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November 30, 2004
New Technology: Progress and New Problems
Following up on new technology issuing from manufacturers, I came across some encouraging, some worrisome, but certainly interesting information.
Advent of aluminum
The new Jaguar XJ8 is an “all aluminum” car. Its structure is made of aluminum and is, therefore, substantially lighter than steel body cars or even mixed-material cars. Mercedes-Benz and BMW build vehicles with aluminum body panels joined to steel structures. Other automakers use aluminum for a limited number of body panels, with the hood being the most common.
New types of steel
It has been said that there is nothing new under the sun, but that was before the advent of “ultra-hard” and “quiet” steel. Sounds interesting and it is.
Ultra-hard steel is steel made with boron. It is stronger than ordinary cold-rolled steel and has dramatically increased memory – that is, it remembers how it was shaped and is much more difficult to bend or change. As a result, it will not deform as easily upon impact and will also be less likely to ding or dent.
Then there is quiet steel, and it lives up to its name. Quiet steel consists of two pieces of cold-rolled steel sandwiching a layer of laminate. The result is a thin metal product that absorbs rather than conducts sound.
Decreasing weight, increasing fuel efficiency
The benefit of quiet steel is that it allows automakers to reduce the amount of foam and sound deadeners in their vehicles, which means that the weight of the vehicles can be significantly reduced. Lower weight means increased fuel efficiency, and with gas prices high, any improvement in gas mileage is a welcome change. Aluminum is also lighter weight than steel and allows manufacturers to take advantage of a different medium to meet or exceed federal fuel efficiency standards.
Recently, the National Highway Traffic Safety Administration fined manufacturers for producing vehicles that failed to meet corporate average fuel efficiency (CAFE) standards, and BMW, as the leading violator during NHTSA’s 2003 fiscal reporting period, will be paying $14 million in penalties on its 2002 model year vehicles and $28 million in penalties for the 2001 model year cars. With penalties like these, automakers clearly have an interest in developing and using production materials that allow their vehicles to satisfy CAFE requirements.
So where’s the rub?
With all of the new materials and uses, there are some significant issues to be resolved. Manufacturers advise that aluminum elements cannot be repaired in the same area and with the same tools used to repair steel parts because of contamination concerns. As a result, automakers advocate having a discreet environment for aluminum work and a dedicated set of tools for use only on aluminum parts, which can require enormous investments and may be too costly for body shops to achieve.
Another essential problem comes from the fact that neither the quiet steel nor the ultra-hard steel can be welded using common techniques. Both types of steel are heat sensitive. Heat changes the molecular structure of the ultra-hard steel and burns the quiet steel. Yet, according to the Mercedes-Benz, USA presentation at the August 2004 I-CAR annual meeting in Chicago, these special metals do not currently carry markings indicating their sensitive natures, nor do parts shipped for replacement identify that the parts cannot be subjected to traditional repair processes.
Simply looking at the manner in which the manufacturer put the vehicle together won’t necessarily help because the manufacturer may have used non-traditional methods during production. Automakers warn that just because a vehicle was welded during the manufacturing process does not mean it is safe nor appropriate to weld during any repair. While the information on initial manufacture and recommended repair may be available online, automakers charge for access to their repair information.
All of that potentially spells liability – for someone. It doesn’t take much imagination to envision the scenario in which a vehicle made with special steel is repaired using traditional welding techniques because the repairer was unaware that a particular part was heat sensitive. But we won’t know whether the automaker (for failing to warn repairers of the sensitive nature of the materials) or the body shop (for failing to update itself regarding new materials) will be held responsible until something happens. Manufacturers, however, appear to be working toward ensuring that problems of this nature do not occur by creating their own certified repair facilities.
Manufacturer certified repair facilities
Redesigning cars, in turn, puts pressure on repair facilities to be able to meet customers’ needs in effecting a proper repair. If a shop does not have the space or financial ability to dedicate an area and tools for one particular material, it will not be able to meet manufacturers’ repair guidelines. Auto makers understand that repair shops may not have the ability to make these commitments and have created their own species of repairers – the manufacturer certified repair facility.
