NCOIL Reviews Model Airbag, Parts Legislation

Posted 8/13/2009
By Robert L. Redding Jr.

The National Conference of Insurance Legislators (NCOIL) hosted its summer meeting in Philadelphia. The NCOIL Property-Casualty Insurance Committee received testimony on two proposals in Philadelphia. First, the committee reviewed a proposed Model Act for Auto Airbag Fraud. Second, the Committee heard testimony on a Model Act regarding Motor Vehicle Crash Parts and Repair.

Harry Moppert, owner of Moppert Brothers Collision Services Group in Morton, Pa., represented the Automotive Service Association (ASA) at the meeting. Moppert submitted oral and written comments on both proposed Model Acts.

NCOIL proposed to address automotive airbag fraud at the state level. Although NCOIL made an attempt to address critical fraud issues, tough penalties, recordkeeping, consumer notice stipulations and law enforcement requirements, it left open the option of installing salvage airbags.

ASA does not support the use of salvage airbags and has a long-established policy in opposition.

ASA discourages the use of salvage airbags. Safety cannot be compromised in this important safety system. While the use of salvage airbags can reduce cost, ASA believes that safety could be severely compromised and that shop owners could be placed at risk for installing salvage airbags. ASA recommends that all shops inquire with their insurance carriers before installing salvage airbags regarding coverage and increases in rates and get this information in writing.

Moppert testified that he did not use salvage airbags in any of his Philadelphia-area shops. He commented, "Although the proposed model legislation before your committee includes elements that make some significant improvements to current law, it fails to address a critical issue; salvage airbags should not be used in vehicle repair. The airbag cover and installation stipulations, recordkeeping, police accident reports, and penalties are certainly helpful to the process but at the end of the day, salvage airbags put vehicle occupants at more risk than necessary. Repairers want to use original equipment manufacturer (OEM) airbags where reliability and performance are tested, warranted and proven. Administering a law as proposed today will be a nightmare for state regulators and law enforcement. With states suffering from diminished economic resources, proper enforcement of this statute would be difficult at best."

ASA asked that the committee eliminate salvage airbags as an option in the vehicle repair process. ASA members have expressed concern that salvage airbags may be inferior in quality and oftentimes are not handled properly; i.e. some salvage airbags may be exposed to the elements prior to sale. The removal of salvage airbags from the marketplace is an opportunity for policymakers to ensure the motoring public is less at risk of airbag fraud and defective airbags.

ASA also testified in opposition to the Motor Vehicle Crash Parts and Repair Act. This legislation has already appeared at the state level and ASA opposed this bill. The model bill promotes itself as an effort to protect consumers but in actuality is an attempt to ensure that certified aftermarket parts are considered identical to OEM parts.

No insurer shall require the use of aftermarket crash parts in the repair of an insured's motor vehicle unless the insurer does all of the following:

i. discloses in writing, when a consumer initiates or renews a comprehensive or collision insurance policy, that the insurer requires use of aftermarket crash parts.

ii. warrants that aftermarket crash parts are at least equal to corresponding OEM crash parts in terms of kind, quality, safety, fit and performance. Replace_ment crash parts certified to meet the standards set by an American National Standards Institute (ANSI)-recognized entity may be deemed equivalent.

iii. pays the cost of any modifications to the parts that may become necessary to effect the repair.

iv. identifies to the consumer, in a written estimate prior to the repair, 1) any aftermarket crash part that will be used and 2) that the manufacturer and/or distributor of the aftermarket part warrants it, rather than the original car company.

Although most states have a notice requirement, typically these are buried in policy agreements and provide no consent requirement or include this consent in the original policy agreement. The NCOIL parts proposal does not call for consumer written consent. ASA supports a formal parts notice and written consent policy. ASA supports state disclosure laws that require insurers and auto collision facilities to obtain the express written consent of vehicle owners before installing alternative replacement crash parts. ASA supports disclosure statements that alert consumers that the use of alternative crash parts other than those manufactured by the Original Equipment Manufacturer may have an effect on their warranties market value.

ASA's testimony highlighted the inadequacies of the consumer notice and consent language in the draft and the problems with equating certified parts with OEM parts. Moppert testified, "After_market crash parts, certified or not, do not assure consumers or repairers that they are equal to OEM. The quality and safety requirements, particularly for offshore parts, may or may not be evident for certified aftermarket parts. Parts certification in the U.S. has been very limited in scope. With 3 percent or less of the aftermarket parts being certified, there is little assurance from any data on quality and safety that can be gleaned for policy discussions."

ASA asked that if the committee opts to continue with a Model Crash Parts bill that the model be limited in scope to a formal consumer notice and written consent process applicable to any crash parts used in the repair, whether they are OEM, aftermarket, certified aftermarket or salvage.

The NCOIL Committee did not make a final decision on whether it would recommend that the airbag fraud or crash parts model bills move forward to the state legislatures. ASA will continue to monitor the NCOIL and state legislative activity on these two issues.

Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry. For more information about the legislative activities of ASA, visit www.TakingTheHill.com.