NAII Maps Out Auto Issues of Joint Concern to Insurers, Repairers

April 12, 2002

Diminished value, direct repair, salvage title and competitive crash repair parts top the National Association of Independent Insurers’ (NAII) automotive issues public policy agenda this year, the NAII announced.

During an address at the Automotive Service Association’s Annual Convention in Arlington, Va., NAII Council Robert Hurns pointed out that the association’s chief automotive agenda is of mutual concern to both insurers and auto repairers.

“The two industries often clash, but more issues now exist in which we can work together to foster competition and contain overall insurance and repair costs,” Hurns said.

Diminished value:
During the past several years, more insurance carriers have been targeted as defendants in class action lawsuits involving diminished value. Most of these cases have been dismissed coast-to-coast based on clear, unambiguous policy language. However, in November, the Supreme Court of Georgia unanimously ruled in State Farm Mutual v. Mabry that auto insurance policies must include diminished value of a vehicle under physical damage coverage—setting a dangerous precedent for the insurance industry and all professional collision repairers, Hurns said.

“If the court’s findings on diminished value spread to other jurisdictions, a greater percentage of vehicles will be totaled,” Hurns commented. “If insurers must add the cost of diminished value to repairs costs, fewer repairs jobs will be the end result, threatening the livelihood of all collision repairers.

“The NAII does not believe the insured is entitled to recover the difference between the value of the vehicle before and after a loss in addition to the cost to repair the vehicle. Personal auto policies that currently contain provisions establishing the cost of repair or replacement as the measure of the insurer’s liability are sufficient and reasonable.”

To date, 34 states have approved the Insurance Services Organization’s policy language that excludes diminished value payments for first-party physical damage, while 16 states have not approved the ISO policy exclusion.

Direct repair:
NAII supports the direct repair concept based upon cost savings benefits, improved efficiency, consumer service and overall guarantee of quality workmanship in auto repair, Hurns pointed out.

“We believe direct repair encourages competition and reduces fraud,” Hurns said. “By allowing insurers to establish long-term business relationships with dependable, quality-oriented repair shops, policyholders benefit from lower costs and increased reliability. Such business arrangements also benefit repair shops by guaranteeing them a steady stream of business through the insurers’ referrals.”

Using pre-selected shops may allow supplemental payments to be made without reauthorization or additional inspections by an insurance company, Hurns added.

Salvage title:
NAII supports greater uniformity and consistency in state salvage-title laws to eliminate safe harbors for title laundering and vehicle theft schemes. To achieve greater uniformity, NAII advocates a statutory definition for the term “salvage vehicle” that is consistent with the definition used in the Uniform Vehicle Code.

Federal standards for vehicle titling is also opposed by the NAII since each state has developed a comprehensive motor vehicle code through which auto ownership and use is regulated. Federal title registration rules would weaken state motor vehicle codes, Hurns said.

“However, inconsistency in state salvage title laws, especially in the context of title branding requirements, can inadvertently lead to some states serving as locales in which vehicle titles are ‘washed’ and clean title documentation obtained,” Hurns said. “We need to identify states with weak or significantly inconsistent standards in relation to neighboring states and strengthen those laws as necessary.”

Salvage title laws also should not apply exclusively to automobile insurers, but govern all vehicle title transactions, including transactions between individuals, body and repair shops, new car dealers, used car dealers, salvage-recycling firms, junkyard owners, auto auctioneers, and others.

Crash parts:
NAII also continues to support the use of aftermarket cosmetic crash parts, while also opposing restrictive legislation and regulation. The Certified Automotive Parts Association should be the authority through which competitive automotive repair parts are approved, Hurns said. “CAPA’s quest is to improve the quality of after market parts, a main objective for the NAII and the repair industry,” Hurns added.

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