To the chagrin of the insurance industry, Rhode Island Gov. Lincoln Chafee finalized a piece of legislation this week that limits when insurers can declare a car a total loss.
HB 5263, and its companion bill SB 465, bars car insurers from labeling a vehicle as a total loss if the cost to “rebuild or reconstruct” the vehicle is less than 75 percent of its “fair market value” before the crash.
Frank O’Brien, vice president of state government relations for the national trade organization Property Casualty Insurers Association of America (PCI), said the piece of legislation was “designed to increase body shop revenues” at the expense of the state’s drivers by “forcing vehicles that are badly damaged to be repaired rather than totaled.”
“We are profoundly disappointed that HB 5263/SB 465, which is part of the agenda of a few body shops, will become law,” O’Brien said in a statement. “Rhode Islanders already pay among the highest amounts for auto body repairs in the nation.”
O’Brien pressed Chafee on vetoing the bill since state lawmakers passed it to the governor earlier this month, saying it “could have damaging impacts on Rhode Islanders’ pockets and purses.”
According to the National Association of Insurance Commissioners, average statewide expenditures ranked Rhode Island auto insurance as the seventh-most expensive in the U.S.
At the industry’s urging, Gov. Chafee vetoed a similar auto repair bill last year. However, that bill also contained language that would have allowed auto shops to sue insurers over disputes of repair costs.
The governor said in his veto message at the time that the bill would add “unnecessary additional costs to consumers.”
This year, the state’s auto repair bill contained no language about litigation but preserved the total-loss standards that Chafee ultimately signed into law. The “right-to-sue” language appeared in another bill, HB 5522, that did not progress past committee hearings this year.
Under the new law, an insurer is still allowed to declare total loss with the car owner’s consent in situations where repairs would cost less than 75 percent of the car’s value.