A bill in Texas aimed at vehicle collision repair safety following OEM repair procedures has made it to the House Committee on Insurance for the third time where, in previous legislative sessions, it was recommended for passage.
HB 1321, sponsored by Rep. Travis Clardy (R-District 11), prohibits insurers from requiring the use of non-OEM replacement parts due to availability or to save money on repair costs. It prohibits insurers from limiting where or who parts are purchased, and parts are not to be considered like kind and quality unless the insurer or OEM has “conclusively demonstrated” it as such by proving that it “meets the fit, finish, and quality criteria… is the same weight and metal hardness… and has been tested using the same crash and safety test criteria” as OEM parts.
Specific to steering, the bill would amend current law to further prohibit insurers and their employees from steering policyholders toward certain repair facilities. Carriers would be barred from suggesting in any way that a particular repairer or facility will provide faster repair times, service, or more efficient claims handling.
Carriers also wouldn’t be able to “disregard a repair operation or cost identified by an estimating system, including the system’s procedural pages and any repair, process, or procedure recommended by the original equipment manufacturer of a part or product.”
During an April 11 hearing on the bill held by the House Committee on Insurance Clardy said the bill seeks “to eliminate some of the biggest issues in the auto insurance market by ensuring that consumers have access to quality and safe replacement parts when they are being repaired.”
“Consumers need to be protected by state law and should not be subject to unsavory business practices, which can lead to catastrophic events,” he said. “Texans have the right to have their vehicles repaired to pre-accident condition.”
Clardy referenced the John Eagle case as an example. John Eagle Collision Center in Texas was sued after a Honda Fit’s roof was replaced with adhesive rather than more than 100 welds called for in Honda’s repair procedures. The suit argues that the improper repair led to Matthew and Marcia Seebachan, a couple that bought the car used post-repair, being severely injured in a collision.
A jury found the body shop responsible for the majority of their ordeal and awarded $31.5 million in compensatory (nonpunitive, covering expenses) damages. The Seebachans later settled with John Eagle for an undisclosed amount. Clardy said the case sent shockwaves throughout the industry, Clardy said. He added that the Texas Department of Insurance (DOI) has said they feel they have insufficient authority to address the issues so the legislation was drafted. This isn’t the first time it’s been before lawmakers; it’s the third.
“It will take a change of state law to protect the constituents and our Texas consumers,” Clardy said. “1321 ensures Texans will have safe repairs made using safe parts and following accepted safety guidelines and procedures. It strengthens our state’s anti-steering laws to ensure Texas families truly can take their vehicle to the repair facility of their choice. It does not mandate the use of original equipment or OEM parts but it does require that the parts used in the repair are quality parts and proven to be safe.
“It defines prevailing rate in a reasonable and necessary amount defined in terms under insurance policies to remove any confusion for repair facilities and the insurance industry alike ensuring repairs are done the right way. Texans pay a lot for insurance, we all do, and they expect carriers to pay properly when disaster strikes. Cheap repairs come at a cost. We must make changes to insurance laws to ensure our families and employees are put back in vehicles that will protect them in the next crash.”
The Association of Fire and Casualty Companies of Texas (AFACT), Texas Coalition for Affordable Insurance Solutions (TCAIS), Texas Automotive Recyclers Association (TARA), National Association of Mutual Insurance Companies (NAMIC), LKQ, and American Property Casualty Insurance Association (APCIA) spoke against bill. The Auto Body Association of Texas, which helped draft the bill, spoke in favor of the bill along with Texas Watch and the Texas Trial Lawyers Association.
Jay Thompson, an attorney representing AFACT, said the association’s primary concerns about the bill have to do with steering, including language that the association believes is “overly broad” and “casts doubt” on carriers being able to recommend repair shops. He said carriers are allowed to recommend shops for the benefit of their policyholders and often warranty repairs.
