BILL ANALYSIS
AB 1200
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1200 (Hayashi)
As Amended August 18, 2009
Majority vote
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|ASSEMBLY: |78-0 |(June 1, 2009) |SENATE: |21-17|(September 4, |
| | | | | |2009) |
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Original Committee Reference: INS.
SUMMARY : Allows insurers to provide automobile insurance
claimants with specified information regarding the services and
benefits available during the claims process.
The Senate amendments :
1)Allow insurers to provide claimants with specific truthful and
nondeceptive information regarding the services and benefits
available to claimants during the claims process. This may
include 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 workmanship
available to the claimant.
2)Require that the written disclosure statement provided by
insurers to claimants, when an insurer orally recommends an
automobile repair dealer, be in a separate and freestanding
document.
3)Add a sentence to the disclosure statement, noted in 2) above,
that would read: "WE RECOMMEND YOU CONTACT ANY OTHER
AUTOMOTIVE REPAIR DEALER YOU ARE CONSIDERING TO CLARIFY ANY
QUESTIONS YOU MAY HAVE REGARDING SERVICES AND BENEFITS."
EXISTING LAW :
1)Prohibits insurers from requiring that an automobile be
repaired at a specific automotive repair dealer.
2)Prohibits insurers from suggesting or recommending that an
automobile be repaired at a specific automotive repair dealer
unless either of the following applies:
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a) A referral is expressly requested by the claimant; or,
b) The claimant has been informed in writing of the right
to select the automotive repair dealer.
3)Specifies that after the claimant has chosen an automotive
repair dealer, the insurer shall not suggest or recommend that
the claimant select a different automotive repair dealer,
unless a claimant expressly requests a referral from the
insurer to a specific automotive repair dealer.
4)Requires an insurer that, by the insurance contract, suggests
or recommends that an automobile be repaired at a particular
automotive repair dealer, to do both of the following:
a) Prominently disclose the contractual provisions in
writing to the insured person at the time the insurance is
applied for and at the time the claim is acknowledged by
the insurer; and,
b) If the claimant elects to have the vehicle repaired at
the shop of his or her choice, the insurer shall not limit
or discount the reasonable repair costs based on charges
that would have been incurred had the vehicle been repaired
by the insurer's chosen shop.
AS PASSED BY THE ASSEMBLY , this bill provided that nothing in
existing law restricts the ability of an automobile insurer to
explain benefits the insurer provides as part of the claims
process involving an auto repair.
FISCAL EFFECT : None
COMMENTS :
1)The author states that this bill will ensure that consumers
can make an informed choice when selecting an auto repair
facility by clarifying that insurers can explain the benefits
of their own repair programs to claimants.
2)Existing law was enacted to prevent insurance companies from
"steering" or otherwise preventing a driver from having auto
repairs performed at a repair facility of his or her choice
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(SB 551 (Speier), Chapter 791, Statutes of 2003). Auto
insurance companies often contract with a network of trusted
auto repair facilities, known as a direct repair program
(DRP), to provide repairs for the insurance company's
claimants. Some benefits of a DRP may include warranties on
repair work, guaranteed prices, streamlined repair process,
and on-site car rental.
The California Department of Insurance (CDI) is in the process
of adopting a regulation to interpret the rights of consumers,
auto repair shops, and insurers in connection with existing
law. The proposed CDI regulation would define when an insurer
"suggests or recommends" that an automobile be repaired at a
specific automobile repair dealer.
3)The Personal Insurance Federation of California (PIFC), the
bill's sponsor, and other proponents state:
a) Some body shop owners want to use the current law to
withhold information from customers about their auto repair
options. For them, it is not enough to prevent auto
insurers from requiring a specific auto body shop. They
want to "lock-in" a customer by depriving them of an
informed choice about alternatives, including an auto
insurer's DRP;
b) One Court of Appeals has overturned a Texas law that
prohibited an insurer from recommending policyholders have
their vehicles repaired at an insurer-owned body shop. In
that decision, Allstate v. Abbott, 495 Fed.3rd 151 (2007) ,
the court said: "Consumers benefit from more, rather than
less, information. Attempting to control the outcome of
the consumer decisions following such communications by
restricting commercial speech is not an appropriate way to
advance a state interest in protecting consumers"; and,
c) This bill would provide an appropriate balance of the
need for claimants to understand the benefits of an auto
insurance policy, including DRP benefits, and the freedom
to choose an auto repair shop without auto insurer
coercion.
4)The California New Car Dealers Association (CNCDA) opposes the
bill and states that the bill will neuter an important
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consumer protection statute and open the door for insurers to
"steer" consumers to repair shops with which they have
agreements that favor insurers to limit the manner in which
vehicles are repaired. The Consumer Attorneys of California
(CAOC) oppose the bill and states that it will remove the
procedural safeguards that prevent insurers from steering
consumers to the insurer's chosen shop. Consumer Watchdog and
the Collision Repair Association of California argue that the
bill allows insurers to badger customers that have already
chosen an independent repair shop, and allows "steering" that
encourages shoddy workmanship and endangers drivers' safety.
The California Autobody Association (CAA) states that it opposes
the bill (unless amended) because it allows insurers to make
statements to claimants that either disparage or discourage
the services available in a non-DRP shop. Phrases such as
"that shop didn't make our preferred list," or "if you take
your car to that shop we cannot guarantee the repairs," or
"you will have to pay the difference in the cost of the
repairs" can cause a claimant to be "steered" toward the
insurer-selected auto body shops.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086
FN: 0002400