The Truth About Collision Repairs and Insurance Company Involvement

The Truth About Collision Repairs and Insurance Company Involvement

When you take your vehicle to a well-known and highly-rated body shop after an accident, it’s only natural to expect that the repairs will be handled by experts who will restore your car to its original condition. Unfortunately, from my experience, the reality is far more complex and often disappointing. While a shop’s reputation may give you some confidence, the tangled web between collision repair facilities and insurance companies can leave you with a vehicle that looks good on the surface but is far from safe. Let me explain why this happens and what you can do to protect yourself.

The Influence of Insurance Companies on Repair Quality

Many people assume that taking their vehicle to a reputable body shop guarantees expert repairs. While that should be the case, the real issue often lies in the relationship between the repair facility, the insurance company, and you—the consumer. Most of us rely on our insurance policies to cover collision repairs, while assuming that the shop will follow best practices. However, many repair facilities are not equipped to deal with the complexities of insurance policies, leaving you at a disadvantage.

In my years in the industry, I’ve seen how insurance companies frequently intervene in the repair process, aiming to reduce costs. They often pressure repair facilities to use cheaper, non-OEM (Original Equipment Manufacturer) parts or alternative repair methods that deviate from the manufacturer’s guidelines. While this approach may benefit the insurance company’s bottom line, it often results in a vehicle that may look fine but could be unsafe in future accidents.

The Financial Loophole: When Repairs Don’t Reflect the True Cost

An insurance policy is designed to indemnify you for a financial loss. While the physical damage to your car happens at the time of the accident, the financial loss isn’t realized until the repair facility invoices the work. Consequently, if the insurance company influences the shop to ignore your manufacturer’s repair guidelines and requirements or otherwise cut corners, use alternative parts like aftermarket or used parts, ultimately never being billed for what should have been done, hence because it was not done, you haven’t incurred the full financial loss that your policy should have covered. This loophole allows insurance companies to save money at your expense, often leaving you with an unsafe vehicle, while passing liability onto the collision center if something catastrophic were to happen in the event of a subsequent accident.

One historic example of this was the John Eagle Collision Center vs. Tracy Morgan: In this high-profile case, the shop repaired a Honda Fit using adhesive instead of welding as specified by the manufacturer, resulting in severe injuries to the occupants during a subsequent collision. The jury awarded the plaintiffs $42M, emphasizing the importance of adhering to OEM guidelines and the dangers of cutting corners to save costs. The judge is on record stating that when John Eagle made the decision not to follow the OEM guidelines- that was a business decision, thus holding them liable for the injuries sustained in the subsequent accident.

The Risks of Direct Repair Programs (DRP)

Insurance companies also control costs through the use of Direct Repair Programs (DRP), Preferred Partners, or Network Shops. These programs may seem convenient for consumers, but they often prioritize cost-cutting over repair quality in exchange for a steady stream of referral work. DRP shops, operating on tighter margins, may cut corners—such as not completing all manufacturer-required repairs or using inferior parts—to meet the insurance company’s demands. While this reduces costs for insurers, it can compromise the safety and durability of your vehicle. Make no mistake, shops working under this model are working to serve the hand that feeds them, and not working in the best interest of the consumer.  As such, I have seen DRP contracts that have explicit verbiage limiting a repair facility ability to properly inform the consumer of their rights, effectively cuffing their hands in trade from referral work.

Non-DRP shops are typically more inclined to follow the manufacture’s guidelines, though this isn't always guaranteed. When genuinely advocating for the consumer, these shops often find themselves at odds with the insurance company. The insurer might label the shop as difficult, while the shop—feeling the pressure—may falsely imply that they are constrained by what the insurance company authorizes. This happens because repair facilities, although well-intentioned, are often not experts in policy law and aim to avoid upsetting you, the customer. Unfortunately, this well-meaning approach can backfire, leading to delays, substandard repairs, additional financial burdens, and, ultimately, a vehicle that may be unsafe to drive because the manufacture’s guidelines were not properly followed. The reality is, only you can authorize the repair work, including the choice of parts.

The Importance of OEM Parts and Understanding Your Policy

Not all insurance policies are created equal, and many may not cover the full cost of OEM parts or other expenditures relating to the loss. It’s crucial to research and select a policy that does. That being said, most repair centers won’t ask for a copy of your policy and may default to the cheapest, easiest option as they have been “conditioned” by the insurance company’s typical pressures. However, it is important to understand that you have the right to insist on OEM parts, even if it means coming out of pocket for the difference. This ensures that your vehicle is repaired according to the manufacturer’s standards, preserving its safety and value.

In the class action lawsuit, State Farm vs. Avery, the lawsuit revolved around State Farm’s use of non-OEM parts in vehicle repairs. The case highlighted the risks associated with using substandard parts and the insurance company’s role in influencing repair decisions. The Illinois Supreme Court initially awarded the plaintiffs $1.18 billion, although the decision was later overturned. Nonetheless, it underscores the legal complexities surrounding insurance company practices, repair standards, and part selections.

