BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1200|
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THIRD READING
Bill No: AB 1200
Author: Hayashi (D)
Amended: 8/18/09 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 8-1, 7/9/09
AYES: Calderon, Cogdill, Correa, Cox, Kehoe, Lowenthal,
Padilla, Runner
NOES: Liu
NO VOTE RECORDED: Florez, Harman, Price
SENATE FLOOR : 19-17, 8/24/09 (FAIL)
AYES: Aanestad, Ashburn, Benoit, Calderon, Cedillo,
Cogdill, Correa, Cox, Denham, Dutton, Harman,
Hollingsworth, Huff, Kehoe, Runner, Strickland, Walters,
Wyland, Yee
NOES: Alquist, Corbett, DeSaulnier, Ducheny, Florez,
Hancock, Leno, Liu, Lowenthal, Maldonado, Negrete McLeod,
Oropeza, Romero, Simitian, Steinberg, Wiggins, Wolk
NO VOTE RECORDED: Padilla, Pavley, Price, Wright
ASSEMBLY FLOOR : 78-0, 6/1/09 - See last page for vote
SUBJECT : Motor vehicle insurance: direct repair
programs
SOURCE : Personal Insurance Federation of California
DIGEST : This bill revises and recasts California's auto
repair anti-steering law duties, obligations and allowed
CONTINUED
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conduct for insurance companies, relative to consumers and
other parties in the claims settlement process.
Senate Floor Amendments of 8/18/09 delete "intent"
provisions, and strike the phrase "pursuant to the policy"
from the phrase "the services and benefits available to the
claimant during the claims process pursuant to the policy."
ANALYSIS : Existing statutory law, Section 758.5 of the
Insurance Code:
1. Prohibits an insurer from requiring that an automobile
be repaired at a specific automotive repair dealer.
2. Prohibits an insurer from suggesting or recommending
that an automobile be repaired at a specific automotive
repair dealer unless (a) the claimant requested the
referral, or (b) the claimant is informed, in writing,
of their right to select the automotive repair dealer.
3. Requires that if a claimant accepts an insurer
recommendation, the insurer shall cause the damaged
vehicle to be restored to its condition prior to the
loss at no additional cost to the claimant other than as
stated in the policy or as allowed by law. If an
automotive repair dealer recommendation is done orally
and accepted, the insurer shall provide a notice of
specified content to the claimant at the time the
recommendation is made. The required written notice
required shall be sent or provided within five calendar
days from the oral recommendation.
4. The written notice, in no less than 10-point type,
informs the claimant that the insurer is prohibited from
requiring that repairs be done at a specific automotive
repair dealer and that the claimant is able to select
the auto body repair shop which will repair the damage
covered by their insurance policy. The disclosure
states that the insurer has recommended an automotive
repair dealer to repair the claimant's vehicle and if
the claimant agrees to its use, the insurer will cause
the damaged vehicle to be restored to its condition
prior to the loss at no added cost to the claimant
except as stated in the policy or allowed by law.
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5. Prohibits an insurer, after the claimant has chosen an
automotive repair dealer, from suggesting or
recommending that the claimant select a different
automotive repair, unless a referral has been expressly
requested by the claimant.
6. Requires any insurer that in its insurance contract
suggests or recommends that an automobile be repaired at
a particular automotive repair dealer must:
A. Require the insurer to disclose the contract
provision prominently in writing at the time the
insurance is applied for and at the time a claim is
acknowledged by the insurer.
B. Prohibit such insurer, if a claimant elects to
have the vehicle repaired at the shop of his/her
choice, from limiting or discounting the reasonable
repair costs based on charges that would have been
incurred had the vehicle been repaired by the
insurer's chosen shop.
7. Authorizes the Commissioner to enforce this section
using his or her powers, including those powers granted
to the Insurance Commissioner in the Unfair Practices
Act.
Existing regulatory law regarding Department of Insurance
(CDI) regulations pending to implement Section 758.5 of the
Insurance Code:
Pursuant to the authority provided in #7 above, the
Insurance Commissioner has proposed a pending regulation
entitled "Insurer Recommendations of Automotive Repair
Dealers." The proposed regulation will implement
Section 758.5 of the Insurance Code (as added by SB 551
(Speier), Chapter 791, Statutes of 2003) and states its
purposes are to "benefit consumers by giving them a
better understanding of their rights and implement
Section 758.5 according to the intent of its authors."
