GCIA Legal Seminar Addresses Steering and Short Pays

By Nick Palermo


Four years ago, collision shop owner Ray Gunder got fed up with insurance companies’ unscrupulous tactics. He shared how he fought to take his business back, and won.

Steering. Short pays. These are the questionable insurance company tactics that are driving independent collision shop owners mad and damaging their businesses. But what can shop owners and managers do? After all, insurance companies are among the most powerful entities in this country. They employ armies of lobbyists to bend policy in their favor. Shops are reluctant to fight back, fearing lost business. Is it right? Is it legal? Is there anything collision shops can do to take back their businesses?

These were the topics discussed at the Georgia Collision Industry Association’s June 23rd seminar, “How to Stay Legal in Your Shop.” The seminar drew more than forty attendees from several states throughout the Southeast.

For Ray Gunder, owner of Gunder’s Auto Center in Lakeland, Florida, collision repair has been a nearly lifelong pursuit. Gunder opened shop in 1969 with two bays and two people, then grew over the years to become one of the biggest around, with 25 staff members and 36 bays. Back in 2008, Gunder got fed up with an insurance company’s shady tactics. He’d heard all of the excuses before: the work he performed wasn’t necessary or his rates were higher than the prevailing competitive pricing. But this time, instead of lying down, he enlisted the help of an attorney. Gunder reached out to Brent Geohagan of Geohagan, P.A. and told him about his issue of being paid short of what was owed.

Geohagan, an experienced business litigator, took his typical initial position of skepticism. “Whenever I have a client come in my office, typically I err on the side of really believing that they’re exaggerating a bit,” said Geohagan. “A lot of times I have a client come in and all of a sudden this set of facts becomes a conspiracy, and somehow the garbage man, the president and the mayor are involved.” Perhaps Gunder was overcharging. Perhaps some of the work he was performing was “fluff.” Maybe Gunder didn’t even realize he was overcharging.

But the more Geohagan learned about Gunder’s case, the more he realized that “everything [Gunder] was telling me was being substantiated.” Geohagan eventually reached the conclusion that “the law has never met [the collision] industry.” He called it “surreal” that a business would perform work and simply not be paid for it. He was determined to help Gunder collect what was owed him.

Gunder and Geohagan tried a demand letter to no avail. They’d need to use a different tactic to get the insurance company’s attention. Because the collision shop has no contract with the insurance company, Gunder educated his customer on the situation and the customer agreed to assign his benefit to Gunder’s shop. Geohagan then filed a breach of contract action to collect the unpaid proceeds of the claim. Geohagan said that once the lawsuit reached the insurance company’s legal team, they gave in.

“What we have found is, as we press these things and it gets into the hands of other lawyers, that ultimately they capitulate and they say ‘hey, you got us,'” said Geohagan. “I’ve lost count of how many we’ve filed and been successful with. We’ve gotten all of our money, all of our attorney’s fees on each one of them. As a result of the fighting, they’ve also stepped away from the steering because they know we’ll fight.”

Although the laws in Georgia are not identical to those in Florida, Geohagan encouraged shop owners in this state to stand up, too. He outlined three possible ways to deal with short pays, aside from the difficult but most common one – “live with it.”

First, shops can enforce the contract with the customer. That means collecting the difference between the cost of repairs and the insurance company’s payment from the customer. Drawbacks include alienating customers and demanding payment from someone who may not be able to afford to pay. Second, the shop can educate the customer, estimator or claim representative. In some cases, this can be effective. In others, it’s a waste of time. Lastly, shops can take the route that Gunder and Geohagan have used with success: stepping into the customer’s shoes and enforcing the contract with the insurer through a lawsuit.

Why should shops use this strategy? Geohagan provided several reasons. First, the shop gets paid. Second, the customer is happy. He or she knows the shop has gotten the compensation necessary to repair the vehicle properly. Lastly, the insurance company is more likely to pay correctly on future claims.

Geohagan emphasized one more important reason to keep the insurance companies honest. It boils down to fairness and justice.

“This is not a windfall,” he said. “This is not a seminar about how you can make more money than you should. This is about y’all getting the money that’s yours.”

Geohagan emphasized the importance of shops standing together. One seminar attendee, David Montanaro of Palmetto Collision Works in Charleston, South Carolina, called the seminar “the biggest show of unity [in the industry] in ten years.”

The collision industry may have a tough road ahead to level the playing field, but this GCIA seminar certainly represented a step in the right direction.

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