2012 -- S 2686

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LC01811

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO INSURANCE - MOTOR VEHICLE PROPERTY DAMAGE CLAIMS

SETTLEMENT ACT

     Introduced By: Senators Goodwin, and Ruggerio

     Date Introduced: March 01, 2012

     Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

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by adding thereto the following chapter:

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     CHAPTER 10.4

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MOTOR VEHICLE PROPERTY DAMAGE CLAIMS SETTLEMENT ACT

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     27-10.4-1. Purpose of chapter. -- The general assembly declares that it is concerned

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with ensuring fair claims settlement practices with regard to motor vehicle property damage

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claims. The purpose of this chapter is to set forth standards for the disposition of such claims as it

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relates to vehicles that are to be repaired in auto body repair shops in the state of Rhode Island.

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     The director of the department of business regulation shall promulgate rules and

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regulations not inconsistent with purpose of this chapter.

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     27-10.4-2. Definitions. – (1) “Automobile body shop” referred to as “auto body shop”,

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means and includes any establishment, garage, or work area enclosed within a building where

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repairs are made or caused to be made to motor vehicle bodies, including fenders, bumpers,

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chassis and similar components of motor vehicle bodies as distinguished from the seats, motor,

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transmission, and other accessories for propulsion and general running gear of motor vehicles,

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except as provided in section 5-38-20;

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     (2) “Claimant” means a person, other than the insured, who claims that the insured is

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legally liable to them for damages resulting from an act, occurrence or other covered event as a

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result of which the insured’s policy may be obligated to provide coverage;

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     (3) “Insured” means the party named on a policy or certificate as the individual(s) with

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legal rights to the benefits provided by the policy;

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     (4) “Insurer” means any person, reciprocal exchange, interinsurer, Lloyds insurer,

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fraternal benefit society, and any other legal entity engaged in the business of insurance,

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including agents, brokers, insurance producers, adjusters and third-party administrators. For the

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purposes of this chapter, the entities in this subdivision shall be deemed to be engaged in the

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business of insurance and subject to this chapter;

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     (5) “Motor Vehicle” means any automobile, truck, or other self-propelled vehicle of any

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type; and

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     (6) “Person” means any natural or artificial entity including, but not limited to,

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individuals, partnerships, associations, trusts or corporations, or limited liability corporations.

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     27-10.4-3. Rental vehicles. – It is an improper claim settlement practice for any

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domestic, or foreign insurer transacting business in this state, or any employee or agent of the

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insurer to:

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     (1) Engage in any act or practice of intimidation, coercion, threat or misrepresentation of

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consumers’ rights, for or against any insured person, claimant, or entity to use a particular rental

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car company for motor vehicle replacement services or products; provided, however, nothing

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shall prohibit any insurance company, agent or adjuster from providing to such insured person,

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claimant or entity the names of a rental car company with which arrangements have been made

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with respect to motor vehicle replacement services; provided, that the rental car company is

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licensed pursuant to Rhode Island general laws section 31-5-33: or

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     (2) Refuse to honor a “direction to pay” executed by an insured, claimant, indicating that

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the insured or claimant, wishes to have the insurance company directly pay his or her motor

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vehicle replacement vehicle rental benefit to the rental car company of the consumer’s choice;

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provided, that the rental car company is licensed pursuant to Rhode Island general laws section

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31-5-33. Nothing in this section shall be construed to prevent the insurance company’s ability to

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question or challenge the amount charged, in accordance with its policy provisions, and the

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requirements of the department of business regulation.

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     27-10.4-4. Steering prohibited. – It is an improper claim settlement practice for any

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domestic, foreign, or alien insurer transacting business in this state, or any employee or agent of

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the insurer to:

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     (1) Require that repairs be made to an automobile at a specified auto body repair shop or

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interfering with the insured’s or claimant’s free choice of repair facility. The insured or claimant

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shall be promptly informed by the insurer of his or her free choice in the selection of an auto body

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repair shop. Once the insured or claimant has advised the insurer that an auto body repair shop

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has been selected, the insurer may not recommend that a different auto body repair shop be

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selected to repair the automobile. An auto body repair shop may file a complaint with the

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department of business regulation alleging a violation of this subdivision. Whenever the

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department of business regulation has reason to believe that an insurer has violated this

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subsection, the department shall conduct an investigation and may convene a hearing. A

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complaint filed by an auto body repair shop must be accompanied by a statement written and

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signed by the insured or claimant setting forth the factual basis of the complaint, and the insured

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or claimant must voluntarily appear and testify at any administrative proceedings on the

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complaint.

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     27-10.4-5. Procedure pages. – It is an improper claim settlement practice for any

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domestic, foreign, or alien insurer transacting business in this state, or any employee or agent of

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the insurer to:

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     (1) Modify any published manual (i.e., Motor, Mitchell or any automotive appraisal

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system) relating to auto body repair without prior agreement between the parties;

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     (2) Fail to use a manual or system in its entirety in the appraisal of a motor vehic1e;

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     (3) Refuse to compensate an auto body shop for documented charges as identified

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through industry recognized software programs or systems for paint and refinishing materials in

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auto body repair claims; and/or

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     (4) Fail to comply with the requirements of section 31-47-12.1.

