Direct Repair Programs

Lori · Posted: Sat Feb 16, 2008 12:32 pm Post subject:

Mike,

Mike of the Ozarks · Posted: Sun Feb 17, 2008 11:18 pm Post subject: Just some clarification.

I am a sole proprietor, I have both a federal ID and a SS. I pay taxes as a sole proprietor based on income not what 1099's say I have earned, but I do pay taxes with my SS based on what my invoices say I have earned on my schedule C.

I agree with you if a policy holder has been paid for damaged parts and they did not fix them, you do not owe the entire cost of replacement again in a subsequent wreck unless they can prove they were replaced. This has no bearing on what the shop did or did not do if they invoiced the vehicle owner. Again the DRP arrangement is different I agree. I know of shops that are on all three of Missouri's top insurers programs and routinely abuse this invoicing. They have been caught and yet they remain on preferred programs. Parts dealers from another state confide in me that some DRP shops routinely order oem part for invoices and ship them back, show the invoice for oem or new parts to the vehicle owner if questioned and substitute cheaper a/m parts to comply with a parts useage requirement to keep their csi report card in order. There are just so many of these types of fraudulent practices going on that I question myself, why would I want to be a party to an arrangement that created the potential for corruption.

If a customer comes to me with an insurance draft and my invoice is less than the amount the insurer estimated, my name isn't on the draft and I do not have a contract with the insurer, any overpayment goes back to the policy holder. If the leinholder, as they often do, feels their collateral is sufficiently protected by virtue of the vehicle owner having subtantial equity in the vehicle, and the repairs the consumer wishes to make are different than the insurer estimate, the leinholder often allows the consumer to make the choice of repair. Indemnification does not require repair of the property but for does require payment of the value of the loss on an acv. The insurer may be beholding to the leinholder and state but the non drp repairer is not beholding to the insurer or the leinholder who may elect to that right or protection.

If my shop name is on an insurance draft, that does not obligate me to repair as the insurer estimated. It also tells me that the vehicle most likely has a lein on it. I tell the customer up front, if you have a lein on your property, and you want to fix it differently than you have been compensated to protect your leinholder, then have your leinholders name placed on the check, take mine off, and I'll fix it according to my estimate and invoice if your leinholder puts that in writing or allows you to cash the check. Afterall the purpose of naming the repairing party or leinholder on a check is not to force the vehicle owner to repair the car, it's to protect the leinholders securtiy in the car. Many times banks have homes, boats, cars, businesses secured by collateral and they really don't care whether the vehicle owner puts barn siding on their car or plywood as long as they pay their notes and are not upside down in their finances.

Not legal but my opinion based on interpetation and consultation by an attorney.

Tommy H · Posted: Thu Feb 21, 2008 4:18 pm Post subject: DRP

I was a DRP for a major insurance company. I was told by my DRP Co-ordinator that I was to repair vehicles the insurnance company way, not my way. I was told to blend the clearcoat into a sail panel. I provided documentation from: Dupont, Glasurit, RM Sherwin Williams and other paint manufacturers, documentation from Nissan, Toyota, Ford, Gm and other vehicle manufacturers that a blended sail panel will fail. I was told to blend or get off the program. I have an extreme dislike for Taiwanese parts. They have proven over and over to not be the same in both form or function. I told my Co-ordinator that I could not tell the vehicle owner that these parts were any good. I was told to lie. I was told to keep my opinion to myself and to say "these parts are guaranteed by the insurance company". You need to get out of your Ivory Tower and into bodyshops, find out the truth about DRP's. It is only about the money, not quality OR safety.

Dealer Guy · Posted: Fri Feb 22, 2008 2:21 pm Post subject: DV is a fact of life.

Lori you state

Lori · Posted: Fri Feb 22, 2008 2:55 pm Post subject:

Dealer Guy, you have answered your own query and made my point exactly,

Mike of the Ozarks

The public perception that a vehicle that has been repaired is not worth as much as one that has never been wrecked, drives the market value of those vehicles. The mere existence of Carfax is for consumers to guard themselves from purchasing previous train wrecks if a consumer or dealer does not disclose the damage history intentionally or by their ignorance of the unknown facts. By the way, the government has ignored a law that was passed in the early nineties, to build a federal database for consumers to have this information freely. There is currently a lawsuit aimed at rectifying this failure to implement the program.

