What do body shops think of diminished value?

What do body shops think of diminished value?

By Ben McNamara
AutoInc. randomly selected 16 ASA collision members and asked each shop owner eight standard questions on diminished value (DV).

Do you believe it's possible to restore a vehicle to a condition where its market value after the repair is the same as it was before the accident?
Twelve of the 16 shops said it is possible to restore the vehicle to its pre-accident market value. Two shops said it is not possible. Two shops said it depends on how the question is interpreted.
Of those 12 that said it is possible, most said it is possible if they are paid to do the proper procedures and those procedures are followed.
Jim Eriks, Highland Body Shop, Highland, Ind., said that if he has to use aftermarket parts, it is not possible to attain pre-accident condition. Several of the other shop owners surveyed echoed Eriks' remark.
It depends
Dennis Cockrell, Trinity Paint & Body Shop, Tulsa, Okla., said, "It depends on how that question is interpreted. Can you return the car to where it is like brand new again? No, it's been hit." He compared it to a tennis ball - once that ball has been hit, it has been affected and will never be the same.
Nathan Primm, Collision Automotive Repair Specialists, Knoxville, Tenn., addressed the dual nature of diminished value by saying the car can be restored physically, but restoration of the vehicle to its pre-market value in the mind of the beholder is not possible.
"Who's to say what the value of a vehicle is?" said Greg Castro, Greg's Collision Center Carstar, Bellflower, Calif. "Unless a vehicle is blatantly hacked, you can't tell there is diminished value."

What is the most common cause of DV on a wrecked vehicle that has been repaired?
Substandard repairs, insurance companies and aftermarket parts
Nine shops reported that substandard repairs are to blame for DV. Other causes cited are aftermarket parts and insurance companies not paying for needed repairs.
Bad repairs are usually caused by trying to cut costs using aftermarket parts, by not getting paid enough to repair the car properly, or by the adjuster squeezing the shop for costs with aftermarket parts or used parts, according to Cockrell. Many times, adjusters simply want the shop to repair the vehicle just to the point that it will get by.
"I think the problem is a lack of ability," said Dennis Mascari, Mascari Auto Body Inc., Allison Park, Pa. He also said that the insurance companies' treatment of all body shops as being equal is a problem. "Why should all body shops be paid the same amount?" He said he runs a quality operation, has up-to-date equipment, quality/certified technicians, and yet is expected to accept the same pay as any other shop.
Other causes
The most common cause of DV on a wrecked vehicle is tell-tale signs of the repairs such as paint and parts, said Russ Oudbier, Judd's Body Shop Inc., Byron Center, Mich.
We don't have the equipment to restore vehicles to the way they were made in the factory, according to Troy Slaybaugh, who spoke on behalf of an Arizona shop owner.

If the insurance company refuses to pay for a specific procedure that should be used in the repair of the vehicle, what should a shop do?
Responses to this question were varied. Most said the shop should keep the customer informed and get them involved when the insurance company won't pay.
If the adjuster says he won't pay for a certain procedure, then go to the claims supervisor, said Cockrell. If the supervisor says they won't pay, inform the customer of the situation. If the customer won't pay the difference, the car will sit there untouched. The shop should not repair that car because it could come back to hurt the shop, he said.
Realistically, the body shop should do the procedures to satisfy the customer, said Primm. He'll do small, inexpensive procedures, but for high-dollar procedures he calls the insurance company. He keeps going up the chain of command in the insurance company and keeps customers informed, advising them that they can pay for procedures that the insurance company denies.
Get the customer involved
Charles Moberg, Coachworks Inc., Springfield, Mass., said the shop should notify the insured that the insurance company will not pay for the procedure and that the shop thinks it is necessary. The shop should then recommend the insured call and speak with their agent.
If the customer makes enough noise, the insurance company will likely respond, said Doug Richmond, Richmond's Automotive, Newark, Del.
Prove your point
When insurance companies refuse to pay, Bob Merritt, Sureway Collision Center, Puyallup, Wash., suggests that shops contact Tech-Cor to verify that procedures are needed, then share the information with insurance company.
Jim Suppe, Florida Auto Body Inc., Ft. Lauderdale, Fla., said he usually doesn't have this problem. He just contacts the insurance company and negotiates with them - he said they usually pay him what he needs.
It's never been a problem [getting the insurance company to pay for procedures], said Castro. "We may disagree in the beginning, but if they make a suggestion on how to do the repair, we do it. If we've complied with their request on how to do the repair, and it doesn't work right, I'll call them and say it doesn't work." He added that the insurance company will then pay for the time spent attempting the repair the insurance company's way, and then his shop will do it the way they think it should be done and get paid for it.
"Refer to I-CAR's standards," said Mascari. "This is an accepted way of repair."
Document your position
"If an insurance company refuses to pay ... your hands are tied," said Oudbier. He suggests placing a disclaimer in the paper work to notify customers that repairs are warranted by the insurance company, then send it to the insurance company.
Get it in writing from the insurance company that it will not pay for specific procedures, then let the vehicle owner know, said Jack Mound, Hoffmantown Body Shop Inc., Albuquerque, N.M.
Refuse to do the work
"Either turn the work away or find a way to collect," said Milt Wittlief, T.H. Auto Inc., Two Harbors, Minn.
The shop should refuse to perform the repair unless the shop is paid, and the shop should notify the customer, said Robert Adney, Body Tek Collision Repair, Merrillville, Ind.
Do the repair anyway
"I pay my employees to repair the vehicle correctly because I want the customer to come back," said Slaybaugh.

