Rhode Island: Court Reverses DBR Ruling on Labor Rate Survey Statute

A Superior Court judge has reversed a Department of Business Regulation decision regarding the implementation of a statute requiring auto insurers to conduct surveys to determine a prevailing labor rate for auto repairs.

According to the court decision, the labor rate survey statute, G.L. 1956 § 27–29–4.4., requires every licensed auto insurer to conduct a labor rate survey, and requires that the results of the survey be the sole determinant of the prevailing labor rate. The DBR had concluded in a November 2007 decision that the statute was ambiguous in several respects requiring the DBR to employ statutory interpretation in order to implement it in a way that made sense. In that ruling, the DBR indicated that it interpreted the statute to require surveys only from insurers writing more than 1 percent of the market in Rhode Island and that the statute did not require insurers to pay the prevailing rate as determined by the survey process, though it required them to consider the survey findings.

“This decision takes literalism to an extreme and absurd level,” commented Paul Tetrault, NAMIC state affairs manager for the Northeast. “The DBR made a good faith effort to apply statutory language in a sensible fashion. The court’s decision says it cannot do that but does not provide guidance on how to apply it.”

The court’s decision apparently requires all insurers licensed to write auto insurance to survey shops, even if they do not actually write any business. “There’s a legal maxim [lex neminem cogit ad vana seu inutilia peragenda] which holds that the law forces no one to do vain or useless things, but that seems to be what this decision requires,” Tetrault said.

Where that part of the decision mandates a clear though impractical action, the part stating that survey results must be the sole determinant of the prevailing labor rate just creates more uncertainty. “The court’s decision does not opine on the fundamental question, which is not whether insurers must use the surveys to determine a prevailing rate, but whether insurers are required by the statute to actually pay that rate for repairs,” Tetrault noted. “In the end, the court’s ruling is just as ambiguous as the original statute. It fails to give insurers guidance.”

The only upside is that this decision may provide the Legislature with good grounds to repeal the statute outright. NAMIC supported an industry coalition during the past legislative session that advocated enactment of bills that would have either repealed the labor rate survey requirement or clarified that the intent was not for the survey results to determine what insurers actually pay.

Direct questions to NAMIC State Affairs Manager Paul Tetrault.

Posted: Tuesday, August 26, 2008 12:00:00 AM. Modified: Tuesday, August 26, 2008 1:16:25 PM.

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