If a customer had a choice of buying a 2004 bmw that has no accident history, and carfax verifies that, or buying one that had 10,000 dollars worth of damage and repaired by a certified dealer, the customer will not give as much for the damaged vehicle. That's the facts Jack! The newer the vehicle and the lower the mileage, the dimishment is greater.

Of course if there are repair related flaws and defects, or the insurer refused to pay to remove the engine and work a buckle down on the frame rail or they insisted on the use of aftermarket parts, that too will drive the value down even further.

Sadly the industry average on the quality of repairs are bad. Too many shortcuts taken to make up for time not paid to do the job right because too many shops refuse to look at who's name is on the front of their business and who their customer is, choose the path of least resistence and work for what the insurer feels is adequate.

Oh that bmw, by the way, by my calculations and inspection and appraisal, has a value or less than two thirds what it should sell for without any damage.

While I am not using the program that T said was a joke, I am using a software program to organize the preloss values determined by recognized appraisal data along with comparable available vehicles for sale in that market, with a visual inspection assessing the severity of the repaired and non repaired damage, to arrive at a post loss value.

The diminishment in value is not a figure a program spits out, it is based on an investigation and assessment based on ove 30 years experience of repairing, selling, and appraising vehicles. DV is calculated by simply subtracting the postloss value from the preloss value. Those are your damages due to the negligence of the party that caused the loss. And in virtually every state in this country, you can collect for those damages once you have proven them. You do not have to sell your car and the shop that repaired your vehicle is not liable if it was repaired to your satisfaction.

tcope · Posted: Thu Feb 28, 2008 6:43 am Post subject:

Lori · Posted: Thu Feb 28, 2008 12:37 pm Post subject:

Mike of the Ozarks

I have to say that I am a little disappointed in both you guys in regards to disclosure of vehicles that have previously repaired damage when you consider trading them in. Sounds a lot like "Buyer Beware". Every car that I have ever repaired and sold or had an accident history, I have fully disclosed that fact and let the chips fall where they may with regard to market value. As a professional in the service industry and anyone as a professional employed in property casualty should have concern that the potential buyers have full knowledge of pre-existing accident histories before they lay down hard earned money or extend their debt to purchase junk.

Didn't State Farm Insurance run to every state's attorney general to make a sweetheart deal to cover their tracks in regard to consumers in every state buying previously totaled state farm salvage? Seems like the bean counters realized they could get more salvage value from vehicles that did not possess a salvage titles at auction. I inspected some of these cars for an attorney that worked to get information released to those consumers to let them know that vehicles they were driving had severe accident histories and known previous damage and that they should have a reputable shop inspect the vehicle for defects? Even though those victims received a compensation from that settlement, it was no where near enough to repair the damage on them to make them safe to drive. State farm should have had to buy these cars back if the consumers had an option, but the attorney generals thought the insurers were good ole boys for bringing up their sins and rewarded them by accepting the settlement offer.

I will agree with you both that only three states pay first party DV. I thought that the subject was over third party DV. While I believe that first party DV exists, I understand that insurers have been able to have it written out of the policies.

In one huge case the last couple of years a collector of a fine piece of art, insured that work for diminishment of value because it was undergoing a cleaning. In the process the work of art got punctured and a claim was filed for first party DV. The insurer refused to recognize that there was any loss of value, but a jury agreed that the work of art was no longer pristene and was simply not worth as much as before it was restored. The settlement was to the tune of over 100 million dollars and the painting was previously valued at 56,000,000. There is a long case history for recognizing loss of value. After all, a cash value policy promises to repair, replace, or pay for the total loss of a piece of insured property. The language of the policy promises pre loss which in and of itself is usually unattainable I'll agree in most cases. Hey, I didn't promise pre-loss the policy does. The insurance industry has been able to successfully remove payment for first party loss of value by the getting all but three departments of insurance to allow insurers to exempt it from policies.

I bet you both have seen the Antiques Roadshow. If you have, I'll bet you have seen the appraiser inform the holder of the object that the value of the object is not worth what it could be, because of flaws, defects, or repairs that compromise what otherwise would have been a pristene undamaged artifact, vase, painting, piece of furniture or whatever.

