State Farm Commercial Liability Insurance - State Farm said last month that it sent the Kansas Department of Insurance to the third-party plaintiffs to obtain an estimate from a selected service mechanic, but that the plaintiff "was not obligated to use this mechanic."
An Illinois attorney on Wednesday also reported hearings from third-party plaintiffs asked to seek estimates on the State Farm's Direct Repair Program network.
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"It's even brought up here in the Chicago area," said attorney Patrick McGuire, whose practice includes accident repairers. (Note: Nothing in this article is intended as legal advice. Consult an authorized advisor in your state.)
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Apart from obvious routing concerns, such cases appear to impose non-related liability on third party claimants. Unlike first-party drivers, who have a contractual relationship with the insurer, third parties generally do not waive any rights.
Unreasonable requests from third-party plaintiffs are bad enough for an unsuspecting store to anticipate hassles. However, such efforts may escalate if insurer representatives or third-party claimants mistakenly believe that actual repairs should be performed at a DRP facility. This would certainly conflict with nationwide store choice laws.
Jeff Avery, director of State Farm Automobile ILR, wrote to the Kansas Department of Insurance on April 15: "When discussing a claimant's desire to secure vehicle repair, if we have selected service mechanics, we offer our selected service program as a first choice. Claimant's geographic location." Answers to Common Complaints "We send them to these mechanics to make an initial estimate for repairs. We will pay once we receive the estimate. The customer is not obligated to use that mechanic. Customers must make reasonable compensation payments, including deciding where and when to repair their vehicle. " They can use the way they see it. …
"If the customer has left their vehicle with their chosen mechanic, we will work directly with that mechanic to arrive at an agreed repair amount."
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"As previously stated, there is no known law regarding your concern regarding specified repair shops," Karen Wallace, consumer assistance supervisor for the Kansas Department of Insurance, wrote April 24 to Tony Adams, vice president of the Kansas Auto Body Association. Adams presented a comprehensive investigation of potential legislative changes that prompted State Farm's response.
"It appears from the response that State Farm wants people to use certain stores for estimates, but not necessarily use those stores for maintenance," Wallace continued.
We asked State Farm some questions about reports of third-party claims practices from Kansas, Illinois and North Carolina:
This includes State Farm's official policy toward third-party claimants, possible sources of interpretation of the new wording in effect, state filing requirements to change the treatment of third-party claimants, why State Farm may impose obligations on third parties, and third-party claimants. How Claims Work When the Party Plaintiff Also Has a First-Party State Farm Policy
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"Thanks for reaching out," Tammy Estes, State Farm senior public relations officer, wrote on April 28. "We have nothing to share with RDN."
Adams said he has faced questions from KABA members about State Farm's third-party practices and experienced a similar situation at his own store.
Adams said the State Farm representative insisted that the third-party plaintiff, a longtime Weaver customer, should bring his vehicle to the DRP store for repairs. Eventually, Adams' store requested a state farm inspector who quickly confirmed that the consumer had the right to repair his vehicle anywhere, Adams said. The keys were at Weaver's.
Adams said he blamed it on a simple mistake by a subordinate, but now wonders if it was part of something bigger.
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In Illinois, "there is no liability for a third-party plaintiff," McGuire said. According to McGuire, they can repair the car and receive an invoice before they discuss the case with the first-party plaintiff.
According to McGuire, an insurer's policyholder who applies as a third-party plaintiff does not have to use the terms of the first-party contract. The consumer can choose whether to treat the loss as a first-party or third-party claimant.
Although filing a first-party claim in the event of a total loss can be beneficial for the victim, it's generally "rarely the case where you're better off as the first-party," according to McGuire.
Eversman said that a third-party plaintiff's obligation to obtain an estimate at the location of the insurer's choice is probably zero, even if they "share the same insurance company."
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The claimant would be an adverse third party, and "this insurer has no right of action against the third party," unless language in the first-party contract asks the customer to waive third-party rights, he said.
Erica Eversman, an attorney for Vehicle Information Services, said she was unfamiliar with the Kansas law, but doubted any insurance commissioner would allow a carrier to make such a claim on a policy.
Allowing the insurer to participate in the repair process can eliminate the need for a third-party claimant to sue the policyholder for reinstatement. However, according to Eversman, this does not mean that the insurer has the right to control the process.
"As a general principle," Eversman said, third parties have no liability to insurers — "the point." He said it would be "inappropriate" for an insurer to attempt such a check.
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State Farm did not respond to requests for comment on the Illinois claim as of Friday, and on the differences between appraisers, select service stores, and outsourced estimates (such as artificial intelligence, desk reviewers, or independent appraisers) writing third-party and first-party pages.
"Some states have laws that prevent insurers from traveling unreasonable distances or establishing other guidelines for vehicle inspections," APCIA vice president of auto and claims policy, Bob Passmore, said in a statement. "However, in most cases, the plaintiff and the insurer can work together to inspect the vehicle, assess the damage and find the most efficient and effective way to pay compensation."
According to Eversman, insurers can engage in insurance fraud by undervaluing claims. He argued that if the insurer used a body shop as its agent, the repairer "could be liable for insurance fraud and undervaluation of claims."
Eversman noted the use of a third party with a potential interest in the claim to write the estimate "on behalf of the insurance company" so that the shopkeeper can write a higher estimate after the claim is seized. That's "the whole game" of having a DRP mechanic write an estimate, he said.
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He argued that while DRP had a "clear purpose" to undertake workshop repairs, hiring a body shop to outsource the claim was an "unbelievable conflict of interest".
Eversman said it would be one thing for the DRP shop to do a "good normal initial repair analysis without disruptive activity," but was clear on the assumptions made without the necessary disassembly to accurately determine the amount of damages. It should be clear that it was "the most accurate estimate possible to construct" - "in writing, in bold" - without setting it apart.
"That would be a different story," Eversman said. However, he said, there is a possibility that this will not remove the shop from the land or eliminate the conflict of interest.
We suggested that if an insurer-authorized estimate shop were to remove components, the scenario would collapse into a shop selection law violation as repair and risk, and Eversman agreed.
Letter, Report: State Farm Tells 3rd Party Claimants To Get Estimates From Kan., Ill. Drp Shops
We asked the Kansas Department of Insurance if it has taken any further action on the matter or given any other guidance to State Farm. We have also held that State Farm has no obligation to provide an estimate where a third-party plaintiff requests it.
"Consumers can share their personal information with anyone, but we don't comment on specific circumstances," the agency's Lee Modsitt said in an April 29 email. and insured to collect all relevant information from interested parties when we receive a complaint and to ensure that business is conducted in accordance with Kansas laws and regulations.
Because they were unable to discuss a specific complaint, we asked about general Kansas laws and regulations regarding third-party plaintiffs.
In suits for temporary damages to property, Kansas courts hear PIK Civ. 4. 171.21 states that:
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"Where the damage to property is temporary and the property is reversible to its original condition, the extent of the damage must be the reasonable cost of repair [plus a reasonable amount for compensation] to restore it to its original condition.
Property with reasonable care during repairs, but no more than its fair and reasonable market value before the injury.
This is consistent with the purpose of tort actions, namely, to reintegrate the injured party to avoid an unexpected fallout for the injured party. Mechanical determination of damages on depreciation factors at the same rate as the cost of labor costs
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