The California Department of Insurance (CDI) took action recently against Allstate Insurance, Sterling Casualty and Alliance United Insurance based on allegations listed in three separate statements of charges/accusations concerning illegal labor rate practices that were allegedly unfair and/or deceptive and based on complaints from body shops throughout the state.
These actions are based on investigations that revealed violations including “Engaging in unfair methods of competition or unfair acts or practices, and other unlawful acts, including arbitrarily capping and denying labor rates without support; failing to send a written denial of a claim; making an offer that is unreasonably low to settle a claim; failing to prepare estimates for an amount that will allow for repairs to be made in accordance with accepted trade standards for good and workmanlike repairs and failing to pay the difference,” based on the statements filed by CDI Attorneys Ramon Cintron and Kevin Bush.
In the action taken against Sterling Casualty Insurance, at least one complaint was received against the company from an unnamed shop in Oxnard, CA. The action against Allstate was based on at least five complaints from body shops, including Collision Concierge in Upland, CA, Autotrends in Oakland, CA, an unnamed shop in Santa Clara, CA and two separate complaints from A&B Collision in Clearlake, CA. The action taken against Alliance United is based on two complaints from one or more unnamed body shops in Oxnard, CA.
Co-owners Alvaro Valencia and Bill Stone of A&B have been filing labor rate complaints for more than two years and are pleased to see that action has been taken by the CDI. In two cases, Allstate objected with A&B’s labor rate of $95 and stated that they were not willing to play more than $75. After the CDI intervened, Allstate increased the labor rate to $82, still $13 below the shop’s stated labor rate. Allstate had no documentation to justify the lower rate simply saying that it was “over inflated” and that most shops in the area accept the lower rate as reasonable and competitive, according to the Statement of Charges/Accusation filed by the CDI.
Bill Stone at A&B Collision hopes that these actions will change the industry for the better. “David Jones is stepping up and representing us, which is excellent,” Stone said. “It took quite a while for these to be filed, because the CDI needs to investigate and build a case, which I understand. We have filed more than 100 complaints with them, because every time it happens, we’re going to complain. 96% of all the insurance companies we work with play fair and that’s all we want. We’re in the only business in this country where someone can walk in and say we’re not going to pay your rate and here is what we’re going to pay. The insurance companies have all the clout and the power and we’re just one shop in a small town. It’s always been a David vs. Goliath situation, but now we have someone on our side, finally. It’s a big deal, that’s for sure.”
Stone is tired of wrestling with insurance companies over what he feels is a very fair labor rate. “We’re not trying to make a killing, we just want to be paid what we deserve,” he said. “They try to cut costs and question our rates for being inflated. They have no survey information to back it up, they just push it on us and what can we do? They will claim things like a ‘basecoat reduction’ and things like that---which I think must be a phrase that was created by the insurance industry.”
Another complainant in the action vs. Allstate is Douglas Marshall of Autotrends in Oakland, CA. He has filed approximately 50 complaints in the last three years and is also happy to see these charges. “This is a one step in the right direction and something that has been needed for many years,” Marshall said. “We’ve been filing complaints every week, and now we’re seeing the results. By keeping good records and documenting everything, we’re able to make our case in every situation. Commissioner Jones is doing all of the things he promised he would and that’s why he’s the best we’ve ever had in that office.”
Tony Cignarale, CDI Deputy Commissioner of Consumer Services and Market Conduct weighed in about the three enforcement actions. “CDI is not able to comment on any ongoing investigations or complaints. However, in general, the department investigates and attempts to resolve each complaint it receives. Each case has a different set of facts and involves different insurance companies and different types of disputes. Therefore, each case may have different results. CDI has been able to resolve many of the complaints filed with additional payments to consumers and to repair shops. In 2014 the Department received more than 175,000 calls from consumers and helped recover over $54 million in claims and premiums.
"In some cases, where insurer practices caused the dispute, we were successful in getting insurers to make changes to the systems, processes, or labor rate surveys so that future claims are handled reasonably and in a fair and equitable manner," Cignarale explained. “ In those cases where CDI alleges that insurer practices are in violation of law, each case must be investigated and evidence must be obtained that would support taking enforcement action. The three cases noted were examples of the result of these types of investigations.”
Penalties in each action are the same---an Order to Cease and Desist from engaging in unfair acts in violation of CIC Section 790.03, including civil penalties not to exceed $5,000 for each act or if the act or practice is willful, not to exceed $10,000. For acts in violation of CIC Section 704(b), suspension of each insurer’s certificate of authority for up to one year, or a $55,000 fine in lieu of suspension.
Each insurance company in question can either accept the monetary penalties associated with each alleged action or a have their case heard at a hearing held at a date to be determined in the CID’s Office of Administrative Hearing in Los Angeles.
Ed Attanasio