If the shop goes ahead and does the repair (from question #3), omitting that procedure, if a court of law decides there is diminished value on that car because that procedure was not used, who is responsible for the diminished value?
Eleven shops said the insurance company would be responsible for DV on that car. Two shops said this doesn't pertain to them because they wouldn't have done the repair. One said it's difficult to determine who is responsible; one said shops are responsible; and one said customers are responsible if they are properly notified of the potential diminished value before repairs and refuse to pay for additional procedures.
Insurance company is responsible
Of the 11 shops that said the insurance company is at fault, two said the insurance company is at fault as long as the shop has documentation showing that the shop communicated that the procedure in question was necessary.
The insurance company is responsible for the diminished value because it agreed to warranty the procedures used, said Oudbier.
When the insurance company doesn't want to pay for a procedure, Becky Matias, Cumberland Classic Paint & Body Shop, Somerset, Ky., refuses to do the repair and notifies the customer why they won't do the repair.
Suppe said his shop would never do the repair without getting the customer involved.
Shop is responsible
Some shop owners allege that even though the insurance company will not pay for certain repairs, the shop still has a choice not to do the work. "It comes down to the shop being responsible," said Wittlief. "But it shouldn't be that way."
Hard to determine responsibility
If a shop knows omitting a certain procedure might put someone in danger, they are making a difficult choice, said Cockrell. It's especially difficult for a shop to make a choice when a repair has already been initiated. Simply refusing to finish a job based on something discovered after the repair had already begun is difficult, and can cause the shop to lose money it has invested in that repair.

If the insurance company requires aftermarket parts on a repair job, even though the shop knows the parts it is being asked to use are inferior, what should the shop do and who is responsible if there is DV on that vehicle after the repair because of the aftermarket parts?
Most respondents thought insurance companies would be responsible, but answers varied as to what to do in this instance. Most shops surveyed think aftermarket parts are inferior, although some said they are getting better. Educating consumers on the potential differences in parts used is one part of the solution, and getting them involved in decision-making is helpful.
"It's getting to the point where, as shop owners, we need to refuse aftermarket parts if they don't bring the repair up to where it should be," said Wittlief.
"It boils down to having a good relationship," Castro said. Shops that have good relationships with the insurance companies usually get what they need to do the job right.
"Our approach is to always put an OE part on the vehicle, unless the insurance company dictates the use of an aftermarket part or the customer specifically requests it," said Primm. He tries to educate the customer about aftermarket parts and the studies that show the retail value on vehicles is less when aftermarket parts are used. If the insurance company is requiring the use of aftermarket parts, he informs the customer. In some cases, the customer will pay the difference in the cost to have OE parts used, said Primm.
The shop should perform the repairs and notify the customer, said Oudbier. "After all, the insurance company warranted the parts for like, kind and quality," he said.
Prove they are inferior
Some shop owners contended that if shops do not want to use aftermarket parts, they need to prove to the insurance companies their inferior quality.
The majority of the time, if a shop shows the insurance company the part doesn't fit, and it wants to buy a new OE part, that's what the shop gets, said Suppe.
Responsibility not easily assigned
If the insurance company is taking advantage of consumers, the insurance company should accept responsibility, said Cockrell. The insurance company should educate the policyholder on the policy. But he added that, "If the customer gets the cheapest policy and doesn't research it, he deserves it [DV]."
If a customer has been notified of the choice of aftermarket parts or OE parts, and refuses to pay out-of-pocket expenses to repair the vehicle with OE parts, it would be the customer's responsibility for DV, said Moberg.

