Legislation pits insurance firms against auto body shops
Auto body business owners in Rhode Island are jubilant over new legislation that they said protects the consumer from insurance companies that undervalue cars and are too quick to declare a vehicle totaled.
"Every day I deal with clients with $5,000 cars. It's their ride to work. Without it, they can't get to work. They get hit. It's not their fault, and the insurance company said it's worth $3,000. There's nothing we can do," said Jina Petrarca-Karampetsos of Petrarca and Petrarca, a law firm.
State lawmakers approved and Rhode Island Gov. Lincoln Chafee signed legislation that prevents insurers from declaring a vehicle a total loss if it can be restored at a cost that is less than 75 percent of its fair market value. Under the legislation, the car's owner would have to agree that the vehicle be declared a total loss.
A statement from the Property Casualty Insurers Association of America said in part, "by forcing vehicles that are badly damaged to be repaired rather than totaled, this law is designed to increase body shop revenues."
However, John Petrarca, who owns Providence Auto Body, tells a different story of a client with a damaged car.
"The car is worth $10,000. So that would give us about $7,000 or $7,500 to fix it. OK, we could do that. The customer would be made whole," he said.
But if a salvage yard offers $5,000 for the car, the insurance company is better off declaring it totaled.
"So they reduce their loss when they total these cars for under 75 percent and the consumer gets hurt and has absolutely no place to go," Petrarca said.
He said it leaves the consumer with cash that won't buy an equal replacement to the car the insurance company won't fix.
Petrarca said the legislation isn't going to make any difference to his profits as he says his shop is plenty busy, but that it will give the car's owner the power to decide whether to fix it or junk it.