Volume 14, Issue 2 - March/April 2012

legal updates


Bill Defining TPA Code of Conduct Passes Michigan Senate Unanimously

The Michigan State Senate has passed legislation that could place several requirements on third-party administrators (TPA), including the addition of a code of conduct by which those that also provide auto glass services would have to abide in order to do business. The bill passed the Senate January 26 with a vote of 38-0.

This was the third reading of the bill, S.B. 306, introduced by Sen. Joseph Hune, though the final Senate version had several changes from the original bill.

The Senate-passed version states: “A [TPA] shall not provide automobile glass repair or replacement services for an insurer unless the [TPA] adopts and follows, when processing, paying, administering or monitoring an automobile glass repair or replacement service for the automobile insurer, a code of conduct.”

Several changes also have been made to the code of conduct. The language in the bill that passed the Senate states in cases where the insured has no preference or prefers a non-network facility, the legislation would require the TPA “to advise the insured that the insured has the right to choose any repair or replacement facility and the TPA shall not threaten, coerce or intimidate the insured into selecting a particular repair or replacement facility.”

The final version of the bill also requires TPAs to submit annual reports to the state’s insurance commissioner. It includes a provision that TPAs provide a list of “the names of the auto glass repair and replacement facilities for whom a preference was stated.”

Industry reaction so far has been mixed with some independent shop owners have said the code of conduct suggested by the bill needs to be strengthened.

“Work needs to be done in the House of Representatives to strengthen the code of conduct to ensure the referral process for non-preference work is equally distributed throughout to network members,” says Shari Montgomery, owner and president of Pollack Glass in Lansing, Mich., and a member of the Independent Glass Association's Michigan Chapter, which has been closely involved with the legislation’s development. Still, she is pleased with the results so far.

She adds, “The Michigan Senate unanimously stood up in opposition to the unregulated opportunity of the TPA self-referral and ignoring consumer choice.”

Ron Overbeck Sr., co-owner of Auto One in Brighton, Mich., who also has devoted much time to working with other glass shops in the state on the bill, echoes Montgomery. “We’re optimistic that we’ll still get the end result that we need,” says Overbeck.

Brian DiMasi, senior corporate counsel for Safelite, whose third-party administration arm could be affected by the bill, has a different concern about the bill.

“Consumers demand high-quality work from network shops. While any shop is free to apply to the SGC Network, network shops must have adequate liability insurance, warranty their work, provide high-quality and agree to fair and reasonable pricing,” DiMasi says.

At press time, the bill was still under the review of the House.

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