of
parts in the Automotive Repair Act, and creating new disclosure
requirements during the vehicle repair estimation and invoicing
process, the bill will inject unnecessary confusion and compliance
concerns for California's well-regulated vehicle repair industry.
Finally, CNCDA argues that although proponents of SB 1460 argue
that it will reduce insurance costs, nothing in the bill requires
SB 1460
Page 13
insurance companies to give policyholders a rate reduction for the
use of non-OEM crash parts.
Consumer Attorneys of California (CAOC) writes that the bill greatly
weakens existing protections regarding the repair of motor vehicles
under automobile indemnity insurance policies. CAOC contends the
bill would change the meaning of "imitation" car part by greatly
expanding the types of parts insurers may use to repair a vehicle
and would eliminate any meaningful standards for producing these
parts. The bill creates an unprecedented legal presumption that an
insurer has met its contractual obligation to return a vehicle to
its pre-loss condition if a certified non-original equipment
manufactured part is used, according to CAOC, who further states,
"Not even parts produced by original equipment manufacturers
receive that legal presumption."
CACO argues that the bill would significantly weaken existing
disclosures meant to protect consumers, and make California's
disclosures the weakest in the country.
7. Policy Issues . A central policy issue in this bill is the apparent
shift in the responsibility for repairing a consumer's vehicle from
the insurer to the parts manufacturer or to the auto body repair
shop. As stated in this analysis, ("This bill" Item # 3 above),
the bill specifies that certified new non-OEM crash parts shall be
presumed sufficient to return the motor vehicle to its pre-loss
condition. Existing Department of Insurance regulations (see
"Existing law" above) mandates that if an insurer requires the use
of Non-OEM replacement crash parts in the repair of an automobile,
the parts must be at least equal to the OEM parts in terms of kind,
quality, safety, fit, and performance, and that the insurer must
pay for any modifications to the parts which may become necessary
to effect the repair, and that the insurer must warrant that the
parts are of like kind, quality, safety, fit, and performance as
OEM replacement crash parts. This bill shifts that responsibility
to the manufacturer, the parts certifier, and ultimately to the
auto body repair shop.
The Committee should consider whether this is an appropriate policy
change, and whether this increases or decreases the protections to
the consumer.
NOTE : Double-referral to Judiciary Committee second. Any amendments
proposed to this bill in committee should be made in the Judiciary
Committee.
SB 1460
Page 14
SUPPORT AND OPPOSITION:
Support:
Personal Insurance Federation of California (Sponsor)
Allstate Insurance Company
Opposition:
Alliance of Automotive Manufacturers
Association of Global Automakers, Inc.
California Autobody Association
California New Car Dealers Association
Consumer Attorneys of California
Consumer Federation of California
Consultant:G. V. Ayers