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Car-repair legislation backed by auto insurers wins key vote

The California Senate approves a bill that would make it easier for insurance companies to steer car owners to company-approved auto body shops. The bill is expected to go to Schwarzenegger next week.

September 05, 2009|Marc Lifsher

SACRAMENTO — An insurance industry-backed bill that would make it easier for auto insurers to persuade motorists to fix their dents only at company-selected garages won a key vote Friday in the state Senate and should be on the governor's desk next week.

Insurers say the bill is needed so that they can give policyholders full information about the benefits of having work done at select auto body shops. Those advantages include lifetime guarantees, fast turnarounds and quality repairs, the insurers say.

But opponents -- an unlikely coalition of car dealers, auto body shops, trial attorneys and consumer activists -- contend the bill would weaken safeguards against "steering," an illegal practice in which motorists are pushed with a combination of economic incentives and penalties into taking their cars to certain body shops. The garages belong to networks of contractors who agree to cap how much they charge for specific types of jobs.

The bill, AB 1200, by Assemblywoman Mary Hayashi (D-Castro Valley), passed the Senate by a vote of 21 to 17. It's expected to easily win a final endorsement in the Assembly, which has overwhelmingly passed a similar version of the bill. Gov. Arnold Schwarzenegger has taken no public position on the measure.

The bill would change a 6-year-old state law requiring insurers to tell claimants that they have the legal right to get their car repaired at any auto body shop they want. Insurers can recommend taking the vehicle to one of their pre-picked facilities, but only if the car owner has no preference.

The proposed changes would still uphold car owners' rights to choose a body shop but also would allow insurers to continue to provide information about their networks, even after motorists make an initial selection.

Consumer advocates said insurers are trying to circumvent current protections for auto owners.

"It opens up a loophole and it takes away the consumer protection that you're not going to be badgered once you choose your shop," said Edith Mermelstein, a Huntington Beach attorney involved in a number of alleged steering lawsuits.

Mermelstein and other opponents contend that some of the auto body shops contracted by insurers are under pressure to keep costs down by using after-market or junkyard replacement parts and by not spending too much time on repairs.

The lawyer cited client Eric Ortega of Lakewood, who is suing his insurer after a bad experience at a company-recommended auto body shop in 2007.

Ortega said his insurer told him that he would have to pay an extra 20% if he were to get body work done at an authorized Mercedes dealership. In the end, he said, his vehicle suffered $3,000 worth of new damage at the recommended auto body shop.

The Personal Insurance Federation of California, the trade group backing the repair bill, said the recommended auto body shops do good work. Insurer-contracted "direct-repair program" shops have been thoroughly checked for the quality and timeliness of their work, said group spokesman Dan Edwards.

He called criticism of the possible use of after-market parts, which are not made by the car's manufacturer, a "red herring" because such parts are "at least as high in quality as the original parts."

Insurers are not giving consumers the entire story when they say that providing complete information is their primary motivation, said Brian Maas, director of government affairs for the California New Car Dealers Assn.

Vehicle owners have no knowledge about contractual limits on labor costs, caps on repair costs or types of replacement parts used, Maas said.

"Our concern is they are sending consumers to direct repair shops without giving them information about the relationship of the shops with the insurance companies," he said.

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marc.lifsher@latimes.com

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