The previous discussion was dealing with third party loss of value. If anyone can prove a loss of value due to the negligence of the tort feasor (at fault driver) or your insured, the insurer must pay for that loss of value due to the fact that they insure that negligent driver with liability coverage. Virtually in all 50 states according to the re-statement of torts. It has nothing to do with the contract of insurance because the third party is only limited to the amount of liability coverage in that policy as to how much the insurer is on the hook for. A third party claimant in not bound by policy language of exemption of payment for loss of value in a liability claim or any other terms and conditions to a contract that they are not a party to.
We'll have to agree to disagree on whether, you as adjusters and appraisers, believe any loss of value exists. If it didn't, why would juries award it, and with insurer's huge checkbooks and legal staffs, why would they pay any loss in value to anyone. You could out litigate just about everybody in the country. The fact is that most insurers negotiate the settlement or they force the party all the way to the court house steps to make sure the expenses will be huge for the damaged party, pick a jury, go through depositions, and then settle before going to trial because they know they would lose in court on any third party claim regarding loss of value.

I have written over ten appraisals for loss of value last year, and some insurers even agreed to arbitration, rather than litigate, and lost. But after some negotiating by an attorney who works on contingency for the loss in value only, all recieved substantial diminished value settlements.
I have even written diminished value appraisals for insurers that have been directed by a Kansas state department of insurance to pay for any claims owed by Missouri insurance companies when presented with claims by Kansas vehicle owners

The sad fact is, that repairs can never restore the value or eliminate the accident history. It is the accident history that is the mitigating factor that determines a car that has been damaged and repaired is not worth what a vehicle is that has never been in an accident.

If you had an actual cash value policy on a diamond ring, and that diamond was damaged or stolen, the payment for loss would be on the value of that diamond at the time of loss or damage. Using insurer logic that a generic diamond or zirconium diamond looks just like a diamond to the untrained eye, it cuts just like a diamond, it may even fit the ring like the original diamond , but it would not be equal to the diamond that was lost. However the insurer might say that all we owe you for zirconium.

Just like that zirconium in my example, generic parts are similar. They may look similar, might even occassionally fit but will definately lower the value of a vehicle when the customer knows the repairs were made with inferior parts. A part made from taiwan with metal that is not as pure as american standards; not the same thickness; made from imitiation molds formed from reverse engineering; no galvanized rust protection, are not just like the original parts and will lessen the value of that repair or the value of the car and will not place the vehicle owner in pre-accident condition. That is, unless he had a generic fender on there from a previous accident.

Lori · Posted: Fri Feb 29, 2008 1:12 pm Post subject:

Mike of the Ozarks

Whether a policy is a home owners or auto, it is an actual cash value policy. We are discussing, or at least I am, the premise of diminishment in an acv policy. Both are based on the New York 165 lines of insurance policy from which all acv policies originated.

It is a common argument used by the insurance industry. If you fix the car the way they estimate, and correctly, there is no DV. Well which way is it? The amount insurers pay based on their estimate or the correct way which is a matter of expert opinion based on which side of the issue you stand. If I fixed vehicles based on the insurer estimate instead of the repair invoice that the law says I must produce and become liable for, many cars would not be fixed properly.

The internet news links that I could provide if we were able to paste links would show you the problems allowing insurers to dictate repairs. There is a inherent problem when you have the fox guarding the hen house. Insurers are looking for cheap fast repairs instead of quality repairs. Even the supreme court recognized the inherent conflict of insurers owning bodyshops by rejecting allstates claim they have a right to own and operate their own bodyshops by ordering them out of the business in Texas.

AlexMundae · Posted: Sat Mar 01, 2008 2:55 am Post subject:

WOW !!!

I don't know how to quote, other wise I would ...

First, on the subject of diminution of value, or DV. Easch and every state recognizes DV in a third party setting, with the possible exception of Michigan with their archaic "no-fault" laws.

