      |
|
|
|
Protect yourself from your insurance company’s penny pinching. (Reprinted with permission from AMI AUTO WORLD magazine 03/13/01) If you get into a fender bender and you have collision insurance, your insurance company pays the body shop to install exactly the same kinds of parts that were used originally to build your car. Right? Well, not exactly, your insurance company may tell the body shop that it will pay no more than the going rate for “imitation” parts. There are essentially three types of replacement parts that can be used to repair collision damage:
PHONY FENDERS
The plaintiffs argued that their contract with State Farm entitled them to OEM parts. Statements in reply by State Farm indicated that the company believes replacement parts and non-OEM parts, particularly those approved by CAPA, are just as good and, in fact, do restore a vehicle to its “pre-loss condition.” State Farm was not alone in the contention. Suits challenging at least a dozen other insurance companies allege that they specify non-OEM parts. Among these companies are the Progressive Group, USAA Casualty Insurance Company, Farmers Group of Insurance Companies, Nationwide Mutual Insurance Company, and Allstate. CONSUMERS WIN A ROUND In October 1999, the Illinois jury ruled that State Farm had breached its contract with policy holders by requiring that lower priced, non-OEM parts be used in auto-body repairs. The verdict required State Farm to pay $456 million as compensation to its policy holders by requiring that lower priced, non-OEM parts be used in auto-body repairs. The verdict required State Farm to pay $456 million as compensation to its policy holders to cover roughly 4.7 million claims. State Farm appealed the decision. As we go to press, the appeal hearing is underway; it’s expected to take several weeks. Insurance companies have been watching the State Farm and similar cases closely. Although many insurers continue to refuse to pay for OEM parts, insisting on CAPA parts, other companies are no longer so intractable. Alert consumers can often successfully demand that new or used OEM parts be used in repairing their cars. Is it worth the hassle? Read On. OEM VERSUS CAPA PARTS The issue at the heart of these lawsuits is whether “imitation” parts are as good as those made by a vehicle’s manufacturer. The National Collision Marketing Institute recently conducted a survey that found that 97 percent of OEM replacement parts fit vehicles correctly. But only 27 percent of CAPA-certified parts—and a mere 13 percent of non- CAPA imitation parts—provided and acceptable fit. The survey also found that non-OEM parts generally take longer to install and finish. In fact, the installation time was increased by as much as 33 percent—despite the fact that, according to the majority of repairers, the insurance companies do not reimburse them for the additional time. Another investigation, an 18-month test by the Collision Industry Conference comparing the fit of OEM parts with CAPA-approved non-OEM parts, found that only one in four non-OEM parts submitted for certification in the previous year initially passed the vehicle fit test now required by CAPA. CAPA PARTS SUSPECT We asked Russell Thrall III, editor-in-chief of Auto Body Repair News, whether the big insurance companies were putting the squeeze on body shops, forcing them to do mediocre repair work. He said: “In large part, yes. Many [insurers] have specified non-OEM [parts] regardless of quality. The majority of insurers sought to eliminate the quality issue by financially backing CAPA to be an independent, third-party certification body. But, as we have seen over the past several years, CAPA’s certification program is suspect.” But Thrall doesn’t place all the blame on the insurance companies. “Parts manufacturers, I believe, are the real problem,” he told AWW. “Inconsistent quality is the root cause for collision-repair-facility complaints. This, coupled with the lack of economic need for quality improvement [because so many insurers were specifying non-OEM parts], has driven a dysfunctional marketplace. Unlike installing non-OEM brake pads or other mechanical parts, crash parts have not established a reputation for acceptable quality levels. This is slowly changing.” CAPA ADVOCATES Clarence Ditlow, executive director of the independent Center for Auto Safety, was asked for his reaction of the verdict against State Farm. “If this decision stands”, he told the New York Times, “the auto companies will be sitting fat and happy, getting monopoly prices on crash parts again.” Ditlow makes the point that when his 1987 Geo Prizm was involved in an accident and needed a new fender, he saved $100 by insisting on a CAPA part instead of an OEM part.
Even on an individual basis, the cost differential might be worth taking into consideration. If your car is an older model, or if something less than a perfect, undetectable repair job is acceptable, you might opt to install non-OEM parts. You might luck out. The major problem is that non-OEM parts are inconsistent: some fit perfectly, while others, even those certified by CAPA, fit poorly. AUTO REPAIRER’S VIEW We asked Robert Alessi, co-owner of V and B Collision in Astoria, New York, for his expert advice. “I would rather use an OEM part on any repair,” he said. “In my experience, they always fit the best, and there is very little, if any, time wasted in making the parts fit. Even CAPA-approved parts don’t always fit properly. I have found that no insurance company will require anything but OEM parts for safety-related items.