This bill:
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1. Adds to the Insurance Code's anti-steering in auto body
repair law a new subdivision to the effect that "An
insurer may provide the claimant with specific truthful
and nondeceptive information regarding the services and
benefits available to the claimant during the claims
process pursuant to the policy. This may include, but is
not limited to, information about the repair warranties
offered, the type of replacement parts to be used, the
anticipated time to repair the damaged vehicle, and the
quality of the workmanship available to the claimant."
2. Requires the written notice required if an automotive
repair dealer recommendation is done orally and accepted
to be in a separate and freestanding document.
3. In addition, the requirement of an insurer to not
provide a suggestion or recommendation of an automotive
repair dealer except upon request or without informing a
claimant of their right to select a the automotive
repair dealer is made subject to the new authorization
for insurers, described in paragraph 2 above, to provide
"information regarding the services and benefits
available to the claimant during the claims process."
4. Recasts the prohibition on an insurer, after the
claimant has chosen an automotive repair dealer, from
suggesting or recommending that the claimant select a
different automotive repair unless a referral has been
expressly requested by the claimant so that such
suggestions or recommendations would be permitted as
part of providing the information regarding the services
and benefits available to the claimant described in
paragraph 2 above.
5. States that the changes made by the act enacted during
the 2009-10 Regular Session that amended this section
shall only apply to actions filed on or after January 1,
2010.
Background on CDI's current regulatory process . While this
bill states that the changes it makes "shall only apply to
actions filed on or after January 1, 2010", the clearest
immediate context where the changes proposed by this bill
will have significant impact is with respect to a set of
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pending regulations which CDI states are necessary to
implement, interpret, and make specific the section of law
which this bill proposes to amend.
CDI's proposed regulation . As currently proposed, the
regulation, entitled "Insurer Recommendations of Automotive
Repair Dealers" reads as follows:
Proposed Text
Regulation Implementing and Interpreting Insurance Code
758.5
California Code of Regulations, Title 10, Chapter 5,
Subchapter 9, Article 7.5, Section 2698.93
ARTICLE 7.5. - Insurer Recommendations of Automotive
Repair Dealers
Section 2698.93 (a) This article applies to any claim in
which an insurer may be required to provide benefits for
repair of a motor vehicle pursuant to a policy of
insurance as defined by section 660 of the Insurance
Code. For purposes of this article "claimant" means a
first-party claimant or insured, or a third-party
claimant who asserts a right of recovery for automotive
repairs under an insurance policy
(b) Except when a referral is expressly requested by the
claimant, after a claimant has chosen an automotive
repair dealer, the insurer shall not suggest or recommend
that the claimant select a different automotive repair
dealer.
(c) For purposes of subdivision (b), a claimant has
chosen an automotive repair dealer when the claimant has
specified to the insurer a specific automotive repair
dealer registered with the Bureau of Automotive Repair
pursuant to sections 9884 and 9889.52 of the Business and
Professions Code which he or she wishes to repair the
vehicle.
(d) For purposes of subdivision (b), an insurer suggests
or recommends that the claimant select a different
automotive repair dealer when the insurer, whether orally
or in writing, communicates information to the claimant
which is relevant only to the choice of the automotive
repair dealer. Suggesting or recommending includes, but
is not limited to, the following:
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(1) Communication regarding the insurer's direct
repair program or its list of approved automotive
repair dealers.
(2) Communication regarding the quality of the chosen
automotive repair dealer.
(3) Communication regarding the quality of an
automotive repair dealer other than the chosen dealer.
(4) Communication which identifies an automotive
repair dealer other than the automotive repair dealer
chosen by the claimant, unless expressly requested by
the claimant.
(e) Nothing in this article restricts the ability of an
insurer to explain contractual provisions of the
insurance policy to the claimant, including the insurer's
obligation to pay only costs that are reasonably
necessary to restore the damaged vehicle to its
pre-accident condition.
NOTE: Authority cited: Section 758.5, Insurance Code.
Reference: Section 758.5, Insurance Code.
CDI states regulation's goal is reducing steering disputes .
