The Montana Legislature passed House Bill No. 506 in 1999. The legislation sought to protect consumers from insurers or their employees that require claimants under their policy to use a particular auto body repair facility.

The National Association of Independent Insurers, State Farm, PPG Industries, Farmers Insurance Exchange and others have sought relief in the United States District Court of Montana, Helena Division. Last fall, the District Court granted a temporary restraining order.

How does the legislation impact repairers? Section 5, section 33-18-224 reads as follows:

Designation of specific automobile repair shops prohibited. (1) An insurance company, including its employees and adjusters, that issues or renews a policy of insurance in this state covering, in whole or in part, a motor vehicle may not:
(a) require or encourage a person insured or a claimant under the policy to use a particular automobile repair business or location;
(b) engage in any act or practice that intimidates, coerces, or threatens an insured person or a claimant to use a particular automobile repair business or location;

This section goes on to outline four important protections for consumers that strike at the heart of the insurer-repairer-consumer relationship.

Insurers may not:
(i) suggest the use of a particular automobile repair business or location;
(ii) mention or provide the name of a particular automobile repair business or location;
(iii) direct an insured or claimant to an automobile repair business or location or entity in Montana that engages in or has a financial interest in the processing of a claim or bill unless the business or location has been selected by the insured or claimant; or
(iv) share information obtained through the processing of an automobile repair bill with an entity that is involved directly or indirectly in any aspect of the automobile repair business; or
(c) suggest or direct its appointed producers to suggest, mention, provide the name of, or encourage the use of a particular automobile repair business or location to an insured person or a claimant.

What is frustrating to the Automobile Service Association is that there are provisions in the law that clearly protect the insurer's right to have a quality repair facility conduct business with the claimant. Insurers are already doing business and making profits in states that have similar laws on the books. Specifically, this law allows the insurer to:
(a) provide an insured person or a claimant with a list of all established automobile repair businesses or locations reasonably close to the insured person or claimant that offer a warranty for the automobile repair services provided by the businesses or locations; or
(b) provide an insured person or a claimant with a list of particular automobile repair businesses or locations that are reasonably close to the insured person or claimant that meet reasonable standards of quality, service, and safety.
(4) If an insurer elects to provide an insured person or a claimant with the list described in subsection (3)(b), the insurer shall:
(a) upon the request of any automobile repair business or location, make available the reasonable standards of quality, service, and safety that are to be met by automobile repair businesses or locations in order to be placed on the list. The standards may not exclude a business or location from being on the list solely on the basis of size or location of the automobile repair business, the number of persons employed in the business, or pricing other than what is fair or reasonable in the market area of the automobile repair business or location.
(b) Include on the list any automobile repair business or location that meets the standards and indicates in writing to the insurer that the business or location desires to be placed on the list.

The law provides for disputes over these lists to be settled by the state insurance commissioner.

Insurers argue that the legislation violates the U.S. Constitution, including the First and Fourteenth Amendments as well as the Commerce Clause. They argue that insurers are prohibited from "communicating to their insureds and to others true and accurate information which is not false, deceptive or misleading regarding automobile repair businesses and services and automobile glass repair and replacement businesses and services." Insurers also state that the law "is a content-based prohibition against commercial speech and communication" and "prohibits and restrains commercial speech on the basis of content in violation of the First and Fourteenth Amendments of the Constitution of the United States."

Insurers go on in their complaint stating that the law violates the Equal Protection Clause: "The statutory prohibitions are imposed only upon insurers whose agents write automobile insurance for primarily one insurer or who are contractually obligated to use one automobile insurer before using other insurers." Insurers believe this is discrimination.

Finally, the argument that the Commerce Clause is violated is because the effect of the legislation is to "favor in-state interests over out-of-state interests." The latter argument is based on the insurer's use of interstate glass networks.

State regulators as well as the legislature have worked diligently to bring the best possible anti-steering legislation to the consumers of Montana. Clearly the bill does not contain everything auto body repairers would like to see nor everything consumers envision. Crash parts legislation has been stymied for years in Montana by the insurance industry.

Auto body repairers should follow this case closely as it develops. The arguments are not unique to Montana. What consumers in Montana are demanding is not unfair. These same arguments can and will eventually play out in other states without sufficient anti-steering protections for consumers.

Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry. For more information about the legislative activities of ASA, visit www.TakingTheHill.com.

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