A Real-Life Example: The Human Cost of Insurance Company Interference

To illustrate the human side of this issue, let me share a story. I once had a client—a grown man, who worked in construction—who sat in my office with tears streaming down his face. He needed his truck to get to work, which contained his tools, and couldn’t afford to lose his job. The insurance company had made the process so difficult for the non-DRP, dealership collision center handling his repairs, that the work had been delayed for weeks. He was stuck between a rock and a hard place, and the emotional toll was evident. He was desperate for a solution. Often times this leads to consumers making decision out of pure survival needs, creating additional challenges.   

This is just one example of how the relationship between insurance companies and repair shops can lead to unnecessary stress and hardship for consumers. It underscores the importance of understanding your rights and choosing a repair facility that adheres to OEM guidelines.

Conclusion

The process of repairing a vehicle after an accident is far more complex than it may seem. Insurance companies often prioritize cutting costs over ensuring quality repairs, leaving consumers with vehicles that may not perform as expected in future accidents. Understanding your rights, choosing a repair facility that follows OEM guidelines, and being aware of the potential pitfalls of insurance company involvement are crucial steps in protecting yourself and ensuring that your vehicle is repaired to the highest standard.

In summary, while it’s reasonable to expect expert repairs from a well-known collision repair facility, the reality is that insurance company involvement can significantly compromise the quality and safety of those repairs. By understanding the dynamics between repair shops and insurers, and by taking control of the repair authorization process, you can better protect yourself and ensure that your vehicle is repaired correctly and safely.

Understanding Diminished Value: How Appraisals Define Loss and Protect Your Financial Position

When your vehicle is involved in an accident, even after it has been meticulously repaired, its market value may not be the same as it was before the incident. This reduction in value is known as "diminished value," and it can have a significant impact on your financial position. In this article, we will explore the concept of diminished value, how it affects you as a vehicle owner, and the crucial role that appraisals play in defining that loss. Drawing from my career experience, I’ll also highlight relevant case law and real-world examples where appraisals made a substantial difference in claim outcomes.

Understanding Diminished Value

Diminished value refers to the reduction in a vehicle’s market value after it has been damaged in an accident and subsequently repaired. Even when repairs restore the car to pre-accident condition, potential buyers may view a vehicle with a damage history as less desirable, resulting in a lower resale or trade-in value. In my experience, many vehicle owners don’t realize the impact of diminished value until they try to sell or trade their vehicle and discover it’s worth far less than expected.

The Role of Appraisals in Diminished Value Claims

A professional appraisal is one of the most important tools for protecting your financial position after an accident. While an appraisal doesn't necessarily protect the car's market value, it serves to define the loss in value that results from the accident. This clear, objective assessment is critical when filing a diminished value claim with your insurance company.

From my perspective, an appraisal provides the evidence needed to substantiate your claim, showing precisely how much value your vehicle has lost. Without a solid appraisal, insurance companies may attempt to downplay or deny diminished value claims altogether.

For example, in State Farm Mutual Automobile Insurance Co. v. Mabry (2001), the Georgia Supreme Court ruled that State Farm must pay for diminished value claims, even if a vehicle was repaired to pre-accident condition. The court recognized that a vehicle's value could still decrease due to its accident history, which must be compensated. Read more about the Mabry case.

Another example is the Jacques v. Allstate case, where the plaintiff successfully used an appraisal to demonstrate the loss in value after an accident. This appraisal was key to obtaining a significant settlement, highlighting the importance of accurate documentation in these claims. See details of the Jacques v. Allstate case.

How Appraisals Support Financial Compensation

Throughout my career, I’ve seen numerous cases where a well-supported appraisal was essential for securing fair compensation. In one particular case, a client’s vehicle was in a serious accident, and while the repairs appeared flawless, the car’s value had dropped significantly. With a thorough appraisal, we were able to clearly define the diminished value, which led to a successful claim and a settlement that properly indemnified the client.

An appraisal involves more than just evaluating the damage; it requires a deep understanding of market trends, vehicle history, and repair quality. That’s why I always recommend that vehicle owners obtain a professional appraisal after an accident, especially if they plan to file a diminished value claim. It’s not only about knowing the value but also about ensuring that you’re fully compensated for your financial loss.

Conclusion: Protecting Your Financial Position

In conclusion, while an appraisal may not restore your vehicle’s original market value, it is a vital tool in defining the loss and ensuring you are fairly compensated for it. Diminished value is a real concern for vehicle owners, but with the right approach and proper documentation, you can protect your financial position. As demonstrated in cases like Mabry and Jacques, being proactive and informed can make all the difference when dealing with insurance companies. Check out this guide on how to prepare for a diminished value claim.

In my view, understanding and addressing diminished value is not just about getting what you’re owed—it’s about ensuring you don’t suffer additional financial loss after an accident. By taking the right steps, you can safeguard your investment and move forward confidently.