Adjustment of Motor Vehicle or Trailer Damage Claims

THE STATE OF WYOMING Mark Gordon Governor # Insurance Department 106 East 6th Avenue ♦ Cheyenne, Wyoming 82002 Jeffrey P. Rude Insurance Commissioner # BULLETIN NO. 01-2021 TO: All Interested Parties FROM: Jeffrey P. Rude, Wyoming Insurance Commissioner JR DATE: January 8, 2021 SUBJECT: Adjustment of Motor Vehicle or Trailer Damage Claims This Memorandum is intended to provide guidance regarding the practice of balance billing consumers as a result of a motor vehicle or trailer damage claim. The guidance provided in this memorandum applies to all motor vehicle polices issued in Wyoming, including but not limited to private passenger automobiles, recreational vehicles, commercial vehicles, motorcycles, or any other risk insured as a motor vehicle or trailer. The primary purpose of insurance is to indemnify the insured against losses for which he/she becomes legally responsible. The types of losses to be indemnified by the insurer are defined in the policy, and the policy also explains any limitations applicable to the indemnification to be provided to the insured. When a loss occurs to a motor vehicle or trailer, the insurer has three options from which to choose regarding adjustment of the insurance claim. Specifically, pursuant to Chapter 33, Section 4 of the Department rules and regulations, an insurance company has the option of settling a motor vehicle or trailer loss by 1) Paying for the loss in its entirety in money based on an appraisal of the damage sustained by insured's vehicle; 2) Repairing the damaged property; or 3) Replacing the damaged property. When option 2 is elected and the vehicle is taken to a repair shop, the amount to be paid for the repairs is frequently limited under the terms of the policy to the "usual and customary amount" charged by repair facilities in the area. The Department has become aware of instances where insurers have refused to pay the entire cost of the repair unless the consumer takes the vehicle to a repair facility that has contracted with the insurer for specific repair and labor rates. In the event the consumer elects to use the repair shop chosen by the consumer rather than a repair facility that is contracted with the insurer, the insurer has refused to pay the entire cost and the consumer has been balance billed for the amount not paid by the insurer. Frequently, when the Department has inquired about the balance bill received by the consumer, the reason provided by the insurer for not paying the entire amount of the repair is that the rate charged by the consumer-selected repair facility is more than the amount charged by the repair facility with which the insurer has contracted. When entering a contract with an insurer, the amount charged by a repair facility is subject to negotiation and may or may not reflect the "usual and customary amount" charged by repair facilities in the area. Refusing to pay the entire amount of the repair cost unless the consumer goes to the insurer's contracted repair facility may negatively impact a consumer's ability to choose the facility that will repair their property, and unreasonably interfere with the automobile repair industry's ability to maintain a competitive, free and fair market. 1 Pursuant to Wyo. Stat. §26-13-124, an insurer is required to settle claims based upon a reasonable investigation based upon all the available information. Part of the available information in any motor vehicle damage claim is the specific terms and conditions of the insurance contract. Insurers are expected to settle claims consistent with the specific terms in the insurance contract. Determining the usual and customary cost of repairs is also part of a reasonable investigation. It is understood that on occasion, a repair facility may charge amounts that are over and above the usual and customary amount charged by other repair facilities in the area. However, if an insurer intends to refuse to pay the entire repair cost due to the amounts charged by the repair facility chosen by a consumer, the insurer should be prepared to provide documentation of the investigation they conducted to determine what the usual and customary charges are in the area where the repair is being done. In addition, insurers should be prepared to identify the policy language upon which they rely that allows them to pay an amount less than the actual cost of the repair. Finally, an insurer should be prepared to provide documentation that they communicated the basis of their decision to pay less than the full amount charged to the consumer, and that they provided the consumer the opportunity to utilize a more competitively priced repair facility, whether contracted with the insurer or not, prior to incurring expenses beyond what would be paid by the insurer. As a licensed producer or adjuster, you should also be aware of the language in the insurance products you sell, and the potential impact those provisions may have on a consumer, so that you can address any Department inquires and provide correct information to your clients in the event of an automobile insurance claim. Failure to follow this guidance when adjusting motor vehicle or trailer damage claims in Wyoming may result in an administrative action. If there are questions regarding the above, please feel free to contact the Department Staff Attorney at the Department main telephone number (307) 777-7401. 2