Body Shops and Insurer Interests

HB 1131 adds Chapter 2306, Occupations Code, effective September 1, 2003. Generally, an insurer may not own or acquire an interest in a "repair facility." (1)

• An insurer that owns an interest in a "tied repair facility" (2) and was open for business or on which construction had commenced on April 15, 2003, may maintain that ownership interest and may operate or relocate that facility. An insurer that owns an interest in a repair facility may use only one "favored facility agreement." (3)
• The terms under which an insurer enters into a favored facility agreement must be identical for all repair facilities, including a "tied repair facility."
• An insurer may not cancel a favored facility agreement until the expiration of the 30th day after the date on which the insurer provides notice to the repair facility of the insurer's intent to cancel. An explanation for the cancellation shall be included with the notice.
• If an insurer has reasonable grounds to believe that the repair facility has committed fraud, then an insurer may summarily cancel its favored facility agreement.
  
  Notes
  (1) "Repair Facility" engages in the business of repairing or replacing the nonmechanical exterior or interior body parts of a damaged motor vehicle.
  (2) "Tied Repair Facility" is a repair facility in which an insurer owns an interest.
  (3) "Favored Facility Agreement" is an agreement between an insurer and a repair facility under which the insurer agrees to recommend, directly or indirectly, to its policyholders or other beneficiaries under the insurer's policies, that the policyholder or other beneficiary obtain repairs at that repair facility or in any other way agrees to influence its policyholders or other beneficiaries under the insurer's policies to obtain repairs at that repair facility.

Notice. A notice shall be prominently posted in a repair facility in which the insurer owns an interest stating: "This repair facility is owned in whole or in part by (name of insurer), you are hereby notified that you are entitled to seek repairs at any repair facility of your choice."

Prohibitions. An insurer may not:

1. Condition the provision of a produce, service, insurance policy renewal, pricing, or other benefit on the purchase of any good or service from a tied repair facility.
2. Share information with a tied repair facility that is not available on identical terms and conditions to other repair facilities with which the insurer has entered into a favored facility agreement.
3. Engage in a joint marketing program with a tied repair facility.
4. Provide a tied repair facility a recommendation, referral, description, advantage, or access to its policyholders or other beneficiaries under its insurance policies that is not provided on identical terms to other repair facilities with which the insurer has entered into a favored facility agreement.
5. Provide a tied repair facility access to the insurer's products or services on terms and conditions different from those under which the insurer provides access to the same products or services to another repair facility with which the insurer has entered into a favored facility agreement;
6. Allow a tied repair facility to use the insurer's name, trademark, tradename, brand, or logo in a manner different than that allowed for any other favored facility;
7. Subsidize the business activities or operating expenses of a tied repair facility;
8. Directly or indirectly require an insurer's policyholder or other beneficiary under the insurer's policy to obtain a damage estimate on a vehicle covered by the insurance policy at a tied repair facility;
9. Authorize or allow a person representing the insurer to recommend to a policyholder or other beneficiary that either obtain repairs at a tied repair facility, except to the same extent that the person recommends other repair facilities with whom the insurer has entered into a favored facility agreement;
10. Require a policyholder or beneficiary to use a claims center located on the premises of a tied repair facility.
11. Enter into a favored facility agreement exclusively with its tied repair facilities;
12. Retaliate or discriminate against a person who:
    

A. Files an action as provided; or,
B. Assists or participates in any manner in an investigation, judicial proceeding, or other action brought or maintained as provided; or,

13. Include earnings or losses of a tied repair facility in a rate filing.

An insurer may provide support services to its tied repair facility if those services are priced at a level that is fair and reasonable to both the insurer and the tied repair facility; and do no confer a competitive advantage to the tied repair facility.

Penalties

A person, including a repair facility, who is aggrieved by an insurer's violation of the above requirements, may bring an action for an injunction or other relief to compel the insurer to comply. In addition to other appropriate relief, the court may impose a civil penalty of between $1,000 and $5,000 per violation. The civil penalty shall be deposited in the state's general revenue fund.