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     (5) Nothing contained in subdivisions 27-10.4-5(1)(2), and (3) of this chapter shall be

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construed to interfere with an auto body repair facility’s contract with an insurance company.

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     (6) If an insurance company and auto body shop have contracted under a direct repair

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program or any similar program thereto the provisions of subdivisions 27-10.4-5(1), (2), and (3)

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shall not apply.

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     (7) If the insured or claimant elects to have the vehicle repaired at a shop of his or her

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choice, the insurer shall not limit or discount the reasonable repair costs based upon the charges

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that would have been incurred had the vehicle been repaired by the insurer’s chosen shop(s).

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     27-10.4-6. Total losses. – It is an improper claim settlement practice for any domestic,

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foreign, or alien insurer transacting business in this state, or any employee or agent of the insurer

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to:

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     (1) Deem a motor vehicle a total loss if the cost to rebuild or reconstruct the motor

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vehicle to its pre-accident condition is less than seventy-five percent (75%) of the “fair market

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value” of the motor vehicle immediately preceding the time it was damaged.

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     (2) “Fair market value” means the retail value of a motor vehicle as set forth in a current

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edition of a nationally recognized compilation of retail values commonly used by the automotive

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industry to establish values of motor vehicles.

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     (3) Nothing herein shall be construed to require a vehicle be deemed a total loss if the

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total cost to rebuild or reconstruct the motor vehicle to its pre-accident condition is greater than

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seventy-five percent (75%) of the fair market value of the motor vehicle immediately preceding

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the time it was damaged.

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     27-10.4-7. Appraisals required. – It is an improper claim settlement practice for any

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domestic, foreign, or alien insurer transacting business in this state, or any employee or agent of

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the insurer to:

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     (1) Fail to have an appraisal performed by a licensed appraiser where the motor vehicle

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has sustained damage estimated to exceed two thousand five hundred dollars ($2,500). Said

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licensed appraiser referred to herein must be unaffiliated with the repair facility repairing the

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subject motor vehicle; and

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     (2) Fail to perform a supplemental appraisal inspection of a vehicle within four (4)

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business days after a request is received from an auto body shop.

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     27-10.4-8. Agreed price for repairs to motor vehicles. – (a) When determining the

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amount an insurer must pay for repair a damaged motor vehicle, every insurer, agent, and

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employee must:

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     (1) Negotiate in good faith with an auto body shop chosen by an insured or claimant; and

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     (2) Reach an agreed price with the auto body shop chosen by the insured or claimant to

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repair the vehicle to pre-accident condition. In reaching an agreed price with the chosen auto

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body shop, an insurer must negotiate all aspects of the repair in good faith, including, but not

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limited to, the auto body labor rate charged by the auto body shop.

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     (b) If an insurer and an auto body shop do not reach an agreed price to repair the vehicle

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to pre-accident condition, the insurer may not:

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     (1) Delay concluding the claim and must promptly issue payment for the amount it

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determined; or

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     (2) Require an insured or claimant to have the repairs performed at a different auto body

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shop.

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     (c) If an insurer and auto body shop do not reach an agreed price, the auto body shop may

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assert a civil action against the insurer, its employees and agents for all amounts in dispute and

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any other damages resulting therefrom pursuant to section 27-10.4-10.

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     27-10.4-9. Penalties. – For each violation of this chapter, the offending insurance

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company, its employees and agents, shall be fined a sum not to exceed five thousand dollars

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($5,000) by the department of business regulation.

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     27-10.4-10. Private actions. – (1) Any insured or claimant, or licensed auto body repair

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facility may bring an action for money damages against an insurer, its employees and agents, as a

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result of the use or employment by an insurer, employee, agent, or person of a method, act or

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practice declared unlawful by sections 27-10.4-3, 27-10.4-5, 27-10.4-6, and 27-10.4-8.

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Notwithstanding any provisions of law to the contrary, all such actions may be brought in the

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small claims, district, and superior court of the state of Rhode Island in the county in which the

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insurer maintains its principal place of business. If the insurer is a foreign entity all such actions

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shall be brought in the county in which the party bringing the action resides.

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     (2) In any action brought under this section, in addition to the relief provided in this

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section, the court may award, in its discretion, punitive damages, reasonable attorneys’ fees and

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costs, and may provide other equitable relief that it deems necessary or proper.

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     (3) Notwithstanding any provision of the public or general laws to the contrary, this

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chapter shall not be construed to prevent an insured or claimant from assigning its rights to an

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auto body shop for any claims arising out of the damage to its motor vehicle.

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     27-10.4-11. Severability. – If any provision of this chapter or the application of the

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provision to any person or circumstances shall be held invalid, the remainder of the chapter and

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the application of the provision to any person or circumstances other than those as to which it is

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held invalid shall not be affected by that invalidity.

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     SECTION 2. This act shall take effect upon passage.

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LC01811

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE - MOTOR VEHICLE PROPERTY DAMAGE CLAIMS

SETTLEMENT ACT

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     This act would set forth standards for the disposition of motor vehicle property damage

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claims that are to be repaired in auto body repair shops in Rhode Island.

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     This act would take effect upon passage.

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LC01811

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