Becoming a certified facility, however, is no easy matter. Mercedes-Benz and Jaguar, for example, will only consider shops sponsored by a franchise dealer, and that is only the first step of the process. Mercedes requires applicants to pass an audit that demonstrates the facility has equipment (like a paint booth, welders, and structure aligning tools) authorized for use by the manufacturer, can comply with all Mercedes standards, can meet expected turn-around time, uses only Mercedes parts for repairs, has proper training, and has computer estimating and office management programs. In his presentation on certification for the I-CAR annual convention in the beginning of August, 2004, Raymond Coker of Mercedes-Benz, USA stated that there are currently only fifty-seven facilities in the United States which have been certified and only seventeen of those have met the structural requirements necessary to work on the CL model.
Insurer response
Some insurance industry reactions to manufacturer certified facilities have been to point out that these manufacturer certified facilities impose burdens and increase costs in other industries. Insurers complain that requiring a vehicle to be repaired at a certified facility to ensure a proper repair and protect the manufacturer’s warranty impairs insurers’ ability to negotiate lower labor rates among a pool of body shops, imposes the use of brand name parts rather than aftermarket ones resulting in increased materials costs, restricts consumer/insured choices for repair, and is its own form of steering. The insurance industry certainly raises interesting questions as to whether these certified facilities are anti-competitive and violate Federal and state antitrust laws and whether they run afoul of provisions in the Magnuson-Moss Warranty Act, 15 U.S.C. § 2301 et seq.
National Highway Traffic Safety Administration’s position
In the 1970s, the U.S. Federal government recognized the need for motor vehicle safety and enacted legislation placing the responsibility for promoting vehicle safety within the purview of the Department of Transportation and its sub-agencies, including the National Highway Traffic Safety Administration (NHTSA). Used motor vehicles have not been exempted from the national safety program and Congress enacted laws requiring the Department of Transportation to develop safety standards to strengthen and encourage state inspections of vehicles in use. Pursuant to 49 U.S.C. § 30126, the Secretary of Transportation is obligated to “prescribe uniform motor vehicle safety standards applicable to all used motor vehicles.”
Despite the fact that 49 U.S.C. § 30126 obliges the U.S. Department of Transportation (DOT) to produce motor vehicle safety standards for used vehicles, when questioned about the overall lack of safety standards for used motor vehicles, NHTSA spokesman, Tim Hurd, explained that NHTSA issued safety standards in 1973 pursuant to the that statute, which can be found at 49 C.F.R. § 570, but that “NHTSA has no active role in the implementation of [the 1973] standards.” Additionally, the policy of encouraging state inspections of vehicles was implemented by the DOT pursuant to the Highway Safety Act. Mr. Hurd stated that, “[u]nder that Act, which requires state highway safety programs, DOT issued a highway safety program standard for vehicle inspection and placed [it] in the CFR. Subsequently, all highway safety program standards were reduced, per Congress, to the status of guidance documents. At some point, they were removed from the CFR.” As a result, the limited standards states can look to for guidance on passenger vehicle inspections (if they bother having an inspection program) are those on brakes, suspension, steering, wheels and tires created 30 years ago.
Technological progress may lead to reduced safety
While technology advances are promoting greater fuel efficiency and better performance, consumers need to be aware that their state-of-the-art vehicles may present greater problems and danger in the event they are damaged and repaired. Because no one else is ensuring your safety in the repair of cars manufactured with these new materials, it is imperative for consumers to become educated about the possible dangers involved. Understand that new technology changes things and, hopefully, makes them better, but when it comes to vehicle repair, you are still on your own.
Posted by E L Eversman at 02:18 PM | Comments (0) | TrackBack
NHTSA Continues Grant Program To Encourage Seat Belt Use
NHTSA opened the application process for states to obtain grant funds to underwrite programs promoting seat belt use. This is one of the few programs offered by the U.S. government that can be described as an attempt to improve the safety of people traveling in "used" cars.
