The estimating systems are guides, nothing more, nothing less - even the providers say so. Yet somewhere along the line, repairers started treating these guides as law and handing over control to the insurance industry.
by Patrick Yurek
"That's all I can pay - that's what [insert name of data provider] shows."
On one of the industry's Internet bulletin boards, I recently read a post titled, "Focus Write save us!" While Focus Write (from the people formerly at CompEst) may indeed prove to be the best estimating system yet conceived, it is not the answer.
The problem is that too many people give too much weight to the estimating systems. The funny thing about this is, it's not even the data providers who are claiming them to have authority.
The "Big 3" database providers - ADP, CCC and Mitchell - all have a disclaimer in their P-page sections that essentially says something to the effect of, "This is only a GUIDE."
The very creators of these programs tell everyone they should only be used for guidance, so who's pushing them as "factual" and/or authoritative"?
The insurance industry.
New, Undamaged Vehicles?
Another interesting aspect (it'd be humorous if it weren't so serious) is that the times listed in these guides are based on installing parts on vehicles that haven't been in an accident:
"Operation times listed are based on new, undamaged parts installed on new, undamaged vehicles." (CCC/Pathways);
"Labor allotments suggested by ADP estimates are for replacement of new and undamaged parts." (ADP);
"The labor times shown in the guide are in hours and tenths of an hour (6 minutes) and are for replacement with new, undamaged parts from the vehicle manufacturer on a new, undamaged vehicle." (Mitchell/Ultramate).
Say what?! I don't know about you, but I have never, in my entire career, repaired an undamaged automobile. This means additional time - above and beyond what's shown in the guide - should be considered when repairing damaged automobiles. You know, when the fender is folded over the mounting bolts on the upper rail or when the reinforcement is mashed tightly against the rear body panel.
Actually, what this means is that any time the vehicle is damaged, additional time should be considered. It says so right in the P-pages.
For a while, I used to add something like, "Access damage - 1.0" to the estimate. But then I started thinking that more lines equals more money. (A general rule of thumb: It's harder to cut times when it's only a little added here and there than it is when the time is all in one lump sum). So I began to write things like, "Access fender mounting bolts (damage area) - .5," "Pre-pull upper rail to access engine compartment components (i.e.: washer reservoir, radiator overflow, battery tray, etc.) - .6," "Access front bumper cover mounting hardware (right side) - .3," "Access right front door hinge bolts - .3."
Rather than settling for a lump sum of 1.0 - which the insurance appraiser often reduced - I assessed each operation in the impact area and assigned a time to access it individually. So instead of 1.0, I wrote 1.7. Even if the appraiser cut .1 from each procedure, I was .3 ahead of the 1.0 lump-sum figure.
Other often overlooked things (due to lack of familiarity with the P-pages) are those that don't appear on the "included operations" list. I've always maintained that if something isn't on the "included" list, it's not included - whether or not it shows on the "not included" list is irrelevant. If the battery burst, it only makes sense to add to "neutralize acid and clean residue."
How We Got Here
So how in the world did these bits and bytes become Bibles? Because the repair industry allowed insurers to take control.
I remember hearing stories about when an estimate was nothing more than, "I'll fix your dented fender for $100, $125 if you want me to fix the scratch in the door from your kid's bike." Back then, repairers had control. Of course, cars were actually made of metal then, so things could be repaired.
Then came the books. The times were still somewhat negotiable, and a shop could get additional time - above and beyond what was listed in the book - for a badly damaged door or fender. But at about that same time, a change occurred in the insurance industry. The appraisers sent out started to "negotiate" on the company's behalf (all in the interest of not getting cheated and keeping rates down supposedly).
Next, computers began making their way onto the scene, and along with them came some very basic programs. The earliest were nothing more than spreadsheets with "quick codes"; the user still had to enter the times and parts prices - usually based on the books. This wasn't entirely a bad thing. At least the estimates were legible. (I think the only people with worse handwriting than bodymen are doctors.)
Then came newer, faster "real" computers and "better" estimating systems/data sources. Instead of flipping though a book and typing the labor times and parts prices, the estimator only had to click here and there and everything was automatically added to the sheet. Speed and convenience - who could ask for anything more?
Little by little, shops gave control over to the insurers and believed the data systems were accurate. Of course, during that same transition, "funny times" also made their way into the industry full time.
When the data providers came out with the latest generation of estimating systems, they were touted as being better, more accurate and up-to-date. Parts pricing would be current. Procedures would be automated. More detail would be built in. Yeah, right.
Annual manufacturer part price increases seem to make for months of chaos - often rewriting several estimates to reflect actual pricing that the data providers haven't updated. The only automated procedures are deductions. Not often have I seen an interior trim panel included automatically when working on a door. The "more detail" that's been built in only makes it harder to decipher what is (and what is not) included in a certain operation.
Better, but for whom? Definitely not for the people using the software to earn a living.
Then there's what's been termed, "Jump On Parts" (JOPs). JOPs are magical, self-installing parts. They're easy to spot - they're the ones without any labor times in the databases.
