California shop owner to testify against suggested changes in anti-steering regs

Meet a busy Gene Crozat

by Anne Koppel Conway

Gene Crozat, owner and founder of G&C AutoBody, located in Santa Rosa, Petaluma and San Rafael, California, has been crossing swords with insurers both at the state legislature and in the courts for years. The latest round of testifying about an anti-steering statute will be February 25. California insurers are proposing modifications to the California Insurance Code of Regulations 758.5 that directly affect Auto Repair Dealers. See the full text on page 3.

Crozat is a bit of an anomaly, at least here in Oregon. His shops are Direct Repair Insurance Shops, DRIP, for many insurance companies. At the first of the year, he raised his rates to $103 an hour, “the highest rate in the US,” he said, “and we collect it.”

It wasn’t always like that. In the mid-1990s, Farmers Insurance labeled Crozat “a whore,” he recalls, and was not sending business his way. Finding that a wee bit offensive, he sued the insurer and won. As a result of losing the lawsuit, Farmers put the G&C shops on their DRIP list and started to liberally refer customers to Crozat’s facilities.

In a 180 degree turn-around, Farmers now calls Crozat’s shops “the best in California.” That’s quite a leap!

In 2006, Crozat founded the Collision Repair Association (CRA). Crozat was president for two years but now feels “they are completely off-base.” According to a statement on CRA’s website, “Finally, the Department [of Insurance] has released proposed changes to the rules that should improve enforcement of Section 758.5 of the Insurance Code, the anti-steering statute.

  "The proposed steering rules should stop blatant acts of steering," said Lee Amaradio, president of the CRA. "The final proof will be how the Department of Insurance enforces the rules when they become final. I’d like to thank the Insurance Commissioner for adding clarity to a law designed to protect consumer choice."

Crozat disagrees on what would be the results of the changes in the regs, at least on Article 7.5, Insurer Recommendations of Automotive Repair Dealers, Section 2698.93 (e): Nothing in the article restricts the ability of an insurer to explain contractual provisions of the insurance policy to the claimant, including the insurer's obligation to pay only costs that are reasonably necessary to restore the damaged vehicle to its pre-accident condition.

He sees this section as a “form of indirect steering.” The insurer is not telling the customer: You can’t go to that shop. But rather if you go to that shop, you will have to pay the difference out-of-pocket. Many customers may take the easy route and not go to that shop.

“You have to read between the lines,” said Crozat. If this proposed change goes through, he said, the insurer will be able to tell customers that they, the insurer, by law, will only have to pay a certain amount. If the repair facility charges more, the insurer won’t have to pay it. “This would be the biggest boon for steering there ever was! We’re going to fight like hell” against it.

The proposed Regulation Implementing and Interpreting California Insurance Code 758.5, he said, is equivalent to offering chicken soup to someone who has a broken leg. Not very effective. He predicts that as a result of the proposed changes some of the largest insurers in California would reap “hundreds of millions of dollars of windfall profits at the expense of consumers and auto body shops.”

If it goes through, he predicts, “a lot of shops will go broke.”

Moses Gomez, who retired as the Bureau Chief for the Central Region and Auto Fraud Program Coordinator for the Department of Insurance in 2005, said these proposed anti-steering regs “are not necessary. Regulations are written to clarify existing laws, not to make things muddy or to complicate things,” as the proposed text would do. The current California anti-steering law is “more than clear.” His “old agency,” the Department of Insurance, “doesn’t enforce the law.” Gomez is currently the owner and principal consultant for MGomez Consulting Group. “I tell people what they need to hear, not what they want to hear.” He occasionally consults for Crozat.

(Editor’s note: Check back with future issues of Collision Standard to find out what’s happening.)

In 2005, Crozat testified on insurer steering, price fixing and labor rate surveys before the State of California Senate Committee on Banking, Finance & Insurance’s Department of Insurance Oversight Hearing, chaired by State Senator Jackie Speier, now a US Representative for the 12th Congressional District. Dealing specifically with the Consumer Services and Market Conduct Branch, Speier said then, it is “disturbing” that so many complaints have been filed with the [Insurance] department, “apparently without response.”

In that hearing she acknowledged, “There’s a whole sea of auto body owners out there who are fearful of coming forward” – fearful of getting “blackballed by insurers and losing their businesses. They can’t afford it. Our job is to fix it, so no one has to be fearful.”

At that time, Crozat testified that some insurance companies were telling customers to pay the repair shop’s bill out-of-pocket. He said, the adjuster told him, “Mr. Crozat, why don’t you eat it?” Up to that time, he testified, G & C and its consumers filed over 800 complaints with the Dept. of Insurance, and he hadn’t heard whether the Department “has hollered one foul.”

In many cases, G&C helps customers take insurers to small claims court to collect the amount not paid by their insurer, he said. Of those the judges rule on behalf of consumers 95% of the time, he said.

Suit against Geico

As a result of Crozat and other shop owners testifying about steering in 2005, Geico was ordered to appear before the Department of Insurance. Crozat said he felt some retaliation from GEICO, which he claimed tried to turn customers away from his shops. In 2006 he sued Geico for capping, steering and setting labor rates and won $60,000.

Geico countersued for fraud. G&C offers customers half of their rental car monies back. Geico doesn’t think they can do that. Crozat has a new attorney, Mark Venardi, Venardi Elam LLP, in Walnut Creek, CA. “He’s brilliant,” said Crozat. That case is going to trial this summer.

Because it is an ongoing case, Venardi prefers not to comment at this time.

Crozat opened his first shop in 1972 in Santa Rosa, recognizing that the highest quality repairs and customer service were the most important aspects of his business. He has been personally repairing cars since 1961and painting them for over 40 years. He began this line of work in the US Air Force at Castle Air Force Base in California (base closed in 1995). He currently has “5 ½ acres of body shop.”