On December 31, 2012, the California Department of Insurance received approval for the adoption of amendments to regulations which govern written estimates of auto repairs and non-original equipment manufacturer (non-OEM) replacement crash parts. The amendments will become effective on January 30, 2013. Insurers will be required to comply with the amendments in handling claims on and after March 30, 2013.

The amended version of subsections (f) and (g) of regulatory section 2695.8 is attached here.

The amendments to subsection (f) require an insurer’s written estimate of an auto repair to comply with standards described in regulations that are applicable to auto body repair shops. The subsection (f) amendments also specify requirements for adjustments that an insurer makes to a repair shop’s estimates.

The amendments to subsection (g) require an insurer that specifies the use of non-OEM replacement crash parts to provide a written disclosure that it warrants that those parts are at least equal to the original equipment manufacturer (OEM) parts in terms of kind, quality, safety, fit, and performance. The subsection (g) amendments also require an insurer that becomes aware that a non-OEM replacement crash part is not equal to the OEM part to immediately cease specifying the use of the part. In addition, the subsection (g) amendments require an insurer to pay costs related to the removal and replacement of non-OEM parts.

Insurers objected to the amendments at the public hearing on the amendments and in written submissions to the Department of Insurance.

Insurers argued that the department lacked the authority to impose auto body repair shop regulations on insurers. Insurer representatives also contended that the regulatory provision that an insurer must warrant a non-OEM part is inconsistent with a Business & Professions Code statute which explains that non-OEM parts warranties are provided by the manufacturer or distributor of the parts. Insurers pointed out that the amendments would be harmful to the public because the amendments’ restriction on the use of non-OEM parts will lessen competition in repair parts and will lead to higher repair costs.

Barger & Wolen will continue to track the developments of these new regulations.