For this article, I used a fairly common vehicle: a 2002 Dodge Intrepid ES. Looking at one of the systems, I found four JOPs (not counting fasteners) on the front bumper alone. Is there no labor required to install the front bumper reinforcement caps, the air duct, the absorber and the license plate mount kit?
These parts are the ultimate parts. You just order them, and when the time is right, they jump from the parts bin onto the vehicle. At least according to one of the data providers.
I see this all the time with car cover plastic, too - it jumps off the roll, cuts itself to length and then places itself on the vehicle, complete with tape. Either that, or a lot of estimators are giving money away (again).
How convenient is it to have to go back through an estimate and correct these "oversights"? Those who know me know that I take a strong stand against profiting from free labor performed by techs. If the estimator/manager/owner is too lazy to enter a labor time on the lines for the JOPs, the money to compensate the laborer should come from the estimator's/manager's/owner's pockets - not borne on the backs of those who do the work.
Face it, there are no self-installing parts. And if the part isn't listed in the "included operations" column, it's not included and you should manually enter a time allowance.
Just like a coach relying on his quarterback throwing to a tight end in the final seconds of the Super Bowl, accuracy counts in estimating systems. Those who rely on these programs also depend on accuracy. It's vitally important to hit the mark.
Well guess what? The "bullseye" is a moving target.
Like I said earlier, I used a 2002 Dodge Intrepid ES as the example for this article. I acquired estimates - written in each of the Big 3's systems - to replace the front bumper cover and to replace the right front fender.
To keep it as simple as possible, I asked collision repair professionals to prepare a very basic estimate: replace the front bumper cover and the right front fender. No "add-ons" - just a simple two-panel replacement.
So how "accurate" are these systems? Alphabetically (to avoid any implication of improprieties): ADP showed 4.5 units for sheet metal and 6.4 units for refinish, for a total of 10.9 units; CCC/Pathways showed 2.7 sheet metal units (after an automated deduction of .4 for overlap) plus 5.5 units for refinish for a total of 8.2 units; and Mitchell/Ultramate showed 4.0 units for sheet metal and 6.0 units for refinish, for a total of 10.0 units.
10.9 vs. 8.2 vs. 10.0.
Is CCC underestimating by almost 25% (10.9 minus 8.2 = 2.7; 2.7 ÷ by 10.9 = 24.77%), or is ADP "giving away" almost 32% (10.9 minus 8.2 = 2.7; 2.7 ÷ by 8.2 = 32.92%)? Which one is "correct"? The difference - at $40 per labor unit and $25 per refinish unit for materials - is substantial:
ADP: 10.9 x $40 = $436.00; 6.4 x $25 = $160. A total of $596.
CCC/Pathways: 8.2 x $40 = $328; 5.5 x $25 = $137.50. A total of $465.50.
Mitchell/Ultramate: 10.0 x $40 = $400; 6.0 x $25 = $150. A total of $550.
There's as much as a $130.50 difference including the materials. And keep in mind, this is a small job.
So I ask again, which one is correct?
They Have No Authority - They're Guides!
Since each of the data providers include a disclaimer stating that the system is to be used as a guide only, they admittedly have little "authority" and shouldn't be given the credence demanded by parties outside the physical repair itself. In other words, if the repairer thinks the time is wrong, he should simply change it - the estimating system itself almost comes right out and says so. Between the "guide only" portion and the part about "new, undamaged vehicles," I'm amazed that the systems have been able to be put forth as having any kind of authority.
(Understand that the following information isn't intended to be, nor should it be construed as, legal advice or an interpretation of the law. Questions about matters of law should be addressed by a practicing attorney.)
I'm not aware of any law in any state that says that insurance companies must pay based on upon estimating guides. In fact, I'd bet that there aren't any such laws.
Additionally, in every contract of insurance (policy) I've ever read, the insurer promises to "pay the amount necessary" to repair the damaged property. Also in every contract of insurance I've ever seen (and I've seen quite a few, by the way) is something to the effect of "we [the insurer] may replace OR repair OR pay in money ..." (Grab a policy and read it.)
The word "OR" indicates a choice. Coffee OR tea. This OR that. You get only one - not both. Insurers are notorious for "co-mingling" these options when by the very virtue of the contract they wrote, they're limited to ONE of the three - not part of one and part of another. In other words, as soon as the insurer elects their option to "pay in money," they give up their rights to their option to "repair."
The other thing they (sometimes) "give up" is the liability associated with the quality of the repair. Why only sometimes? It gets a little tricky to explain and, again, I'm not an attorney.
First, it's important to understand whom the shop is contracted with. In case there's any doubt, it's the vehicle owner. The contract of repair is exclusively between the repairer and the vehicle owner. The repair facility - the professional - has contracted with the vehicle owner to repair the vehicle.
Second, if the shop has a direct-repair agreement, it's generally secondary (in fact, it's generally not a "contract"). The contract of repair is primary.
There is, however, an ongoing dispute as to what constitutes "paying in money" as opposed to choosing the "repair" option. There's some contention that when an insurer writes an estimate, they're electing to repair (even though they don't take physical custody of the vehicle, roll up their sleeves and start banging out dents). Common sense tells me that when the insurer writes a check, they're electing to "pay in money."
