Are You Being Duped Into Breaking The Law?

by Evangelos “Lucky” Papageorg, AASP/MA Executive Director

There is a legal principle that states, “Ignorance of the law is no excuse.”

Unfortunately, with the multitude of rules and regulations collision repairers must navigate, it’s nearly impossible to be aware of them all. Some laws may be outdated, akin to the “blue laws” in Massachusetts. (Did you know that one such law prohibits grazing cattle on the Boston Common?!) Thus, it’s important to remain vigilant. Additionally, regulations that were well-intended at the time of enactment may now be interpreted differently. As circumstances change, the original intent and the beneficiaries of these laws can shift significantly.

Are you aware of the specific wording in current regulations regarding labor rates for collision repairs? Massachusetts law under Chapter 100A, Section 8(c) explicitly states: “…No registered motor vehicle repair shop or other person shall…charge or offer to charge a higher rate or discount for an insured repair than for an uninsured repair…” This language may have been originally designed to protect insurers, addressing concerns that collision repairs would inflate costs for insured repairs while offering lower rates for uninsured customers. The lower charges to the uninsured dealt not only with labor rates, but also repair versus replacement of parts, procedures and the types of parts being used. Today, we see that the governing regulations address these issues on behalf of insurers under the guise of cost containment. 

Before I go any further, I want to clarify that I am not an attorney nor am I attempting to practice law. For a comprehensive legal perspective on this issue, please refer to attorney Sean Preston’s article on page 32 of this issue.

Here’s how I personally view the situation: Nearly 40 years later, the collision repair industry has evolved drastically. The insurance industry has not kept pace with fair and equitable reimbursement rates for repairing modern, technologically-advanced vehicles. They often rely on contracts established decades ago to define what they consider a “prevailing competitive labor rate” and to dictate what constitutes “standard and accepted practices” in collision repair.

It’s fair to say that many collision repairers could unknowingly find themselves breaking the law due to the intent and spirit of labor rate regulations as stated in Chapter 100A, Section 8(c). Remember, “pleading ignorance” is not a viable defense. Violations could lead to unfair claims handling suits under MGL 93A, which could result in penalties of up to triple damages if found guilty.

This concern is especially relevant for repair shops that are on referral programs or have contracts with insurance companies. While you may offer discounts to insurers for sending work your way, having multiple labor rates could pose a problem. It might be argued that your posted labor rate should be the lowest rate you’ve contracted with an insurer. This is particularly frustrating and unsustainable in today’s economic climate.

You could inadvertently be setting yourself up for a lawsuit if you do NOT practice balance billing on all your insurance-related repairs. If you are an independent shop not listed with insurers, Chapter 100A, Section 8(c) essentially mandates that you charge your posted labor rate for all work. A possible scenario which could arise if you do not balance bill: A vehicle owner pays you out of pocket for a 23-hour repair at your posted rate of $77/hour*, totaling $1,771 in labor, but their insurer would only have reimbursed you at $44/hour. The customer might claim you overcharged them by $759 if you are not billing all your work – regardless of the presence or absence of insurance – at the rate of $77/hour. If they raise this issue and you do not reimburse them, they could sue for “treble” (times three) damages and you could face a court judgment of $2,277 – definitely a situation to avoid! (*NOTE: This hourly rate dollar figure is only used as an example, and is not intended to set a specific minimum or maximum labor rate.)

If you are a referral or contract shop, the same language in the regulation could be interpreted to say that you must post your labor rate at the lowest amount you’ve agreed to with an insurer. This would include any additional fees for procedures and total losses. If you are an independent shop with a fair posted labor rate, you should charge that rate regardless of whether insurance is involved. Yes, that means practicing balance billing! If you fail to do so, you risk being duped into breaking the law; this issue also extends to parts used and other repair-related services.

Shops that have embraced strategies like “Breaking Free in ‘23” and “Getting More in ‘24” have implemented balance billing and are seeing the benefits while safeguarding against potential unfair claims handling. These same shops are also positioning themselves to “Thrive in ‘25.” 

It’s crucial to understand that after reading this piece, along with Preston’s report, it may evoke fear in those who do not fully grasp the implications. Independent shops might feel pressured to lower their posted labor rates to match those dictated by insurers. Please do not succumb to this fear. Empower yourself by recognizing your right to balance bill! Contrary to warnings sent by the Division of Standards at the behest of insurance companies, and by some insurers with their estimates, you are NOT breaking the law by balance billing unless you have a contract with an insurer. This interpretation of the language in Chapter 100A, Section 8(c) should not cause you fear. It should empower you to do the right thing by following the regulation language, charging your posted labor rate across the board and balance billing when the vehicle owner’s insurance carrier fails to cover the entire cost of the repair – a charge you determined allows you to accept the liability for doing the repairs while maintaining a reasonable ROI on your investment and business.

To avoid becoming a defendant in a lawsuit, you should independently consider your options:

•  Option 1: “Go all in.” Join every referral list and agree to work for an unfair reimbursement rate, which you accept as the “prevailing rate,” if you do not balance bill.

•  Option 2: Decide to opt out of all referral lists, thereby ceasing to be part of the problem, and charge what you determine to be your fair and reasonable posted labor rate, practicing balance billing when insurance is involved.

•  Option 3: Continue as an independent collision repairer and charge your fair posted labor rate regardless of insurance involvement, i.e.: balance billing as necessary. 

Keep in mind that your customers are very familiar with balance billing and have been getting balance billed by their medical professionals for years based on health insurers’ underpayment for services rendered by their doctor! I have yet to hear a patient say: “I am not going back to my doctor because he balance billed me for what my insurance did not cover.”

Ultimately, the choice is yours. The Alliance is here to assist you with any questions. If you are not already a member, see the application on page 7. It’s a small price to pay to ensure you are not being duped!

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