53 shop employees, including 24 repair shop owners, were arrested and charged with insurance fraud. The five-month-long sting operation in Orange County was geared towards discovering automobile repair shops engaging in fraudulent insurance practices. Every arrested body shop worker and/or owner has been charged with one felony count of insurance fraud charged under CP code 550b(2), which reads, in part:
(b) It is unlawful to do, or to knowingly assist or conspire with any person to do, any of the following:
(1) Present or cause to be presented any written or oral statement as part of, or in support of or opposition to, a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.
(2) Prepare or make any written or oral statement that is intended to be presented to any insurer or any insurance claimant in connection with, or in support of or opposition to, any claim or payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.
CHANGE THE WAY YOU DO BUSINESS NOW
When one drills down on the details, you will hear about a wide variance in the application of the law and the details of the alleged violations depending upon the shop. Some have suggested that the whole thing was a “headline grabbing” effort by someone in an election year. A few have even explained that in their case, they told the person playing the sting to leave and suggested they go to their competitor. Ironically, they were accused of trying to aid the person in fraud. Since this will be decided through the court system, I will refrain from passing my own judgment on if these charges will stand up in court based upon how the sting was conducted, if the charges are entrapment, valid interpretation of the law, an enforceable law, or any other angle that might be used as a defense in court. What I will say is that this situation is a clear and blatant example of poor business practices that need to be fixed. All shops might want to make sure they have tightened up their business practices, training and word track …unless they are crooks. Any shop that wants to be above reproach must immediately change their business practices, but you will have to do more than that if you want to avoid being painted by the same broad brush of this sting and the arrests.
CYA: Cover Your Act
First, every honest shop should do whatever they must to cover their act against another sting or stupid employee mistake. As an industry, perhaps we should make an official distinction between estimates written for use as an insurance claim and an estimate for the consumer. Perhaps every estimate written and presented should carry a disclaimer and clarification of what the intended use is. If the estimate is overall, perhaps the disclaimer should say something like “this estimate is written based upon ALL visual damage regardless of any insurance claim or damage from multiple causes. The estimated price quoted is based upon repairing all damage as listed to pre-accident condition based upon universally accepted repair standards and using OEM parts. Any alterations, exclusions and deviations from the components of this complete estimation will change the price. Further, your insurance company’s business practices may request deviations or repair practices and parts use that may or may not be acceptable and consistent with this business and could result in a price change.”
Just to make sure you cover yourself, you may even add some clause about, “if used as an insurance claim, you may need to itemize estimated damage that is not related to the specific accident or that might represent a ‘betterment’.” Be sure and have your attorney review craft the language you elect to use to cover your act.
As a matter of proper business practices, you might want to consider a policy the requires your estimators/sales staff to write two separate estimates where there is damage from separate incidents. Regardless, you still should use a disclaimer that you are not responsible to know when and how the circumstances of the damage occurred.
NO EXCUSE
Regardless of the legal language you can use to cover yourselves, there is not excuse or alternative to being honest and not a party to insurance fraud. For those that told the consumer how to fraud the insurer, there is no excuse. They are the rotten apples that give us all a bad reputation and black eye. These bad characters should go to jail and their shops closed.
On the other hand, we all know that customers often ask if something can be thrown in or you can help them cover their deductible. Fine, you can do that, but at your cost and not hidden in the cost passed on to the insurer. The key to success and not going to jail may be in making sure all of your employees are aware that no matter how slow the economy gets and how much you need another repair, you NEVER participate in insurance fraud.
Beyond the philosophical position, businesses need process, procedures and tools to make sure our employees do it right every time. Consider creating specific “word track” that keeps them from saying the wrong thing and gives them the right thing to say, instead. Many times an employee can be stumped and not know what to say, or how to say it so they don’t run off the potential sale. Process is key here. Word track is essential. Once you craft the right word track that diplomatically states your policy and legal position in such a way as to not offend the consumer, write it down! Then, put it on a poster prominently displayed in the lobby of the shop. Next, get it printed on 3 x 5″ cards and a stack left on every employees workstation. With these simple tools in place, your employees can point to the poster or hand the consumer the card and say, “This is the law and our policy, but I can help you in this legal and honest way …”
Silver Lining?:
To find a positive aspect of this whole incident is a stretch at best to find a silver lining. This is yet another blemish on our industry. Perhaps the only upside is that the laws and business practices will be further defined and clarified by this case. The fuzzy line defining if the shop is writing an estimate for the consumer or for the insurer will be tested and determined. At least that will make it clear.
MARKETING:
The worst part of the media frenzy was the mistaken idea that by identifying these body shop, consumers would know which shops to avoid. I suspect that instead, crooked consumers and those wanting to cut corners now know which shops will help them! Ironically, this may have been the best marketing for the wrong shops. Unfortunately, the media did not publicize those that were tempted, tested, and still advised the consumer not to break the law. Those that are not crooks need to market themselves against the association with these other guys. Now is the perfect time to make a distinction in them minds of the consumer between the “shinola and the other shops! If you are that honest shop, make sure you market yourself in such a way as to make the distinction. Use the bad publicity and notoriety to elevate your business and your honest business practices.
Putting everything else aside, this is a wake up call to all shops everywhere to tighten up your business practices and ensure you have word track and procedures that will cover your act and keep you and your employees out of jail.