Lori, the quotes you've posted are in reference to FIRST party claims, which are governed by the contract of insurance. Third party claims, on the other hand, are NOT governed by the insurance contract, instead, they re goverened by tort law. Essentially, the law of torts aims to restore an injured party to as good a position as they held prior to the loss. If the vehicle is not worth as much after the reapirs as it was prior to the loss, then the vehicle owner was not restored to their previous position.

Let's talk about this "diminishment". Someone said that the loss is in the propsective purchasers mind. The problem is that their mind translates quite quickly to their wallet.

Those who keep mentioning "restoring the vehicle to pre-loss condition" are missing a few vitally important points.

First, the repair industry cannot duplicate the factory. Not when it comes to factory robotic welds. Not when it comes to dipping the body for corrosion protection. Not evn when it comes to the finish itself (factory piant is chemically substantially different from aftermarket paint).

Have you ever seen bird droppings on a repainted vehicle ? They'll etch the finish down to the substrate - not so with the factory finish.

Also, the manufacturer's warranty is voided by any collision repair (on the parts affected by the repair). NO MANUFACTURER warranties work done as a result of a collision, with the possible exception of those manufacturers like BMW when the repairs are done at a certified BMW repair facility. Even then, if there is body filler in the panel, the warranty on that panel is voided.

You could try to argue that the insurer warranties the repair (and aftermarket parts for that matter, but those warranties are not transferrable like the manufacturers warranties are.

So in reality, the potential purchaser "thinks" it's worth less, so they are willing to pay less - guess what ? It becomes a reality.

Of course, this presumes that all relevant facts are known - full and open disclosure of the damage history. Please don't use the feeble "argument' of "if it was't disclosed, they would pay the same, making the DV non-existent". That's the same as someone paying for a diamond when it's nothing more than a piece of glass being sold by an unscrupulous salesman.

(by the way Lori - you're right- it IS "don't ask, don't tell", plausible deniability, but even then, as alleged experts, especially when a dealer does an inspections, this has bitten quite a few dealers)

So, shops can't really restore a vehicle to true loss condition, and market forces, defined as paying consumers, have decided that DV is real.

As far as shops giving their tax number ... that's just silly. Really. Unless the shop is doing work FOR the insurer, the insurer should NOT be paying them.

Unless something has drastically changed, the shop owner has a contract to do work for the vehicle owner. It's the vehicle owner who has to pay the bill. If I were a shop wner (I am not) I wouldn't really care where they got the money (well, I might care, but only in extremes). They could get the mmoney from their insurer, or the at-fault party's insurer, or their Uncle Mark and Aunt Pam, or they could sell their furniture - really doesn't make a difference to me.

Perhaps even more simply, it is thevehicle owner who authorized the repairs, it s the vehicle owner who is receiving the benefits of the service, it is the vehicl owner who owes for the bill.

Tell me why the insurer would be paying me (unless I was fixing "IRV") ?

OK, last (at least for me, for now) bt not least, aftermarket parts.

Wow.

OK - first,I want a MSDS for a Ting Coi fender. That dust could contain harmful chemicals, and I want to know about them.

Second - OE panels are glavanized, A/M is not. Instant difference. NOT like kind.

Let's go ack to the warranty issue again. OE parts arry a 12 mo/12 mile warranty - or te balance of the manufacturer's applicable warranty, whichever is GREATER. In most cases, the longest warranty is the outer body rust through warranty. A/M has no such warranty. A/M "warranties" offered by insurers (which may or may not be lega to begin with, yet another story) are NOT transferrable.

A/M parts, for the majority, are not truly LKQ.

Oh - and back to the DV/properly repaired issue for a minute ... how in the world does John and Jane Doe know if a vehicle IS properly repaired ? Answer: In most cases they don't. I clearly remember when "bondo" was a taboo - everybody knew that it would evnutally bubble (70's & 80's era and maybe a bit later).

It is at least in part this "fear of the unknown" that furthers the positionof DV exists.

I hope everyon here understands that I am not tying to be combattive or condescending, I am merely tying to clarify, factually, a few issues that I've seen discussed here.

Just my nickels worth.

Lori · Posted: Sat Mar 01, 2008 1:49 pm Post subject:

Good morning Alex and welcome!

Lori · Posted: Sat Mar 01, 2008 2:31 pm Post subject:

Mike,

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