Fined $20,000 for Minnesota's Short Pays
AIG Personal Lines Claims has been issued a Consent Order by the
Minnesota Commissioner of Commerce stating in part that AIG and
others "paid an alleged 'prevailing rate' to Minnesota body shops
that was less than the total charged by the body shops for certain
repair costs." The Consent Order has imposed a civil penalty of
$20,000 and a cease and desist order from any continued violations
of Minn. Stat. § 72A.201, subd. 6(2)(a) (2006), the statute the
order cited AIG violated.
Minn. Stat. § 72A.201, subd. 6(2)(a) (2006) requires insurers "…to
pay all costs for the satisfactory repair to the insured's
or claimant's vehicles."
Commissioner Glenn Wilson also ordered AIG to reimburse all the
insured and claimants referenced in the order for their out-of-pocket
expenses paid to the body shops.
The order correcting the short pay is in part the work of the Alliance
of Automotive Service Providers, Minnesota (AASP-MN). Over the past
year, AASP-MN submitted dozens of unfair claims practice reports
to Wilson's office. Many of the reports documented "short pays"
from AIG to the body shops for their hourly paint and material rates.
The association and its members have been documenting these cases
of short pays. AASP-MN has also urged its membership to stop absorbing
short pays and instead to inform their customers that they will
be responsible for their insurance company's failure to pay reasonable
"When these practices result in harm to consumers, regulatory agencies
are much more likely to intervene and take corrective action," stated
AASP-MN executive director Judell Anderson in a press release issued
by the organization. "Unfortunately, in an effort to protect their
customer, shops inadvertently perpetuate insurer practices that
are detrimental to the repair industry and consumers in the long
run. This is an example of how the repair industry can make a difference-provided
they're willing to take the time to document instances of insurer
AIG agreed to informal disposition of the matter without a hearing
and has accepted the terms of the Commissioner's Consent Order.
HERE to read the AASP-MN press release.
HERE to read the Consent Order.
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