Dollars Times Hours = Inadequate

by Kevin Gallerani, AASP/MA President

Many insurance companies insist on paying dollars times hours for refinishing materials, but with shops’ costs increasing all the time, we all know that’s just not a realistic way to calculate what we’re owed. What some shops may not know, though, is how to combat the pressure from insurers who try to force the issue. 

The answer is clearly laid out in Massachusetts regulations; 212 CMR 2.04(1)(e) specifies that “With respect to paint, paint materials, body materials and related materials, if the formula of dollars times hours is not accepted by a registered repair shop or licensed appraiser, then a published manual or other documentation shall be used unless otherwise negotiated between the parties.”

Essentially, the law says to provide documentation if you cannot agree on a dollars times hours amount, so in the past, my shop has printed out Mitchell’s guide as documentation. Around 75 percent of insurers will pay an appropriate amount for paint materials based on that guide, but that still leaves a faction that will not. We respond to the 25 percent that still refuse to pay properly by providing a secondary document; we print a pour sheet that shows exactly what we mixed for that individual job.

Still, some of them complain, despite the fact that those two documents tend to result in very similar amounts. You cannot get much more accurate than a pour sheet that shows the exact ounces measured on the scale, but with certain insurers continually objecting to pay accurate amounts, our shop is looking into purchasing another material calculator that will enable us to provide a third layer of documentation to these insurance carriers.

We are leaning toward Eagle MMS, which lists everything from tape to booth supplies, based on percentages. It covers all the actual materials that we should be getting paid to use on a repair. Of course, Eagle isn’t the only company that makes this type of product. There are other calculators available on the market that do the same thing, so if you’re thinking about investing in one for your shop, take a look at your options to decide what makes the most sense for your business. I know that 3M’s RepairStack allows users to create invoices, and my paint provider also offers an in-house invoicing tool that can be customized for the shop. I’m pretty sure most refinish manufacturers provide inventory tracking and invoicing methods as well. There are plenty of options out there for shops to choose from, but what’s important is that you choose one or more to make sure that you have that documentation. And when it comes to documentation, I believe more is better. 

After all, shops only get paid for so many things. We sell labor, and we sell parts. (And we all know that we can only do so much with today’s pitiful parts discounts.) We should also be making money from paint and materials. We should be collecting a fair amount for everything we do, and that means not only being compensated for the cost of paint and materials but also being allowed to charge a reasonable markup on those products because we are not charitable organizations – collision repair shops are businesses, and we’re in this business to make money. We shouldn’t be forced to sacrifice our profits for the benefit of massive corporations that collect more in premiums in one month than any of us will ever see in a lifetime! 

Now, you may think it’s pretty ridiculous that we need to invest in a new tool and provide three different documents just to collect what is owed to us. And I think you’re right! Why do we have to provide evidence in triplicate?! Will it even make a difference? I’m not sure, but it seems like a pretty good way to make sure we have a solid defense if we have to move forward with filing complaints to the Auto Damage Appraisers Licensing Board (ADALB) which is the next step, in my opinion. 

The more information we can provide, the better off we should be. If the insurer wants to ignore one document, provide another and ask them, “Which one do you want to pay?” They can’t tell me all that documentation is wrong, especially when the figures are so close. It’s a lot of work, but we can bombard them with paperwork. The more invoicing we throw at them, the more they have to read to argue; the more evidence we provide, the better the odds are in our favor. But if you don’t ask for it, you’re not going to get it. Let’s not forget that documentation is also key for those of you who balance bill the customer.  

As an Alliance, we need to hammer down insurers and keep them busy. Let’s force them into defending their decision when refusing to pay for proper and fair reimbursement for P&M. And if you want to complain about not getting paid, file a complaint with the ADALB. They’re the ones who should be able to do something about this nonsense. If you need help, we are here to assist you in the process. Please contact us.

Want more? Check out the August 2024 issue of New England Automotive Report!