Is Assignment of Proceeds the Answer?
Are you consistently being short-paid on your jobs by insurance companies? Have numerous attempts to get paid proven futile? Then assignment of proceeds - to be used only as a last resort - may be the next consideration.
At last year's Automotive Service and Repair Week (ASRW), Darrell Amberson, AAM, collision division director, was interviewed by Bob Anderson, AAM, an industry veteran and former chairman of the Automotive Service Association board of directors, during the general session and had this comment about the insurer-repairer relationship: "We as collision repairers have a love-hate relationship with insurers. We repairers often get very angry over some insurer practices, and often with good reason."
Amberson said the level of frustration has resulted in an increased level of activity in the legislatures and courts as repairers seek resolution of issues. "Both repairers and insurers must recognize the need for dialogue and work to seek mutually beneficial solutions," he said. "We can disagree over many things but we must recognize the need for each other."
Defining Assignment of Proceeds
One such issue that involves the courts is assignment of proceeds. Assignment of proceeds is a transfer of ownership of an accounts receivable or direction to pay. There may be a need to obtain an assignment of proceeds if the insurance company has not paid the complete claim amount as a result of a variety of issues including - but not limited to - refusal of reimbursement over required p-page operations, disagreement over labor rates and materials, aftermarket versus original equipment manufacturer (OEM) parts costs, etc.
The body shop then works with the vehicle owner to transfer the right of payment of a property damage claim over to the body shop. This allows the insured party to get their car and move on. Meanwhile, the body shop - after exploring options other than litigation - may seek payment for the unpaid claim by taking the insurance company to court.
Mike Anderson, AAM, owner of Wagonwork Collision, an ASA member-shop in Alexandria, Va., said he is of the opinion that assignment of proceeds is gaining prominence among collision repairers as a result of several things.
"I believe insurance carriers are becoming more and more difficult to deal with and are taking advantage of these economic times to not properly pay shops for what it takes to repair a vehicle properly. In addition, I believe that many insurers are now not paying for items that they used to pay for and it is forcing shops to seek alternatives for proper reimbursement," said Anderson.
Scott Benavidez, of Mister B's Paint & Body, an ASA member-shop in Albuquerque, N.M., weighs in on his belief that there is growing frustration among some repairers to get the due compensation for work performed.
"We were willing to give away so much in the past for fear of the insurance companies and trying to make the customer happy," said Benavidez. As a result, collision repairers are not always paid in full for the work performed.
'Tool of Last Resort'
While collision repairers may have frustration toward insurers for a variety of reasons, Phil Mosley, general manager of Elite Collision Service Inc. in West Chester, Ohio, strongly urges repairers to view assignment of proceeds as a "tool of last resort."
Mosley has been involved in a number of proceeds cases against insurers and won each case. "Assignment of proceeds is not a talisman. It's not an excuse to be brash. You need to be courteous, professional and keep your composure," Mosley said. He decided to pursue litigation after growing frustration with insurance companies on claims that had been short-paid by as much as 50 percent and averaging 20 percent.
Anderson said a shop may take several assignment of proceeds cases to court under one judge, jury, trial, hearing, etc. It would make sense and be more economical, he adds, since a shop is the plaintiff in all cases and an insurer is the defendant (versus taking insurers to court one claim at a time, which may result in high legal fees).
Despite the growing frustration level at not getting paid for work performed, Mosley stresses that assignment of proceeds should be used with extreme discretion and caution.
As a collision repairer, how do you exercise this discretion? According to Mosley, you need to first look at the big picture. He suggests asking yourself, "Are there particular insurers who are routinely, habitually short paying on claims?" "Is the short-pay amount a great enough amount that you are consistently coming up short on jobs?" There is a difference between being short-paid on 1 percent to 2 percent of a claim amount versus 20 percent, he said.
Do Your Research
After assessing your situation, you may conclude that assignment of proceeds may be the route to take. What do you do next? You must not only have all information pertaining to the claim gathered, but you must also know your state's statutes regarding assignment of proceeds. Each state has different laws and regulations governing practices, said April Miller of Hernandez Collision Centers in Savannah, Ga., an ASA member-shop. Miller strongly advises shops to look at their statutes because not enough shops know what the governing law is in their state.
Miller said good sources to turn to for this information are the state department of insurance, state comptroller's office and individuals in other states who have gone through assignment of proceeds cases and may be able to point you in the right direction. The strength of your state's laws will dictate how you pursue reimbursement, or if obtaining an assignment of proceeds is even a viable option. In many cases, a simple letter from your attorney stating the statute and the balance owed will be enough to obtain reimbursement of monies owed on repairs performed, said Miller.
Mosley echoes the importance of knowing your state's laws and said he turned to the Internet, attorneys and associations for information.
The next step in the assignment of proceeds process is to find a good attorney. Mosley said he "got lucky" and found an attorney with extensive court experience that included arguing cases before the Ohio Supreme Court.
Mosley cautions that he is not an attorney so therefore any suggestions he may make are based on his personal experiences and should in no way be taken as legal advice.
He said the first few cases that went to court were for small claims amounts totaling several hundred dollars. During these cases, the judge had an opportunity to learn the language of the collision repair industry. Having no prior knowledge of the industry, a judge may have no idea what a blended panel is or what p-pages are, for example.
For those collision repairers who participate in direct repair programs (DRPs) with insurers, assignment of proceeds may be a nonissue. But for those repairers who have tried to work through issues with insurers only to face a brick wall, then assignment of proceeds may be something they should consider, but only after careful deliberation, research and consultation with an attorney.
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