What impact do you think DV claims have on the industry?
Some of the shops expect the impact to be negative, a few think it will be positive, some think the DV issue will not have a large impact on the industry, and others either aren't sure about what to think or are withholding judgment.
Negative impact
"The impact is bad for guys like me that do a quality repair," said Mascari.
Eriks defines the impact of DV claims in one word: devastating.
"Who is determining diminished value? Other body shops," said Castro. "This will put their peers in the industry at bay because they are going to be evaluating the quality and workmanship of repairs. It could be an ugly situation."
Cockrell referred to one situation where a vehicle owner wanted to get paid by the insurance company for the DV on his car that he wrecked himself. He planned on selling the car anyway after the repair, but used the DV ploy to pocket some extra money. "He shouldn't have been given a dime," Cockrell said.
Positive impact
"Overall, I think it's good for the industry," said Richmond. "We can take the insurance company to task and have more leverage [to do a proper repair]."
DV claims have not had much of an impact yet, but in a few years, shops will be able to put it back on the insurance companies, said Adney.
Right now, customers don't understand DV, said Primm. As they become more educated and begin to argue with the insurance company about procedures or aftermarket parts, the insurance companies will take notice.
Other opinions
It could run a lot of shops out of business, said Mound.
Everyone should probably share the burden, said Slaybaugh. We need standardized repair procedures and to be paid for the procedures, he said.
"The majority of our customers are satisfied when they leave here," said Matias. "But they do have the common perception that their vehicle may have a lesser value."
Overall, it will mean that shops will be able to get paid for what they do, said Richmond. But it will also mean that shops will have to be more accountable for what they do.

What can the industry do to solve the problem of DV on wrecked vehicles?
Responses to this question were varied, and no consistent solution was proposed. Some shop owners said they did not know what could be done to solve this problem.
Rating system
One suggestion was to classify shops with some type of rating system. The licensing of shops was another suggestion.
Clean up the industry
The industry, overall, needs to be cleaned up, said Cockrell. "Communication and integrity - those are two of the biggest problems with body shops," he said. "There are a whole lot of shops that need to be shut down [for shoddy repairs]. There are a whole lot of adjusters that need to get pink slips."
Professionalism, better training
Moberg believes DV is done by substandard, backyard mechanics, not by certified, trained and professional repair shops.
Shops should be more professional because "it's up to us to live with these repairs," said Mound.
Castro said, "We've come a long way in professionalism [both the body shop and insurance sides]." This trend needs to continue, he said.
The industry needs more training on both sides - the body shop people and insurance people, said one Ohio shop owner.
The insurance companies need to become educated, especially the independent appraisers, said Primm.
Other opinions
"All body shops need to unite, like the Steelworkers Union," said Cockrell.
"Consolidation gives shops more leverage," Castro said. "It is good. It's inevitable." More shops need to learn to adapt to the changing environment of the industry, he said.
Take the time and repair things correctly, said Slaybaugh. I take longer than most shops, but I do a good job.
As long as the insurance company dictates repair procedures and the use of aftermarket parts, then we need to continue to transfer the liability of diminished value to them, said Eriks.
Aftermarket parts should be banned and something should be done about insurance companies dictating a repair when it should be replaced, said Matias.
The industry can't do anything to solve the problem of diminished value of a wrecked vehicle, according to Adney. If the vehicle is wrecked, it's wrecked.

Have you ever had a DV claim made against your shop?
Only one shop surveyed has had a DV claim made against the shop.
Some final remarks on the concept of diminished value:
DV is a tool used by certain companies for leverage, according to Castro. "The industry has a long way to go." Shops have made different choices along the way - some have prospered, some haven't. We are now seeing a major shakeout in the industry, he said. "Change is good. It's inevitable."
Some insurance companies are open-minded and willing to work with shops, said Primm. Others are adamant and unbending.
Mound said that he knew of a vehicle where going into the repair there was DV assessed on the vehicle of about $3,000. This, plus the cost to repair the vehicle, resulted in it being totaled.
Insurance companies should make their adjusters more personally responsible for their estimates - that will improve overall claims, said Cockrell. He added, however, that the industry needs reform on both sides of the fence.
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AutoInc. Magazine ®, Vol. XLV No. 9, September 1997