So, for all of you states looking for funding for law enforcement to write more tickets, here is your chance.
http://a257.g.akamaitech.net/7/257/2422/06jun20041800/edocket.access.gpo.gov/2004/pdf/04-26351.pdf
Posted by E L Eversman at 08:43 AM | Comments (0) | TrackBack
November 19, 2004
Getting It Wrong Again On 3rd Party Diminished Value
A colleague forwarded a link to a Washington Post article describing the economic pain of diminished value suffered by a couple to their new Lincoln LS. The owners were not at-fault, so their claim was not a first party claim against GEICO (which happened to insure both parties) under their own auto policy, but it was as a third party. According to the WP article, the couple was told by GEICO and Virginia regulators that their diminished value was not covered and they wouldn't be compensated for it.
This answer is wrong. The couple has every right to sue the person who hit their new car for negligence and recovery any and all decrease in value caused to the LS. They don't have to deal with GEICO as the other party's insurer at all. They can simply sue for the full value lost, and, once they obtain a judgment, GEICO would end up paying the judgment on behalf of the at-fault driver.
It is extremely irritating to hear that people are even being given incorrect information from their own insurance regulators who, frankly, should know better but apparently don't. Regulators need to remember that third parties work with the at-fault driver to have their cars repaired as a courtesy to the at-fault drivers' insurers. Maybe every third party should start suing the at-fault drivers and letting the insurers pick up the expense of defending their negligent insureds in addition to paying any judgment obtained. That might finally get the attention of the insurance industry and the regulators who are supposed to protect consumers from over-reaching behavior.
At least as journalists, communicators, and information providers, let's start getting it right.
An Accident Can Wreck A Car's Resale Value (washingtonpost.com)
Posted by E L Eversman at 11:15 AM | Comments (1) | TrackBack
November 17, 2004
Insurance Industry Could Lose Antitrust Exemption
Insurance Journal reported today that Senator Fitzgerald of Illinois made the statement that: "It might be time to use federal antitrust enforcement to ensure that the insurance brokerage industry remain free, competetive, and healthy for consumers."
Fitzgerald suggested Congress might reconsider the McCarren-Ferguson Act which currently exempts the insurance industry from most federal antitrust laws for activities that are regulated as the "business of insurance" at the state level. The Senator said that the present broker fee scandal convinced him that there is a role for the federal government to play by disallowing excessive market concentration.
It would certainly be interesting to see how well the insurancy industry could adapt to playing by antitrust rules. Since the enactment of the McCarren-Ferguson Act in 1945, insurers have enjoyed a privilege of doing business in an environment free from federal oversight. Trying to adapt to the rules of the free market society might be daunting to them.
Sen. Fitzgerald Says Broker Fee Scandal May End Antitrust Exemptions
Posted by E L Eversman at 02:46 PM | Comments (0) | TrackBack
November 15, 2004
GAO Cites Deficiencies In NHTSA's Data Collection
The U.S. Government Accountability Office (GAO)released its report to congressional committees on the National Highway Traffic Safety Administration's (NHTSA) data collection and sponsorship of state data collection programs. GAO, apparently, found a good deal lacking in NHTSA's data and its collection methodology.
For instance, the GAO report cited disparities in the type of data collected, requirements for collection, and lack of uniformity in determining when data must be collected. The report noted that some states involved in the investigative study require police reports to be filed when there is automobile property damage over $500, others when the property loss exceeds $1,000, while some states leave the reporting decision to the discretion of the law enforcement officer or only if at least one vehicle must be towed.
Additionally, GAO found NHTSA's oversight of the state programs it funded was lacking. Of the states involved in the analysis, only one had complete data integration across all of its traffic-related databases. In the other words, some states might be able to tell you that a person caused an alcohal-related traffic accident but not whether there was a conviction for drunk driving.
So, despite NHTSA's congressional mandate to collect information on traffic safety, the quality of that information is up for grabs.
You can access the full November 2004 GAO report titled "Highway Safety: Improved Monitoring and Oversight of Traffic Safety Data Program Are Needed", document GAO-05-24, at http://trb.org/news/blurb_detail.asp?id=4379 or by clicking download file. Download file
Posted by E L Eversman at 11:12 AM | Comments (0) | TrackBack
November 11, 2004
"Clipping" -- A Dangerous Repair Technique Condoned By Insurers
You might not be aware that there are no federally mandated safety standards for vehicle repair. Likewise, the vast majority of U.S. states do not even register or license collision repairers. So, the person repairing you car might use a repair technique known as "clipping" to get your car back on the road and to satisfy a cost-conscious insurer.