According to the CDI website, the need for the regulation
has arisen because insurance companies and automotive
repair dealers clash over what information insurers can
tell claimants, and when the information can be told. The
CDI states the purpose of the regulation is to clarify the
type of information which can be disclosed by an insurance
company to a claimant, and when the information may be
disclosed. By clarifying when an insurance company may
provide a claimant a referral, and by clarifying what
communication constitutes a referral, the CDI intends that
this regulation will reduce the conflict between insurance
companies and automotive repair dealers in interpreting
Section 758.5.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/27/09)
Personal Insurance Federation of California (source)
Allstate
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American Insurance Association
Association of California Insurance Companies
Farmers
Liberty Mutual Group
National Association of Mutual Insurance Companies
Pacific Association of Domestic Insurance Companies
Progressive
State Farm Insurance Companies
21st Century
OPPOSITION : (Verified 8/27/09)
Bakersfield Auto Body
Bertolli's Auto Body Shop, Inc
California Alliance for Retired Americans
California Autobody Association
California New Car Dealers Association
California Public Interest Research Group
Collision Repair Association of California
Congress of California Seniors
Consumer Action
Consumer Attorneys of California
Consumer Federation of California
Consumer Watchdog
Consumers for Auto Reliability and Safety
Consumers Union
Faith Quality Auto Body, Inc.
Fender Menders, Inc.
Older Women's League of California
Penske Automotive Collision Center
Precision Auto Body
Privacy Rights Clearinghouse
ARGUMENTS IN SUPPORT : According to the Personal
Insurance Federation of California (PIFC) which supports
this bill and is its sponsor, existing law prohibits auto
insurers from forcing a driver to a particular auto repair
facility, but fails to ensure that drivers get a complete
picture of their auto repair options. This bill guarantees
that drivers can make an informed choice when selecting an
auto repair facility.
The PIFC states Section 758.5 of the Insurance Code
prohibits auto insurers from requiring a claimant to use a
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specific auto repair facility. According to the PIFC,
Senator Speier declared that her bill would "eliminate the
insurance industry practice of 'steering' auto body repair
work, which occurs when an insurer prevents a consumer from
having auto body repairs done at a repair shop preferred by
the consumer." Auto insurers do not object to this law.
However, PIFC believes some body shop owners want to use
the current law to keep customers in the dark about their
auto repair options so as to deprive them of an informed
choice about alternatives, including an auto insurer's
"direct repair program (DRP)." A DRP is a network of
vetted body shops that operate under contracts covering
warranties, guaranteed prices, experience and service.
PIFC believes this bill will ensure that every consumer can
make an informed choice of auto repair facilities by
providing an appropriate balance of the need for claimants
to understand the benefits of an auto insurance policy,
including the benefits that DRPs may provide, and the
consumers freedom to choose an auto repair shop without
auto insurer coercion.
ARGUMENTS IN OPPOSITION : The California Autobody
Association (CAA) states it is very concerned that this
bill, as proposed, instead allows insurers to legally
"steer" the insured or claimant to an insurer preferred
repair shop even after an informed consumer has clearly
made a choice as to where the vehicle should be repaired.
The CAA believes that consumers should have meaningful
choice; that insurers should not disparage the consumer's
choice of repair shop and that consumers be fully informed
of all benefits provided by their auto body repair shop.
The California New Car Dealers Association (CNCDA) is
opposed to this bill which it says "will neuter an
important consumer protection statute" and open the door
for insurers to "steer" consumers to repair shops that have
contractually agreed to save insurers money by following
insurer limitations on the manner in which vehicles are
repaired. The CNCDA also states that this bill, while
apparently innocuous on its face, "is in reality a Trojan
horse that would allow insurers to engage in communications
that the Legislature sought to prohibit with the enactment
of Insurance Code Section 758.5.
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Although insurers claim to have the consumers' best
interests in mind, it is the bill's adding the 'ability of
an insurer to explain benefits' despite a consumer's having
already announced a preference for a particular body shop
that would give insurers the license sell their own program
and to disparage or 'damn with faint praise' the choice of
body shop made by the consumer."
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher,
Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,
Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jeffries, Knight,
Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza,
Miller, Monning, Nava, Nestande, Niello, Nielsen, John A.
Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas,
Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Yamada, Bass
NO VOTE RECORDED: Block, Jones
JJA:mw 8/27/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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