Lori Benson was driving home one day in May when a car that seemed to come out of nowhere crashed into the side of her Volkswagen Beetle.
Benson indisputably was not at fault. The other driver had apparently blown through a stop sign before plowing into her car, Benson said. Neither driver was hurt, but the back half of the Beetle was badly mangled.
Benson figured the at-fault driver’s insurer — Geico — would step up to cover the full cost of repairing her Beetle. But she was wrong. Benson got stuck paying a $631 bill that she’s now fighting Geico over.
If your vehicle is damaged by someone else and you’re not at fault, you are supposed to pay nothing — no deductible and no portion of the repair bill. Either the at-fault driver or, more likely, the driver’s insurer is responsible for returning your vehicle to its pre-crash condition.
And that’s what Benson, 65, of Onset, expected to get: full compensation.
But what most consumers don’t know is that most insurance companies, including Geico, impose a cap on how much they will pay an auto body shop for labor. If a shop charges more, blameless parties like Benson must pay the difference out of pocket.
Insurers insist that, as Geico wrote to Benson, “You have the right to go to the repair shop of your choice.” But that is true only if you are willing to pay hundreds of dollars for repairs at a shop that doesn’t adhere to the cap.
Geico pays $41 an hour for labor, according to a letter from Geico to Benson. But the highly rated, licensed auto body shop where Benson had her car repaired charged $50 an hour, which she agreed to upfront.
But before you blame that body shop for having a high labor rate, consider that the labor rate cap most insurers impose on shops is among the lowest in the country.
Geico’s cap is only slightly higher than the labor rate insurers were paying 15 years ago. And only about $10 higher than they were paying 35 years ago. That means the labor rate has increased by only about 33 percent while the consumer price index has surged at four times that rate.
It’s enough of an issue that the Legislature last year appointed a “special commission on auto body labor rates” to study it and make recommendations.
The way insurers keep labor rates low is by negotiating agreements with some shops for highly discounted rates. Those shops are designated as “preferred repair shops” and their rates as “prevailing.”
Only a minority of body shops are “preferred,” but many other shops without such agreements conform to those rates to avoid losing business. (Each insurer negotiates its own prevailing rate; most of them are around $41 an hour.)
Geico is a top auto insurer in Massachusetts, with more than 15 percent of the market in 2020. Geico insures hundreds of thousands of potential customers for auto body shops.
Most auto body shops are highly dependent on work paid for by insurers because most of the damaged vehicles that come into their shops get banged up in accidents, and fixing them is almost always covered by insurance.
In fact, in Massachusetts, you are required to have insurance in case you damage someone else’s vehicle. If you are at fault, you face serious financial consequences, including a deductible and up to six years of expensive surcharges. If your coverage is too low to cover all costs, you are personally liable.
If you are blameless, the other driver or the driver’s insurer is supposed to cover your repairs.
The commission on auto labor rates included legislators, state insurance officials, and representatives of the auto body and insurance industries. It conducted public hearings and accepted reams of written testimony. In the end, it recommended establishing a standing “labor rate advisory board.”
That advisory board would annually conduct various surveys on labor rates to “provide a basis and recommendation for … a fair and equitable labor rate,” according to the commission report. When commission members were polled on the report, seven of the 10 members said they viewed it favorably, while the three representatives of the insurance industry viewed it unfavorably.
The commission report says that, since 2008, the auto body labor rate “has not increased significantly” and auto body shops across Massachusetts “have stated that without an increase … [they] will begin to close.”
The insurance industry’s position, as stated by one of its top lobbyists at one of the hearings, is that “market forces” are responsible for stagnant labor rates: There is less work available due to fewer accidents (thanks to advances in technology), leading to heightened competition among shops. In 2019, there were 22 percent fewer physical damage claims filed compared with 2003, according to the lobbyist.
The insurance industry has also said auto body shops in Massachusetts bill for more hours compared with shops in other states, making the cost to repair a vehicle in the state only slightly less than the national average.
I have not closely scrutinized the statistical assertions of either the auto body or insurance industries. But I’m pretty sure I know the one point made by the insurance industry that impedes passage of any of the several bills now on Beacon Hill that would mandate a labor rate increase. If auto body labor rates are significantly increased, the insurance industry told the commission, “there would be an increase in insurance premiums paid by Massachusetts residents.”
No consumer wants that. But is it fair for innocent parties like Benson to get whacked for hundreds of dollars for choosing an independent shop?
Benson said the shop she went to was recommended by the VW dealership where she bought her Beetle. Plus, she’d had work done there before.
I was introduced to Benson by Jack Lamborghini, co-owner of Total Care Accident Repair in Raynham, where Benson’s Beetle was repaired. Lamborghini, who was a member of the commission, first got in touch with me in an e-mail asking me to look into the labor rate issue.
Lamborghini said he tells potential customers upfront that he charges more than the prevailing rate. Some decide to go elsewhere. He ordinarily charges $64 an hour for labor but discounts the rate to $50 an hour for customers who are being squeezed by the prevailing rate cap.
I talked to two other Total Care customers. Each shared e-mail exchanges with insurers showing the prevailing rate cap is not uniformly enforced. In one case, the insurer agreed to reimburse the customer $448; in the other, the insurer offered to reimburse half of the $681 bill the customer had paid.
But Benson has received no indication Geico is willing to reimburse her any amount, despite her dogged efforts. “We have not changed our position,” Geico wrote to her in its most recent e-mail.
Benson said she will file a $631 claim in small claims court. I think she’s got a good chance at winning, but even if she does, there’s got to be a better way to protect the blameless when their vehicles are damaged by others and they want to go to an independent shop.
Got a problem? Send your consumer issue to sean.murphy@globe.com. Follow him @spmurphyboston.