“Companies can’t force you to go to any particular repair shop,” Thompson said. “The law’s been pretty clear since 1991… They can’t require you, or put in their policy form, that you use any specific part to repair that vehicle. Companies make estimates of repairs and they may use parts that are like kind and quality in making those estimates. They may or may not be what’s referred to as OEM.”
The bill, he said, includes language that could be interpreted in a way that makes repairs more difficult and costly for consumers.
TCAIS Director Beaman Floyd told the committee the coalition has many of the same concerns as AFACT.
“We feel like part of what we’re doing for consumers is working in that tension between making sure that people get quality safe repairs and making sure that the marketplace is working to keep costs under control,” he said. “We have a particular concern with the bill, as worded, that when it talks about… specific processes that you’re adopting into statute that you are doing certain incorporation by reference and we don’t know if an OEM would change those processes or make them more prescriptive or expensive than we think is necessary then we would be statutorily bound to follow those.”
Tchad Taormina, TARA legislative director, said the bill would eliminate consumer choice and a competitive automotive parts market.
“The recycled parts sold by TARA members facilitate a critical role in the economic market providing consumers with a choice with their vehicle repair needs,” he said. “Without the existence of recycled parts many times there would be no alternative part options to an expensive new part.”
LKQ made a similar argument for the case of aftermarket parts. When the committee asked if the aftermarket parts LKQ sells have been tested and meet the same safety standards as OEM parts they said they don’t test OEM parts but their quality assurance testing facility does test aftermarket parts.
Chad Kiffe, ABAT board member and general manager of Berli’s Body & Fine Finishes, cautioned the committee that if OEM repair procedures aren’t followed, repaired vehicles won’t be safe in a future collision. While the opposition to the bill says premiums will go up if the legislation is passed, he said there are carriers that already follow OEM repair procedures regardless of cost. The bottom line, Kiffe said, is the bill would ensure motorist safety.
“This bill basically defines like kind and quality,” he said. “That term has been around for years in our industry and has been used very loosely with insurance companies and parts suppliers. These parts are not of the same likeness kind and quality. They’re not made out of the same materials. The thicknesses are different. They react different. All we’re asking is that if you’re going to consider those parts in the repair of a vehicle that it truly does follow like kind and quality and there’s a definition in there to provide that.”
After testimony concluded, Clardy told the committee the opposition is misrepresenting the bill’s purpose.
“An insurance policy is a contract where one party says, ‘I’m going to pay for this’ and the other party says, ‘I will perform in this manner.’ That’s all we are asking insurance companies to do in this context,” he said. “What has changed from 20, 30 years is the way cars are manufactured and how cars operate. These are not pull off a fender and slap a new one kind of cars. These are not pull off a bumper and get a new one and make sure the chrome is shiny.
“These cars are very intricate, well-designed, comprehensive pieces of equipment, and they all have to work together. When we talk about the crushing functions and as the compartment is protected, you take one piece of the puzzle out and the machine is not operating as it should. …There’s been a lot of time and energy and engineering by very, very bright people; when they design these cars they know exactly what they’re doing and crash test it. All those things are done for a purpose and the principal purpose is for people to operate in their daily lives to protect their spouses, protect their children, protect their grandchildren.”
Repairer Driven News reached out to ABAT President Burl Richards for his thoughts on the testimony provided during the hearing.
“The people speaking against the bill — the insurance company lobbyists, the insurance companies, LKQ — it’s all about money; insurance premiums are going to go up based on this and then we had some testimony there from a couple of our board members… [about] research [that] showed, when they called a couple of insurance companies, the premiums [would go up] $9 a month.
“…This bill would clean up a lot of stuff that’s wrong with our industry. …It’s a common sense bill. It’s a safety bill …If the opposition, if LKQ or if the insurance companies, were really interested in safety they would reach out to us and we could maybe make some compromises but there’s no interest in that.”
The committee left the bill pending and hasn’t yet put it on a future agenda for consideration.
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