Clipping, or full body sectioning, typically entails cutting off the entire front or rear of a damaged vehicle and welding the undamaged salvage half of a different car onto yours. Sounds ridiculous, as well as unsafe, but cars are clipped every day -- and you just might be driving one.
Because there are no mandated repair standards which have been determined to be safe, someone you love might be riding in a vehicle repaired like this Mazda. When it was in a subsequent accident, the car ripped apart, leaving the occupants to the mercy of providence.
My question is always: Which one of your loved ones would you want to be in the back seat of a car repaired like this?
Posted by E L Eversman at 02:35 PM | Comments (0) | TrackBack
NHTSA's Long Range Strategic Plan -- Any Hope For Safety Standards?
In August 2004, when the comments for the National Highway Traffic Safety Administration's Notice 17794 on NHTSA's long range strategic plan were submitted, my comment was the only one suggesting that the agency investigate creating repair standards and collect information on damaged motor vehicles. Amazingly, no one at NHTSA is interested in the fact that absolutely anyone, qualified or not, might be repairing cars -- in any way that person sees fit.
Comments can be accessed through the docket management system with the entry of 17794 for the docket search. My comment can be accessed in that location as number 35 or click download file.
Posted by E L Eversman at 01:17 PM | Comments (0) | TrackBack
November 01, 2004
Kentucky Appeals Court Sends State Farm Back To Court
In a decision rendered September 10, 2004, the Kentucky Court of Appeals vacated, in part, the decision of the trial court granting summary judgment in favor of Defendant, State Farm Mutual Automobile Insurance Company, on all remaining counts of Plaintiff, Linda Cook's, Complaint. The Court of Appeals vacated and remanded Cook's claims for breach of contract and for statutory misrepresentation.
Cook is a first party claimant under her State Farm automobile insurance policy. After being involved in an accident in 1996, she took her 1994 Saturn to Performance Body Repair, Inc. for repair. State Farm paid for the repairs to Cook's vehicle less her deductible.
After experiencing problems with her car, Cook eventually sued State Farm for understating the necessary repairs on her estimate and for failing to pay for a proper repair to her vehicle. Of particular note in the decision granting summary judgment to State Farm, the trial judge wrote: "Plaintiff's breach of contract claim, Count III, fails since all of the repair procedures identified by Plaintiff, for the first time two years after her car was repaired: (a) were in fact performed by the body shop that repaired her car and were paid for by Defendant; (b) would have been authorized by Defendant, if necessary and a result of her covered claim; or (c) were the result of omissions by or actions of the body shop."
The Court of Appeals, however, found the trial judge's statements on this issue presumptious, noting that there were issues of fact relating to procedures and repairs that Cook alleged were not included in the estimate and that, "State Farm had the final word on those repairs that it would and would not pay for, not Perfomance or any other body shop."
The appellate court also found that State Farm never presented any facts or evidence entitling it to summary judgment on the statutory misrepresentation claim. Instead, the court found that State Farm misinterpreted Cook's cause of action and, therefore, failed to present necessary evidence on the right claim.
I find it disturbing that the trial judge so willingly grafted non-existent facts into the materials submitted. There apparently is little appreciation within the legal community that insurers have cost-saving goals and might arbitrarily refuse to authorize certain necessary repair procedures in an attempt to achieve those goals. Equally perplexing is the willingness to assign all blame for problems with the repaired car on the body shop. Anyone who knows anything about the collision repair business understands that body shops work under enormous pressure from insurers to make repairs according to the insurers' terms and estimates, not their own.
Thus, I make my own legal slogan: Caveat body shop
Access opinion at the Kentucy Courts website or Cook v. State Farm Mutual Automobile Ins. Co., C.A. No. 2002-CA-000801-MR Download file
Posted by E L Eversman at 12:22 PM | Comments (0) | TrackBack