“Another problem arises with aftermarket window lifters that are weaker than OEM and perform poorly after they are installed. It’s getting a little better since the State Farm verdict, but it is still a struggle to get some insurers to pay for OEM parts or to pay a fair labor rate based on the actual time provided by the carmaker and the current labor rates. Generally, insurance companies pay $35 per hour based on the flat rates in the New York area, for example, are more like $65 an hour”. LEASE PROBLEMS Alessi says he knows of several people who have experienced problems because their leased vehicles were repaired with aftermarket parts. After a vehicle goes off lease, the lease company can demand a stiff penalty if it discovers non-OEM pars were used for repairs. That penalty can be as much as—or more than—the cost of repairing the vehicle with OEM parts in the first place. SALVAGE-PARTS PROBLEMS Other repairers we spoke to complained about the LKQ specification for salvage parts. The gripe is that the insurance companies assume such parts come from the salvage yard in perfect condition. It stands to reason. Though. That if a car was damaged enough to be totaled and end up in a junkyard, most of its bodywork suffered at least some damage. The repairers don’t get paid for the time it takes to make salvage parts usable. Nor do they get paid for the time needed to find exactly the right part. Yet when car owners learn that salvage parts have been used, they sometimes suspect the body shop; they assume their insurance companies would have been willing to pay for brand-new, OEM parts. WARRANTIES Almost all carmakers stipulate that using a non-OEM part for collision repairs voids their warranties. For example, a Toyota warranty states: “Toyota vehicle factory warranties transfer when repairs are completed with new Toyota Genuine Parts. The use of used salvage and/or imitation/counterfeit parts is not covered by the Toyota transferable limited warranty on such parts and all adjoining parts and systems which are caused to fail or rust by those parts.” Note the mention of “all adjoining parts.” That means that if you install a non-OEM part and the original part it’s bolted to rusts or breaks, the original part is no longer covered by your warranty. CAPA parts carry warranties of their own—but they do not cover adjoining parts.
HOW TO TELL OEM FROM AFTERMARKET Every replacement part is supposed to have a “one-time” manufacturer label: once peeled off, it cannot be replaced. After being painted over, the label’s upper layer is removed, leaving a lower layer that identifies the manufacturer. You can demand that the repair shop show you this label. Parts are also supposed to be stamped with the manufacturer’s name or code in an inconspicuous spot (such as the inside lip of a fender); however this stamp is often hidden from view (particularly in the case of bumpers). OEM parts are often stamped with the vehicle’s identification number so that any other number will indicate that a part has been replaced. CAPA-approved aftermarket parts are marked to indicate that they have been certified by the association. WHAT SHOULD YOU DO?
|
In recent years, more and more insurance companies have come under the gun
for the kinds of practices that, in 1998, landed State Farm Mutual Insurance
Company in the Circuit Court of Williamson County, Illinois, facing a class-
action lawsuit. State Farm was accused of breaching its contract to restore its
policyholder’s collision damaged cars to the same condition they had been in
before their accidents. The lawsuit alleged that State Farm’s actual practice
was to specify non- OEM parts whenever they would prove cheaper in repairing its
policy holder’s cars. 
There is no question that non-OEM parts are cheaper and sometimes fit as well
as OEM parts. And these savings can add up to big bucks for the insurers. Court
documents in the State Farm case alleged that the company saved $32 million in
1994 by using non-OEM parts. 
“State Farm will now only call for OEM parts or used LKQ parts. They will not
[approve and pay for] any aftermarket parts unless requested to do so by the
policyholder. On the other hand, most of the other companies I deal with will
write aftermarket parts as long as they are CAPA certified. And only on vehicles
with more than 6,000 miles or older than one year.” Alessi points out that the
issue concerns not only body parts but mechanical and electrical components as
well. “It isn’t just poor-quality aftermarket fenders and doors that are the
problem,” he says. “Most insurance companies [specify] aftermarket air
conditioner condensers and radiators instead of OEM. There are many new
aftermarket parts available that are inferior. There are, for example, taillamp
assemblies that look like the originals but are actually cheep copies that are
brittle and leak water into the lamp housing. There are aftermarket mirrors that
are made of primitive castings that have spaces between the mirror and casing. 
If you decide to allow non-OEM parts to be used in your vehicle, be aware of
any warranties that might apply. For instance, the GEICO insurance company
warranty states: “We warranty that all quality replacement body parts (part not
manufactured by the vehicle manufacturers) identified on your estimate are free
of defects in material and workmanship and meet generally accepted industry
standards. This parts-and-labor warranty will be in effect as long as you own
the vehicle described in the estimate.”