Editorial: Glass Shop Owner and Supplier Speaks Out Against Arizona Insurance Fraud Legislation
January 19, 2010

Editor's Note: Just last week, legislation targeting auto glass businesses was introduced in the Arizona House of Representatives. If passed, the provisions set forth in Arizona's House Bill 2463 would define several unlawful practices when dealing with auto glass claims-for example, submitting claims in instances where the work wasn't provided; submitting claims with references to geographic areas in which the work was not completed; submitting claims in which the owner of the vehicle didn't authorize the work; and showing work performed on a date other than when it was actually performed.

One Arizona auto glass business owner, Kerry Soat of Fas-Break, which is based in Chandler, Ariz., has taken issue with the legislation, and submitted the following guest column to glassBYTEs.com™/AGRR magazine regarding the introduction of the legislation. Mr. Soat's opinions are solely his own and not necessarily those of this magazine.

by Kerry Soat

I have reviewed bill Arizona's House Bill 2463 submitted to the Arizona Legislature by several representatives. The bill is a revision to Section 1, Title 20, Chapter 2 of the Arizona Revised Statutes.

This bill, obviously, was written by an insurance company for the sole benefit of the insurance companies. It also is a total waste of the Arizona taxpayers' time and money to even consider what is proposed in this bill. It was my assumption that the legislature was more concerned about our budget deficit this year than unfairly singling out an industry to please the insurance companies. Maybe that has something to do with our budget deficit-I don't know.

If we are going to pass a law that applies to the collision and comprehensive sections of an insurance policy it should apply to "all industries" that use it, like the auto body shops, auto repair shops, tow companies, auto rental agencies, dent removal companies, head light restoration companies and any other companies that provide work to the insurance companies under an auto policy.

Under Section A, Number 1. It states that it is illegal to make a false claim to an insurer. It is already illegal to make a false claim to an insurer; contact the Arizona Department of Insurance and ask them. This bill spells out the items of making a false claim:

a. If services were not performed. There's already a law against this-it's fraud.

b. Showing work done in a geographical area other than where work was performed. This only applies to the way an insurance company pays claims. It should not be illegal to put down a person's "home address" on the invoice when they got the work done in Phoenix or Tucson because they live in Prescott or Sierra Vista. It only applies to the way the insurance companies pay claims. Why are we making a law to protect the way an insurance company decides to pay claims?

c. Not authorized in writing by the owner or lessee of the vehicle.
There is already a law on the books protecting this action. It is illegal to bill anyone for anything they never authorized to have done.

d. Showing work done on a date other than when performed.
How does this injure any insured or vehicle owner other than the way the insurance company pays claims? This has nothing to do with a fraudulent practice to anyone in the state of Arizona.

Under Section A, Number 2. Falsely sign on behalf of a policyholder on a work order. The Privacy Act has covered this part very well with penalties and fines to apply to anything regarding falsifying signatures. What about the forgery laws already in place? I think the Attorney General or City Attorney's offices would like to keep their jobs.

Under Section A, Number 3. Misrepresent to a policyholder:

a. The relationship of the glass facility to the insurance company. When a glass shop has been successfully paid by an insurance company to their client's satisfaction and the insurance companies satisfaction, evident by the check, will it be illegal to state we have done business with that insurance company? Would it be illegal to state they have approved of our work since they have paid for it? Why do insurance companies pay for work if "they" are not satisfied with the work performed? Do they need a law to stop this? Doesn't the insured vehicle owner already have legal actions available to them for unsatisfactory work?

b. The cost of the proposed repairs. This item is very vague to even be included without more explanation. The cost to whom? The insured after a deductible, the insurance company after the deductible or the total invoice cost before sales tax or after sales tax? When dealing with an insurance claim what is the proper cost explanation to whom?

That the insurer has approved the repairs or replacement. This item would be totally impossible to comply with since insurance companies use "third party billers" to handle their glass claims. Call any 800 number glass claim phone number and see who answers the phone. It is not your insurance company but another company usually a competitive auto glass company. Why is this legal?

The glass shops, repair personnel, and the insured's very rarely talk to the insurance company regarding approval for a glass claim. This clearly gives an insurance company an out on every invoice submitted by any glass shop for any job since none of the claims are "preapproved" by the actual insurance company. Does this make all "third party billers" illegal in the state of Arizona if this is passed? Maybe this would be good?

Under Section A, Number 4. To represent to a policyholder that the repair or replacement will be paid by the insurer "at no cost" the policyholder. With a $0 deductible state law, how can this be made illegal when it is the fact? This clause is so ambiguous it needs to be totally deleted.

