Hammer & Dolly – December 2013

One Shop Says “NO” to the State Farm Agreement

November 11, 2013 was a big day for the Taylor family in Taylor’s Auto Body Shop in Charlottesville, Virginia. It was the day they made the decision to say “No” to signing the new State Farm® Select Service® agreement for their business based on the impending implementation of the PartsTrader system and potentially other vendor requirements.

The Founders of Taylor’s Auto Body Shop, Doug and May Taylor, were present at the Collision Industry Conference meeting in Las Vegas, Nevada during the time of their negotiations with the insurer and had heard all of discussions that took place there in relation to insurer mandates. They did have legal counsel perform a review of the agreement and the recommendation was to not participate under the existing guidelines..

May found the situation they were in particularly upsetting, saying, “We felt bullied. It did not make any difference that we have such a good relationship with the agents and did a large volume of work for them.  In the past twelve months, there has only been one customer complaint and that was because of some old damage. It just showed to me that State Farm does not care about the customer service or quality of repair.”

She continued with, “When we returned from CIC and SEMA in Las Vegas, we found that the insurer was pushing us to sign or not and to make the decision that day, either way. It was then that we realized that we needed to separate ourselves and change our business model accordingly. We have always been a company who markets directly to our existing and potential customers, but we will be focusing more attention to gaining and retaining our clientele in the future. I believe that this is an opportunity to educate the consumer about the repair process and why they should choose us.”


Thoughts of the Executive Director

We can now all stop wondering when the new State Farm agreement will arrive that includes the parts and materials procurement system and now start wondering what the aftermath will be. For those of you who are a part of the Select Service program, you are now more than likely operating under the new agreement, unless you’ve made the decision to not sign. Those of you who are not signing, it’s time to understand what the term “reasonable and/or usual and customary” means.

What kills me is that 99% of the shops who sign do not have the document reviewed by legal counsel. Probably because after doing so would result in a “Seriously?! Who came up with this stuff?” from the other end. And because most of you know that’s bound to happen, then you just figure, “well, they’re just going to tell me I’m better off without it, but I don’t think I could afford to do that so I’ll just go along with it because if I don’t someone else will anyway.” I know this internal dialogue sounds at least vaguely familiar. That’s how the cyclical system has lulled the shops into accepting things that no other industry aside from healthcare would.

So I’m going to pretend you did send it to a lawyer. Any [good] lawyer will tell you a few things to consider as general principle. The below is not legal advice, but interpretation of things I’ve been told**:

1)      It’s not a contract. Therefore it’s not admissible under any contract law and hasn’t been tried in court as to validity anywhere in the US.

2)      No one would enforce it because either party can quit at any time for any reason.

3)      If you sign it, then you are essentially agreeing that the practices outlined are within your scope of business and you’ve made a decision to accept them. This could automatically negate any future litigation or claims against them by you.

**These are hearsay, and you should have your own legal counsel review your particular documents or agreements independently.

While I certainly understand the pressures that you face each day, I would implore you to think of the future of our industry as a whole. The decision to get on these procurement programs also forces your parts vendors to do so if they want to do business with you. The option to use your own vendors is proven to be a farce in the already existing markets on the system. If your vendor is making the business decision to bow out then you will not be able to buy from them and maintain good ratings with the insurer, and you may be coerced into buying parts out-of-state just to save [them] a few bucks. You dealer body shops should really pay attention to this if you want to continue buying parts from yourself.

Going back to the intro, the term “reasonable and/or usual and customary” has been used a lot in our industry to use what one repairer agreed to and force it on another. No, that’s not the exact definition, it’s mine. This is the term that insurers use against shops who are non-DRP or are DRP, it doesn’t matter, to systematically reduce the reimbursement rates for particular operations whether by labor rate, hour, or price.

Fast-forward a year (or less), and you will have the parts procurement systems in many shops in our area because of a few insurers with a large market share. Once given the foothold, the pressure for non-participating shops to utilize a particular system to procure parts is only the next logical step. If more than 50% of the market utilize one, then the insurer will say it is reasonable and customary for the other 50% to do so as well.

Just wait until they start on your paint and materials. Don’t believe me? Go back and read 4e in the agreement.