Commercial Licensing Regulation 3 - Automobile Body Shop Storage Rates

Regulation Authority:

R.I. Gen. Laws §§ 5-38-27, 42-14-17, and 42-35-3

Purpose and Reason:

The Department of Business Regulation (“Department”) hereby adopts Commercial Licensing Regulation 3, entitled Automobile Body Shop Storage Rates (“Regulation” or “Post-hearing Amended Regulation”) effective February 26, 2009 and makes this statement in accordance with R.I. Gen. Laws § 42-35-2.3. The purpose of this Regulation is to: (i) provide definitions for terms related to the imposition of storage fees; (ii) establish reasonable maximum rates that may be charged by automobile body repair shops licensed pursuant to R.I. Gen. Laws § 5-38-27 for storage of automobiles; (iii) clarify different categories of storage fees and charges; and (iv) provide standard procedures for the notice and imposition of storage fees. The actions and information required by this Regulation are hereby declared to be necessary and appropriate to the public interest. The current Commercial Licensing Regulation 3 effective on October 27, 1994 and re-filed on December 19, 2001 is referred to as “Current Regulation” and the Current Regulation as amended herein is referred to as the “Post-hearing Amended Regulation” or “Regulation”. The regulation as posted and proposed in June 2007 and March 2008 is referred to as the “Proposed Regulation.” There are numerous differences between the text of the Proposed Regulation as published in accordance with R.I. Gen. Laws § 42-35-3 and the Post-hearing Amended Regulation as adopted. The changes to the Post-hearing Amended Regulation are delineated in the attached redlined document that delineates all changes between the Proposed Regulation and the Post-hearing Amended Regulation, as adopted. There were editing changes made to improve content for readability, capitalization of all defined terms, outlining changes, formatting changes, and other self-explanatory amendments. The Department conducted hearings on June 19, 2007 and on March 26, 2008. The Department re-noticed the Proposed Regulation, without any new or additional amendments, in order to comply with R.I. Gen. Laws § 42-35-3(a)(5) because the Department did not provide adequate notice of its redlined changes between the Current Regulation and the Proposed Regulation. Attached to this concise explanatory statement is a redlined document of the Post-hearing Amended Regulation that includes the Proposed Regulation as well as post-hearing editing in form of bold additions to the body of the Post-hearing Amended Regulation and double strikethroughs for any deletions to the Proposed Regulation. JURISDICTION AND AUTHORITY TO SET STORAGE RATES R.I. Gen. Laws § 5-38-2(b) establishes within the Department the Auto Collision Repair Licensing Advisory Board (“Board”) consisting of nine (9) gubernatorial appointees who have authority pursuant to R.I. Gen. Laws § 5-38-2(h) to “adopt and publish with the prior approval of the [Director of the Department] rules of procedure and other regulations in accordance with the Administrative Procedure Act, chapter 35 of title 42.” Pursuant to R.I. Gen. Laws § 5-38-27 the Director of the Department also is charged with promulgating rules and regulations to establish reasonable, maximum, storage fees that may be charged by licensees. BOARD RECOMMENDATIONS The Board’s evaluation of the Current Regulation began in February 2006. Several public meetings were held to discuss the amendments to the Current Regulation. On August 15, 2006, the Department received a letter from the Chairman of the Board dated August 8, 2006 with an attached proposed amendment to the Current Regulation. According to that letter, “[i]nput from Insurers, the Department and the Auto Body Repair Shops, as well as concerns voiced by PUC were addressed. The input of the Legislators and other factions of the industry were all aired. The vote to submit the proposed Regulation was unanimous and is now forwarded for your approval.” On November 14, 2006, the Department received a letter dated November 10, 2006 from the Chairman of the Board that provided additional rationale and information for the proposed amendments to the Current Regulation. The Board’s proposed amendments to the Current Regulation were reviewed and revised further by Department staff. The Proposed Regulation was posted and noticed for hearing on June 19, 2007 and March 26, 2008. In addition to the numerous written and verbal comments made at hearing, the Department also took into account the following facts in adopting the proposed amendments to the Current Regulation: 1. The Current Regulation was initially adopted pursuant to statute on October 27, 1994; 2. The rates set in the Current Regulation are long-standing rates that the automobile body shop industry has relied upon in order to support the costs related to storing vehicles which are ultimately not repaired (storage fees are not allowed for vehicles which are repaired); 3. The storage rates have not been increased in over thirteen (13) years; 4. The