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PostPosted: Tue Sep 11, 2012 2:12 am   Post subject:   

Max I respectfully disagree on the zironium comparison. Both art and diamonds are chattel of appraised value. Cash value policies cover both and require that they be replaced with like kind and quality when a loss is experienced. The analogy is that neither can be replaced with a knockoff or imitation. A cubic zirconium may look just like the original diamond and be of the same cut and to the inexperienced eye, could fool anyone as to the real value. Just as zirconium is a knock off so are imitiation parts because they are reverse engineered. To a non repair expert, they may appear to be of the same quality, but to the trained eye, they are not. This was proven in Smith vs American Family insurance and set a precedent in Missouri as the case was not settled but AmFam lost on the appeal. Just as fake diamonds, fake parts are not of the same value and actually lower the resale value of a vehicle when they are used in the repair.



Does the California code or statutes regarding use of aftermarket parts apply to third party claimants that are not a party to the contract of insurance since they are only stepping into the shoes of the negligent driver and paying a loss under the limits of liability? Are they basically saying that if this is all we would owe our policy holder, this is all we are offering you for settlement?



What are your opinions where the insurer did not authorize the repairs or contract with the shop but paid for the loss in money? In court, judges are siding with shops using assignments of proceeds or claims, asserting that since the insurer could not prove the repair costs were unreasonable or unnecessary and they did not contract for the repairs, that they owe the shortpay. Many of these issues regard the use of a/m parts and refusing to pay for procedures their drp shops would not have charged for.



CALIFORNIA



Wilkins v. Delross and Mason v. Ellis, Sonoma Cty, CA, Superior Court, Case #s SMC-09-174813 & SMC-09-175738

(Oct. 2009)







Quote:
Rights of third parties (not at-fault drivers recovering against persons who caused accident) to recover reasonable cost of repair rather than insurer-determined lesser amount. "Reasonableness" connotes a range of charges and rates, not one set rate. (State Farm is the insurer involved.)




The two day transcripts of the trial are available to read online if you would like them. The judge stated he did not care how the first party insurer calculated the loss to be. It mattered not to him if they used chicken entrails or straws thrown to the wind to ascertain the costs or labor rates, as tort law prevailed and the third party was not bound to the terms and conditions of the first party contract of insurance.


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PostPosted: Tue Sep 11, 2012 3:15 am   Post subject:   

Quote:
Does the California code or statutes regarding use of aftermarket parts apply to third party claimants that are not a party to the contract of insurance since they are only stepping into the shoes of the negligent driver and paying a loss under the limits of liability?




It would mainly apply to them as the policy would do nothing but over-ride the statute.
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PostPosted: Tue Sep 11, 2012 3:53 am   Post subject:   

I understand California is a different world but I just posted a court case where the negligent party's insurance did not prevail in a case regarding settlement in a third party loss. So how could the contract of insurance ever prevail over a statute that it was in conflict with.



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PostPosted: Sat Sep 22, 2012 10:40 pm   Post subject:   

Max must have agreed?



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PostPosted: Sun Sep 23, 2012 12:57 am   Post subject:   

Sorry to have been out of the loop -- don't know why I didn't receive notice of Mike's prior responses. And I do not entirely agree, either.



Quote:
imitiation parts


This phrase has been overused and used improperly. The correct term is OEM vs Aftermarket. And those terms cannot be used to make an analogy out of CZ vs diamonds and faked original art.



But, I'm not arguing in favor of insurance companies on this. If the insured wants OEM parts, they have the right to ask for them. The insurance company has the right to say, with respect to the cost, we believe it's unreasonable. That has more of an implication in first party claims than third party claims.



And that brings me to the Small Claims Appeal cases. The Court correctly observed that the issue had nothing to do with the insurance company's payments, but everything to do with the torts committed by the at-fault drivers. They, not the insurance company, had the responsibility to indemnify the damaged parties.



As the Court pointed out, if the insureds were dissatisfied with the amount of payments their insurance company made on their behalf, which were not enough to pay for the repairs, the insureds may have a cause of action against their insurance company.