However, one of the most recognized expert resources for insurance only makes the matter more confusing. In 15 Couch on Insurance 2d (1983), sec. 54:37, at 437-38, it's stated: "Where the insurer exercises its option to repair, it is in the same legal position as any person making repairs, insofar as liability to strangers is concerned. Consequently, where a collision insurer has agreed to repair and actively takes the matter in hand, making all necessary arrangements, the reasonable conclusion is that the insurer thereby assumes the duty of having the repairs made with due care; and it is not relieved of this duty merely because it chooses to select an independent contractor to make the repairs, and refrains from exercising any supervision over his work."
It appears that Couch speaks directly to DRPs - "actively takes the matter in hand, making all necessary arrangements." But again, I'm not an attorney.
I've also never seen a contract of insurance (which by the way, is much, much more than a "policy" - it's a legally binding contract) that states that the insurer is allowed to dictate the times charged by the repairer, the methodology to be used in the repair process or the source of the parts to be used (unless, of course, they were to choose the "repair" option).
Shops that allow the insurer to dictate any of these things against the better judgment of the repairer are giving control to the insurer - control that the insurer has no legal right to. Much like giving too much credibility to the estimating systems.
There's no law that says estimating systems must be obeyed. There's no law that says insurers can dictate the repair process. Yet insurers do it daily - because shops let them.
Back to Estimating
Merriam-Webster's online dictionary defines "estimate" as follows:
Nowhere does it say, "fixed in concrete" or "written in stone."
We're all entitled to our opinions - even the insurers have that right. But since "estimates" are just that - opinions regarding the damage/cost, how can one take
There's a reason that the insurance contract says, "the amount necessary." And the reason is based in law. There's a legal tenet that is often referred to as "liquid damages" (again, this isn't intended to be, nor should it be construed as, legal advice or an interpretation of the law).
Liquid damages is the amount of loss actually incurred. Not your "guesstimate," not the insurer's speculation, not conjecture. FACT. In other words, the final invoice.
Ask yourself this: If the parts prices change, why does the insurer pay the increased price?
I'll tell you why - it's because that's the amount they're obligated to pay, the amount necessary. So why wouldn't this apply to labor charges as well?
It does. Remember, the contract doesn't allow for speculation. The contract doesn't say the insurer only has to pay what they could have gotten the job done for down the road at one of their direct-repair shops. It clearly and specifically states that the insurer will pay the amount necessary to repair the damaged property.
And the amount necessary is reflected on the final bill - the repair invoice.
You're the "Only One"
"Nobody else adds time for jump on parts ... " Tough. I can't help it if they're not smart enough to know the P-pages. I also can't help it if they want to give money away. That's their problem, not mine.
The measure here is not "usual and customary." The true measure is "reasonable and necessary."
Of course, any business has the right to work for free - this is America. But if an operation, part or procedure is necessary to properly repair a vehicle and the charges assessed by the repairer are reasonable, there are no grounds to deny compensation.
What constitutes reasonable, and more importantly, how would reasonable be defined in court? I don't know for sure, but I do know that a sharp attorney could demonstrate the price differences between shovels at different home improvement stores, different prices for haircuts at competing beauty salons or any number of similar products or services from different vendors. And I doubt a 10 percent difference would be viewed as UNreasonable.
I would hesitate to guess what would be considered unreasonable if there was evidence of higher overhead, more training, larger investment in equipment, etc. It all boils down to the judge's impression - and the ability of an attorney to argue his case.
Picture this: "Your Honor, nobody else charges for this."
"Your Honor, we've established, and the insurer agrees, that this operation is necessary to properly repair the consumer automobile. We just want to get paid for providing that service."
What do you think the judge would say? Could you imagine the insurer telling the court that the part is self-installing or that the business should provide services for free?
McDonalds and Burger King both offer comparable products, but they're priced differently based on cost and a reasonable profit margin. And neither give away so much as a slice of cheese. (Cheeseburgers cost more than regular hamburgers, don't they?)
I can't tell you how to run your business. The insurance company can't tell you how to run your business. At least we shouldn't be able to - unless you let us.
A computer program, devoid of the ability to "judge" and make decisions, certainly shouldn't control your business. Moses did not come down from the mountain with Ten Commandments and three estimating systems.
There is no law proclaiming that estimating systems govern repairs.
There is no basis to claim that one system is more accurate than another.
The data providers themselves state that the p
rograms are not reflective of damaged automobiles. The insurer must pay the "amount necessary" as long as it's reasonable.
With that in mind, repeat after me:
It's only a guide.
It's only a guide.
It's only a guide ..
Writer Patrick Yurek is the vice president of Collision Consulting LLC (www.CollisionConsulting.com). He has 23 years of industry experience and has held every conceivable position in a collision repair facility. Among his credits are several PPG certifications and General Motors technical certificates. Yurek can be reached at Info@CollisionConsulting.com or CollisionManager@aol.com or at (704) 821-4190.