Department took administrative notice of the fact that there have been significant increases in costs to land, real estate taxes, insurance premiums, utilities without a corresponding increase in storage fees over the past fourteen (14) years; 5. The Board followed a deliberative process which included representatives from the automobile body repair shop industry, the insurance industry, and the Department over a six (6) month period of time; 6. The concerns of the insurance industry were discussed and considered; 7. Representatives of the insurance industry acknowledged at hearing that an increase in the storage fees is reasonable; however, they disputed the amount of the increase, and the methodology used in arriving at the amount; 8. The Current Regulation now requires that all storage have adequate and operational lighting, fencing, and security which will require automobile body repair shops that collect said storage fees to undertake additional expenditures to comply with these requirements; 9. It is the Department’s understanding that the Current Regulation has been in place since 1994 and was adopted following a process involving representatives of the auto body industry, insurance industry, and the Department. The process by which the Current Regulation was adopted and utilized has not been subject to challenge in the past fourteen (14) years; 10. The storage rates that are being adopted are those recommended by the Board; 11. The goals of facilitating ease of administration, avoiding statutory redundancy, deleting moot provisions, providing notice to consumers, insurers, and lien-holders, encouraging professional conduct in the charging and payment of storage fees are enhanced by the modifications in the Post-hearing Amended Regulation; SUMMARY OF MATERIAL, NON-TECHNICAL CHANGES In accordance with R.I. Gen. Laws § 42-35-3, that the following is a summary of the non-technical amendments to Commercial Licensing Regulation 3 (Post-hearing Amended Regulation). 1. Proposed Section 1 (“Authority”) and proposed Section 2 (“Purpose”) have been added to provide clarification regarding the statutory authority for the Proposed Regulation and to provide clarification to interested parties of the purpose of the Proposed Regulation. There were no substantive amendments to Sections 1 and 2 of the Proposed Regulation in the Post-hearing Amended Regulation. 2. The definition of “Day” was amended from the prior definition in Section 1 of the Current Regulation from “any calendar day in which the vehicle is on the property for more than twelve (12) hours” and the definition in the Proposed Regulation Section 3 was further amended in response to comments to “any calendar day in which the vehicle is on the premises of the automobile body repair shop for eight (8) hours or more.” (Emphasis added). The “eight (8) hours or more” was added in the Post-hearing Amended Regulation in response to comments requesting that the Department set a minimum time parameter for the imposition of storage rates. 3. The definition of “Storage” was amended in the Post-hearing Amended Regulation in response to submitted comments to clarify that the security system had to be operational. The words “and operational” were added to the definition of “Storage” in the Post-hearing Amended Regulation. 4. The prior definitions of “Inside Storage,” “Outside Secured Storage,” and “Outside Not Secured Storage” in the Current Regulation have been deleted because the Proposed Regulation no longer includes rates categorized by inside storage, outside secured storage, or outside not secured storage. “Storage” is defined in Section 3 of the Proposed Regulation as “ vehicles stored in a secured, lighted area surrounded by a six-foot or higher fence, with a reasonable and operational security system.” 5. The requirement that the automobile body shop use the least expensive suitable means of storage in the Current Regulation Section 2 has been deleted because there is no longer a distinction between the different types of storage as described in number 3 above. 6. The distinction in the prior Section 1 of the Current Regulation between storage for the first seven (7) days and rates for more than seven (7) days has been deleted. 7. The Current Regulation Section 3 (Proposed Regulation Section 7) has been amended to require that an automobile body repair shop must permit an insurance representative access to inspect any vehicle for photographs and vehicle identification number checks within four (4) hours of the request. 8. Proposed Regulation Section 4 (A) is an amendment that sets storage rates based on the size of vehicle. 