But the "appeals" cases were not between the third parties and the insurance company. The court held that the repair costs were reasonable (the hourly labor rates were roughly in the middle of all those offered into evidence), and that the appellees were entitled to their damages as awarded by the Small Claims Court. I find nothing improper in that decision. But it is certainly not controlling as far as case law is concerned. It is not a genuine appellate decision that can be stated as precedential. It would be considered "dicta" which is not binding authority.



The matter also had nothing to do with the CA insurance code as the court observed -- it was a matter of tort, not contract. And it mostly had nothing to do with the cost of parts. It had mostly to do with the difference between labor rates billed and what the insurance company wanted to pay. It was a basic tort liability case, and the injured parties were not properly indemnified.



The same argument, perhaps worse, would be made if the insurance company wanted to substitute a CZ stone in place of a diamond or a fake original in place of the real thing. Those are not indemnnities. And, truth be told, in those kinds of claims, there has to be an appraised value in advance, and that value will not be disputed by the insurance company, it will charge a premium to cover the potential loss. So, once again, apples and oranges don't compare.



The coming change to CA law will take away from insurance companies their current right to pay only the parts cost for aftermarket parts when they are available. But the real issue is that the insurance companies have been forcing repair shops to use only aftermarket parts even when the repair shops complain that the parts are inferior or defective. And that's what the CA legislature was responding to.



So, as I read the draft legislation (I have no idea what changes may have been made, because I generally don't follow P&C changes until after the law changes, unlike my greater interest in life, annuity, and disability changes), if the two parts are identical in all essential ways except cost, there may be less support for the OEM parts. But if it can be shown that aftermarket parts are indeed inferior, the insurance companies are wrong to demand their use regardless. And I think that's what the new law is addressing.



So I really don't think we're on opposite sides -- it's all about fairness to claimants (whether first or third party). That's what we ask our clients to pay premiums for. That's what we expect our insurance companies to do. When the insurers place more emphasis on profits vs payments to claimants, they have violated the basic nature of their promises in the contract.



As far as chicken entrails is concerned, the court said:



Quote:
Quite frankly the contractual relationship between State Farm

and its insured can develop whatever methodology they want to come up with a price on their first party claims. If State Farm chose to determine their price by reading chicken entrails and consulting with the three witches from McBeth, that's fine. I think that's just about as accurate as the

survey itself is. I think that survey from a statistical

standpoint would get a first year college student a flunking

grade. But that's the method they chose. That's the method

that their people agreed to, their insured agreed to. That's

the contract. So be it.




This was not a breach of contract matter. The small claims court awarded damages greater than the insurance company wanted to pay, but the damages were not assessed to the insurance company, they were assessed correctly to the at fault drivers. Those persons have contract claims against their insurer. But they owe the damages as reasonable costs of indemnity to the damaged third parties:

Quote:


the third party plaintiff is entitled to be compensated for the reasonable cost of repairs that are necessary to restore the vehicle to its pre-accident condition. Plaintiff asserts that the bill submitted by G and C is a reasonable charge. State Farm argues that the amount it tendered is the reasonable sum required. State Farm did not attempt to establish the G and C rate was unreasonable. A reasonable charge implies a range of charges. If the charge falls within that range, it will be deemed to be reasonable. No particular charge can be said to be the only reasonable charge. The G's and C charge fell within the range of reasonableness.




As I said, when it comes to me, personally, I could really care less about auto body parts or mechanical parts, as long as they look and work the way they should. There's plenty of evidence that OEM stuff is just as, if not more, defective as anyone else's. Look at all the MFG recalls that have been made over the past 30-40 years because a part from one of its "suppliers" was defective -- and led to the injuries or deaths of folks before they decided there was a "problem".



Over the years, I've had little or no trouble with any aftermarket parts I've ever used to repair my vehicles. And I haven't had any significant auto body repairs in 40+ years of driving history either. So I may not be the most amenable sounding board.


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PostPosted: Sun Sep 23, 2012 1:07 am   Post subject:   

I need to address this separately:



Quote:
they are only stepping into the shoes of the negligent driver and paying a loss under the limits of liability?


That's an incorrect statement. The insurance company does not "step into the shoes" of their insured, they are their insured's "wallet." When they lose sight of that in search of profits, that's where the problems arise.



