Beware of written waivers!
There are many good motor vehicle repair shops in Massachusetts. However, there are also some bad apples. Over the next few months, this multi-part series will discuss several scenarios that are composites of real situations that often required litigation to resolve. The purpose of this series is to arm agents and companies with information and tips to help insureds avoid fraud and get the full value of the repair paid for by their insurance company. All names used are fictional.
Mr. Victor owned a brand-new Mercedes sedan. The passenger side doors were side-swiped in an accident and the vehicle was towed to a motor vehicle repair shop. Mr. Victor went to the shop and was given “standard paperwork” to sign.
Included in the paperwork was
- a repair order authorizing the shop to repair the vehicle;
- a direction to pay to authorize Mr. Victor’s insurance company to pay the shop directly, and
- a waiver pursuant to 940 CMR 5.50.
The shop’s repair order did not list the repairs to be performed. It did state, however, “Customer agrees with shop’s posted labor rates.” The waiver stated that the customer waived his right to know what the repairs would be and what their cost would be so long as the repairs did not exceed the NADA value of the vehicle, i.e., the book value of the vehicle.
The insurance company appraiser determined that to return the vehicle to its pre-accident condition, among other repairs, the vehicle’s doors should be replaced with original manufacturer factory doors. Per the direction to pay, the insurer paid the shop for the new Mercedes doors. The vehicle was repaired and returned to Mr. Victor. The vehicle looked good, and Mr. Victor assumed that all of the repairs contained in the insurance appraisal and paid for by his insurer had been made.
A few months later, Mr. Victor slid on ice and damaged the same passenger side doors. The vehicle was taken to a different repair shop and during the course of repairs, it was discovered that the prior shop had not replaced the damaged doors with new Mercedes doors but rather had filled them with lots of putty and painted over them and had not performed other critical repairs totaling over $5,000. The shop diverted the money received from the insurer to itself to cover the higher labor rate and did not replace the doors or perform other necessary repairs.
Tips to Avoid this Scenario:
Under Massachusetts law, a repair shop cannot charge a customer for any repairs on the customer’s vehicle unless the shop has obtained from the customer authorization for the specific repairs to be performed including parts and labor and the price to be paid. There is a loophole to this law, however.
The shop does not need to inform the customer of the specific repairs to be performed and their price if the customer signs a waiver under Massachusetts regulation 940 CMR 5.50 stating:
“I understand that I have the right to know before authorizing any repairs what the repairs to my car will be and what their cost will be. You need not obtain approval from me for repairs or inform me prior to performing repairs what the repairs are or their cost, if the total amount for repairs does not exceed $ ____________.”
It is likely that the law included this provision for the convenience of the shop and customer to cover small repairs such as in the instance where the customer drops off a vehicle and it is unknown at the time what exactly is wrong, but the customer tells the shop to just fix it so long as the cost does not exceed $300 or some such agreeable amount.
However, as in the scenario above, unscrupulous shops have used this loophole to divert the insurance payment to cover a higher labor rate or other excessive charges not covered by insurance rather than perform all of the repairs paid for by the insurer. Such shops often put a large dollar value in the waiver nearing or even exceeding the value of the vehicle.
In short, do not sign the waiver! Insist that the shop itemize the repairs to be performed and the total cost in writing prior to authorizing the repairs and compare that to the insurance company appraisal to ensure they are the same.
If any of our readers have stories about repair shops that are bad apples (or good apples!), I’d love to hear them. Feel free to contact me via the links below. For those who would like to read Part I of my ongoing series, it can be accessed here: “Tips To Help Insureds Avoid Auto Repair Shop Fraud: Beware of Shops Offering to Waive the Deductible!“
Attorney | ForbesGallagher
Kara Larzelere joined ForbesGallagher in 1994 and concentrates her practice in insurance and corporate matters. She advises insurance companies and insurance agencies on a variety of matters of concern including issues of regulatory compliance, insurance coverage, liability, employment law, organizational structure, and agency acquisitions.
In addition, she has briefed over a dozen appeals before the Massachusetts Appeals Court and the Massachusetts Supreme Judicial Court on varied issues including fiduciary duty law, consumer protection, and indemnification.