9. Proposed Regulation Section 4 (B) which was proposed has been deleted in the Post-hearing Amended Regulation because the Department has the authority to set rates at any time as set forth in statute and a clarification of that authority is redundant and unnecessary. Additionally, any future amendment to this Regulation, as is the case with any Departmental regulation, is subject to requirements of R.I. Gen. Laws § 42-35-1 et seq. 10. Proposed Regulation Section 5 sets forth processes for the prohibition of storage charges on repaired vehicles except under certain specific circumstances and specific conditions. Proposed Regulation Section 5 (C), was deleted in the Post-hearing Amended Regulation because it duplicated the requirement in Section 5A in the Proposed Regulation. Section 5(B) was re-written in the Post-hearing Amended Regulation in order to clarify the requirements in response to comments submitted to the Department. Subsection 5(B)(i) was re-worded to clarify that the automobile body repair shop is responsible for providing the written notice that was implicit in the Proposed Regulation. This is not a new requirement—the storage charges in this subsection were proposed to be conditioned upon the return of the receipt of certified mail. 11. Proposed Regulation Section 6 sets forth conditions, circumstances, and processes for the imposition of storage fees for totaled or partially repaired vehicles. Section 6 was re-written in the Post-hearing Amended Regulation in response to comments requesting clarification between vehicles declared a total loss as the result of an insurer’s initial appraisal inspection compared to a vehicle declared a total loss as a result of a supplemental appraisal inspection. Sections 6 (A), (B), (C), and (D) in the Proposed Regulation applied to vehicles that are deemed a total loss after repairs had commenced and after a supplemental appraisal by the insurer deems it a total loss. Sections 6 (E) and (F) in the Proposed Regulation were applicable to vehicles that are deemed a total loss by the insurer at the initial appraisal as well as those vehicles deemed a total loss by the insurer upon a supplemental appraisal. Therefore, in response to comments submitted requesting clarification, and in order to clarify the applicability of Section 6 of the Proposed Regulation to either vehicles totaled at initial appraisal or after supplemental appraisal, Section 6 was re-worded after hearing into Sections 6 (A) and 6 (B) in the Regulation. Section 6(A)(i) in the Regulation reflects the requirements in Sections 6(E) and (F) in the Proposed Regulation which implicitly required the automobile body shop to provide written notice via certified mail to the vehicle owner. This is not a new or additional requirement because this requirement to provide written notice was implicit in Section 6(E) and 6(F) of the Proposed Regulation. Section 6(A)(i) addresses the written notice and Section 6(A)(ii) of the Regulation reflects that portion of the requirements in 6(E) of the Proposed Regulation that address when the storage fees may commence. Section 6(A)(iii) of the Regulation reflects requirements in Section 6(F) of the Proposed Regulation. Sections 6(B)(i), (ii), (iii), (iv), (v), and (vi) in the Regulation reflect requirements in Section 6(A), (B), (C), (D), (E), and (F) of the Proposed Regulation, respectively. Section 6(B)(v) was added in the Post-hearing Amended Regulation to ensure that notice was provided to vehicle owners whose vehicles had been declared a total loss after a supplemental appraisal. Additionally, Section (B)(v) in the Post-hearing Amended Regulation clarifies that the seven (7) day notice requirement in Section 6(B) of the Proposed Regulation applied only to vehicles declared a total loss as a result of the initial appraisal inspection. 12. Current Regulation Section 5 entitled “Application” has been deleted and substituted with Proposed Regulation Sections 5 and 6. 13. Proposed Regulation Section 8 which set forth a process for automobile body repair shops to submit variances from the rates set forth in Proposed Regulation Section 4 was deleted. This proposed section was deleted in the Post-hearing Amended Regulation because no such petition had ever been utilized by the industry, and unnecessarily subjects the established rates to administrative review. Section 8(B) was added as a condition to ensure compliance with statutory and regulatory requirements. 14. Section 4 of the Current Regulation entitled “Stolen Vehicles” has been deleted and substituted with the relevant processes described in the Proposed Regulation Sections 5 and 6. Additionally, Section 8 was added to the Post-hearing Amended Regulation in response to comments from several insurers requesting that an owner or insurer get notice that an automobile body shop is in possession of a stolen vehicle and as an added consumer protection measure. 15. Proposed Regulation Section 8 (renumbered to Section 9 in Regulation), entitled “Enforcement” has been added to the Regulation to allow for enforcement of violations of the Proposed Regulation. 16. Proposed Regulation Section 9 (renumbered Section 10 in Regulation) , entitled, “Severability” has been added to the Regulation to protect the validity of the Regulation in the event that one of its provisions is deemed invalid. 17. Proposed Regulation Section 10 (renumbered Section 11 in Regulation), entitled, “Effective Date” has been added to clarify the effective date of the Regulation.