Most case law follows the dicta of the court in the Small Claims cases. I don't know of any case law concerning third party claims. Because I'm sure we all agree that no third party has the right to sue the insurance company for nonpayment -- they sue the party that caused their damages.



All the case law concerns the insurance company's defense or lack thereof of its insureds. If the insurance company doesn't want to pay the full loss, then there is (or may be) a breach of contract to the insured. But as tcope has said elsewhere, there is no contract between insurance companies and third party claimants, so a third party cannot bring a breach of contract claim against the insurance company.



I would agree with the insurance company if it proved the charges were unreasonable. But they are rarely, if ever, going to be able to do that in third party actions. First party actions are on a different plane. And that's where the changes coming to CA law are siding with insureds over insurers.



I don't think the changes are unreasonable, except that it will simply be another one of those "You (the consumer) win" and at the same time, "You lose" because insurance companies will simply increase the cost of collision coverage to compensate. Same as trucking companies pass on the increased cost of diesel fuel to those who ship cargo. We all end up paying for it.


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PostPosted: Mon Jan 14, 2013 10:29 pm   Post subject:   

Max, thanks for your comments on the above, I did not get notice that you had commented anymore on this topic. But while we are here, the following has come to pass.



Quote:
Insurance Commissioner Dave Jones announced that the Office of Administrative Law (OAL) approved amended regulations submitted by the California Department of Insurance (CDI) regarding the use of non-original equipment manufacturer (OEM) replacement crash parts.



"The amendments build on existing protections by requiring insurers to settle automobile insurance claims using repair standards described by the Bureau of Automotive Repair, and not the insurer's own standards of repair," said Commissioner Jones. "This also places greater accountability on the insurer when they require use of an aftermarket replacement part so that damaged automobiles are repaired properly and safely."




entire article



http://www.bodyshopbusiness.com/issue/article.aspx?contentid=108654


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PostPosted: Tue Jan 15, 2013 1:43 am   Post subject:   

I see no issues with that new regulation... it really does not change anything. I don't know of any insurer that would want to use defective AM parts.

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PostPosted: Wed Jan 16, 2013 12:52 am   Post subject:   

Evidently the problem was that insurers were specifying aftermarket parts that were not cerfitfied. Sourcing and specifying parts that were not certified to meet the definition of like kind and quality to save a buck at the consumer's expense. So many parts have been returned because fo issues of fit and quality, the insurer had refused to pay for restock charges, shipping, and returns. They also will owe for time required to alter the parts to fit which does not make sense. If they don't fit they are not like, kind, and quality parts.



In addition shops will be paid for their time and labor for the attempted use of parts that were supposed to fit but did not. It now is the responsibility of the insurer to pay for these issues instead of telling CA. shops to just deal with the distributors when the insurer sourced and specified the cheaper imitation parts.



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PostPosted: Wed Jan 16, 2013 2:02 am   Post subject:   

So before the insured had no recourse when they could show that the parts used were not LKQ?



It seems to me that the only chance is that the DOI now has the power to address the issue rather then the insured needing to pursue the matter.



I agree 100% with the enforcement of using _true_ LKQ parts and the insurance company addressing the issue when it's shown that they are not LKQ. If an insurance company does not do this they should be put out of business. I suspect the number of carriers not doing this is almost non-existent.

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PostPosted: Fri Jan 25, 2013 5:40 pm   Post subject: outcome of case  

what is the outcome of this case? has third party insurance paid OEM parts or aftermarket parts. can they force to use recycled parts for rear-ended damage incurred to truck and other parts which are not crash parts. i was not at fault and somebody damaged my new car less than one year old. i filed claim against insurance co of other driver at fault


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PostPosted: Mon Jan 28, 2013 9:19 am   Post subject:   

No, they can’t force you to use recycled or after-market parts. The other party’s insurance company is trying to cut down the costs of repair by using after-market parts.



Stick to your decision and point that you won’t accept anything else, other than the original parts. Don’t sign the release paper till you’re satisfied.


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PostPosted: Fri Mar 15, 2013 10:06 pm   Post subject: car  

It's an F'ing car! Get it fixed at a reputable shop and see how it looks. If original parts are that important, have insurance pay you for non- original, get your own checkbook out and pay the difference. most people do not keep cars forever, this kind of stuff makes you crazy. Move on.


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