The insurance companies themselves advertise nationally that Medicare Advantage plans have $0 or No Cost plan premiums when in fact the insurance company is paid by the Medicare Part A for the plan.

Since they are not an auto glass company this law wouldn't apply to them but the statement is exactly the same. Insurance companies do not pay for claims where they are not "legally bound" to pay for, no matter what was stated by the auto glass company. What does anything the auto glass company says have anything to do with "binding" the insurance company? This part is ridiculous.

Under Section A, Number 5. Add to the damage before repair. This action is already against the law as insurance fraud and fraud in general. The Attorney General's office already has the power to prosecute this action. It doesn't need to be spelled out in this separate law. This law should apply to auto body shops, auto repair shops, and all repair shops in general not just auto glass shops. I'm not sure if this one section wouldn't make this law un-constitutional due to its lack of scope.

Under Section A, Number 6. Perform work substantially beyond the level of work necessary to repair or replace the auto glass. By whose standards would this apply? Those of the insurance company, the state of Arizona, the Auto Glass Shop, the Auto Glass installer, or AGRSS and ROLAGS? The majority of auto glass companies are not AGRSS-registered, but I am, in addition to being a qualified trainer. One example of this is when an auto glass company runs into existing "rust issues" when the windshield is removed; it is against the AGRSS Standard to replace it without repairing the rust first for a safe installation. The insurance companies know this and also allow "extra charges" for this service if the auto glass company can repair it to the AGRSS standard. For the convenience to our "clients," which happens to be the insured of the vehicle, not the insurance company, most auto glass companies will repair this issue and take it up with the insurance company "after" the installation. In some cases the vehicle will be referred to an auto body shop for extensive rust repair. Quite often the insurance companies will refuse payment for this service because it wasn't "pre-authorized" but for a safe installation it had to be performed to stay within the AGRSS guidelines. I can almost assure you the AGRSS or ROLAG Standards were never considered during the writing of this bill.

B. A Violation of this section is subject to enforcement under this Article. Does this mean "none" of the other sections are subject to enforcement? Why is this section so important? Read the next section and you will see why.

C. For the purposes of enforcement, a policyholder's insurer is considered to be an agent of the insured for determining liability under this section. Does this law give the insurance company the power to prosecute? Does the Attorney General's office know this? Do the insurance company's legal departments get to bill the State of Arizona for this prosecution ability for "enforcing this law"?

Who in the world ever came up or wrote this? Since when does an insurance company "need to" or have the "right to" take over the legal rights from an insured to enforce a law without the permission of the insured? Doesn't the insurance company only have the legal obligation to pay the invoice for work performed under an insured loss by an insured according to the insurance contract?

Since when do the insurance companies become the caped crusader to protect their insured's from the evil force of auto glass companies? I am sure this is un-constitutional and I'm not even an attorney.

Not only that, if you read the rest of this section it even refers to "presuming" a person's guilt by knowledge of a particular element of the prohibited activity. I thought we were innocent until "proven" guilty. Only an insurance company wouldn't want to take the time to consider a person's innocence and since this law gives them the rights to "enforce" these actions why not "presume" guilt also.

Since when do any of these actions not already covered by Fraud, Privacy, and General Business Conduct, laws obtain the level of a Class 6 Felony?

When does writing an invoice with someone's home address and doing the work at their doctor's visit in Phoenix constitutes a Class 6 Felony? Where has the Arizona Legislature gotten to by writing this law other than campaign contributions? I want a list of campaign contributions for all of the Legislators who have "authored" this bill and any that would sign it.

Auto glass companies are small business people sometimes one man operations working out of their homes trying to build their dream of building a larger business and hire employees. What does this country need now, more employees? How counterproductive is this law?

Why would the people of Arizona need more legal protection from these operators than what is already on the books? It might be possible more "enforcement" might be needed for the laws we already have but when do insurance companies get to become "law enforcement agencies"? What other state has ever passed a law like this one?

Where are all the consumer complaints to make this law necessary? How many articles to the editor have we seen regarding these mass fraudulent actions by the Auto Glass Companies? The only complaints I get from clients are for "over aggressive" sales tactics at car washes. This gives the Insurance Companies the right to "enforce" this law?

I think if you tally complaints, you will find more complaints at the Arizona Department of Insurance regarding the payment of claims and the handling of the claims by insurance companies than the fraudulent actions of a few auto glass companies.

The Arizona Department of Insurance has done an outstanding job at policing Fraud in the auto glass industry and the insurance industry also. Why take this ability away from them and turn it over to the Insurance Companies? If our legislators can't see what they are doing then the Insurance Companies are having their way with them.

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