Declaring the bill would raise costs “without adding commensurate advantages to consumers,” Rhode Island Democratic Gov. Dan McKee on Friday vetoed legislation based on the auto body repair industry.
House Bill 6324 and also the virtually identical Senate Bill 870 held that insurers couldn't refuse markups along with other charges associated with auto body shops' paint and material and sublet expenses. Additionally they required insurers to alert customers once the carriers total vehicles but don’t wish to have them.
The Senate passed SB 870 inside a 28-9 vote on June 24. The home passed HB 6324 having a 47-18 margin on July 1 and SB 870 in concurrence, 67-0. The Senate passed HB 6324 itself on July 1, 30-7. The votes suggest enough support might exist to override McKee’s veto.
“While I recognize the stated intent of the bill would be to protect consumers, there are servings of this legislation that I could support, overall the legislation will add costs without adding commensurate benefits to consumers.” McKee wrote to lawmakers Friday.
“… According to the National Association of Insurance Commissioners, Rhode Island ranks 7th in the nation for highest car insurance premiums. As we look to restart our economy after the pandemic, we can't implement measures that may drive costs even higher for consumers and smaller businesses. Our focus should be reducing costs to help our economy grow.
“Now is the time to recognize what's driving the rising price of auto body repair and insurance costs in Rhode Island, such as the role insurance providers can enjoy in reducing rates.”
The veto message illustrates a paradoxical stumbling block repairers seeking to advocate for such legislation must overcome: Officials easily voice concern over the prospect of shoppers paying higher premiums. But there’s little discussion from the chance of consumers forced to pay higher out-of-pocket costs if insurers arbitrarily refuse appropriate charges.
However, McKee expressed concern the relation to markup and sublet discussed within the bill were too vague. His implication here appeared to be the chance for body shops to abuse remarkable ability to be reimbursed for all those charges.
“The legislation would add two types of costs that insurers could be required to pay to auto body shops when repairing an automobile covered with insurance,” McKee wrote. “Neither of these terms are defined there are no clear limitations of when those costs may be appropriate.”
HB 6324 and SB 870 would have prohibited some insurance company from ignoring the markup throughout paint, body and refinishing materials calculation software.
“Some insurance company shall not discount documented charges by neglecting to make use of a system in its entirety, including a car industry standard markup,” states a passage SB 870 might have put into Rhode Island’s unfair claims practices statute, General Laws 27-9.1-4.
Another section of the bill would add completely new language related to sublets. It might be an unfair claims practice if insurers were found “Refusing to pay for a car body repair shop for documented necessary sublet services paid out to vendors or incurred by the auto body repair shop, for specialty or unique services performed in the overall repair process, including costs and labor incurred to research, coordinate, administrate or facilitate the required sublet service, as well as an automotive industry standard markup. Examples of sublet services include, but aren't limited to, towing, transportation, suspension, alignments, electronic calibrations, diagnostic work, mechanical work, and paid charges to release a vehicle.”
Leading national insurers do commonly reimburse sublet markup, based on responses from the approximately 200 shops polled during the January 2021 “Who Will pay for What?” survey by Collision Advice and CRASH Network.
As noted above, McKee said he could support some parts from the bill.
“I am available to dealing with Legislators on language that would address the remaining issues within the legislation such as industry software and the salvage vehicle process,” he wrote.
Rhode Island's current law 27-9.1-4 says some insurance company who doesn't want to help keep a totaled car “must notify the owner of the vehicle in writing from the requirements of needing both a salvage title along with a reconstructed title.” It implies the carrier isn't keeping the automobile, but it doesn't show that fact.
SB 870 would give a requirement that the insurer “must obtain, on paper, the owner's consent and acknowledgement the insurer is not retaining the salvage and include an argument from the owner's obligation and potential costs to get rid of or otherwise retain the salvage.”
McKee’s reference to “industry software” also refers to paint, body and refinishing materials calculators.
The unfair claims practice law already states insurers must “compensate an auto repair shop for documented charges as identified through industry-recognized software programs or systems for paint, body and refinishing materials in auto body repair claims.”
Under SB 870, this language would state that an insurer must “compensate an auto repair shop for their documented charges as identified through the most up to date form of automotive industry-recognized software packages or systems for paint, body and refinishing materials in auto body repair claims, including, although not restricted to, programs for example Mitchell's RMC, PMC Logic, Paint, Micromix, or perhaps a paint manufacturer's programs. Some insurance company shall not discount documented charges by failing to make use of a system in its entirety, including an automotive industry standard markup.”
It’s unclear the amount of this extra language McKee supported . But based on bill advocates’ comments to a House Corporations Committee hearing May 20, the non-markup revisions might have value to repairers and consumers too.
Randy Bottella, owner and operator of Reliable Collision, said their email list was necessary because many insurers only recognize one materials system – which calculates a blended average rather than reflecting the particular items used in the repair.
Rep. Robert Craven Sr., D-North Kingstown, reported that body shops have a “general frustration” with carriers and described insurer practice when trying to elude car insurance law with nitpicking.
The Legislature requires insurers to cover paints authorized for the repair, according to Craven. He asked lawmakers to consider a situation where some insurance company agrees, “‘Yes, we will pay out for the paint,'” but refuses to reimburse tape. When challenged the tape belongs to a splash of paint, the insurer retorts, “‘No, that’s not exactly what the General Assembly said.'”
Rhode Islanders are fortunate repairers often will eat the costs, but “it’s not fair” and it was “irritating to determine people ripped of by this type of nitpicky practice.”
The body shop and Legislature outline what’s necessary, and insurers “start cutting around the edges,” Craven said. He said it was time insurers were told to prevent.
This wasn’t a problem with all insurers, “are just some of them,” Craven said.
SB 870 Senate Majority Whip Maryellen Goodwin, D-Providence, hasn't yet responded to an e-mail late Monday afternoon seeking discuss the veto and it is prospects for being overridden in the Legislature. Neither Craven nor bill sponsor Rep. William O’Brien, D-North Providence, have yet taken care of immediately similar emails early Monday evening. Still check Repairer Driven News for updates.
