Rhode Island: NAMIC Urges Supreme Court to Take Appeal in Auto Body Labor Survey Case

NAMIC has filed an amicus memorandum with the Rhode Island Supreme Court urging the court to consider, and ultimately undo, a lower court’s troubling interpretation of a controversial labor rate survey statute.

The memorandum asserts that the lower court’s ruling would lead to absurd results and would hurt consumers.

At issue in the case, Auto Body Association of Rhode Island v. State of Rhode Island Department of Business Regulation, is the propriety of the DBR’s interpretation of a statute that requires auto insurers to conduct a survey of licensed auto repair shops as part of their process of determining the “prevailing labor rate” used to determine what insurers pay for repairs.

The DBR interpreted the statute as applying only to insurers writing more than 1 percent of the market, and requiring only that insurers use the survey results in their determination. However, in August, a Superior Court judge issued a decision and order reversing the DBR’s interpretation, holding that the survey requirement applies to all insurers licensed to write auto insurance regardless of market share and that the survey results are to be the sole basis for determining a prevailing labor rate paid to repair shops.

That decision has been appealed and the order has been stayed until the Supreme Court decides whether to consider the case. The court is expected to take up the matter on Oct. 23.

NAMIC’s memorandum argues that the Superior Court’s interpretation of the statute is counter-intuitive to the point of absurdity since it does not recognize the presence of certain statutory language inconsistent with the interpretation. “The language of the statute clearly implies that insurers are to use the survey results as part of a process of determining a rate,” noted Paul Tetrault, Northeast state affairs manager for NAMIC. “This was not recognized in the court’s decision.”

The court’s erroneous interpretation would enable one industry to essentially establish rates paid by another industry without any kind of procedural safeguards, NAMIC argues in its memorandum. “The survey process is wholly inadequate for this kind of function,” Tetrault noted.

The memorandum also points out that the court’s decision would have the absurd result of requiring surveys by all insurers licensed to write auto insurance, which could mean all licensed property/casualty writers in the state in light of the state’s licensing schemes. “This would be a costly and pointless exercise,” Tetrault asserted.

Ultimately, NAMIC’s memorandum notes, the court’s decision will end up hurting consumers as indicated by the DBR’s prediction that it could lead to a 7 percent to 12 percent increase in auto insurance premiums.

“Hopefully, the Rhode Island Supreme Court will see that the lower court’s decision is inconsistent with legislative intent as well as common sense and will act to replace confusion with clarity,” Tetrault commented.

Direct questions to NAMIC State Affairs Manager Paul Tetrault.

Posted: Tuesday, October 07, 2008 12:00:00 AM. Modified: Tuesday, October 07, 2008 1:03:45 PM.

Salary Survey: Reports updated and available online 24/7/365.

(317) 875-5250 - Indianapolis | (202) 628-1558 - Washington, D.C.

Contact NAMIC | Press | Advertise | Sponsor

We are 1,400 property/casualty insurance companies serving more than 135 million auto, home and business policyholders, with more than $196 billion in premiums accounting for 50 percent of the automobile/homeowners market and 31 percent of the business insurance market. We are the largest and most diverse property/casualty trade association in the country, with regional and local mutual insurance companies on main streets across America joining many of the country’s largest national insurers who also call NAMIC their home. More than 200,000 people are employed by NAMIC members.