The following is a plain language explanation of the compliance provisions of the NJ Auto Body License Law to assist all current AASP/NJ members. Be prepared for compliance inspections!

AUTHORIZATION TO REPAIR INFORMATION

Initial Repairs

N.J.A.C. 13:21-21.11 (a) – (Plain Language) It is in violation of the New Jersey Auto Body Licensing Law for an auto body shop to commence any repair work, including the ordering of parts unless the shop has obtained either specific written authorization to repair or verbal authorization to repair.

NOTE: Verbal authorization is only acceptable if the vehicle is presented by someone other than the customer or an authorized representative of the customer, or if the vehicle is presented before or after normal business hours. If the shop obtains verbal authorization the estimate must contain a notation of the date, time, telephone number if any and the name of the customer that granted the verbal authorization and the customer must be given a copy of the estimate containing these notations.

NOTE: If the customer has actually visited the shop prior to the repair work commencing specific written authorization should be requested at that time.

Additional or Supplemental Repairs

N.J.A.C. 13:21-21.11 (b) (Plain Language) It is in violation of the New Jersey Auto Body Licensing Law for an auto body repair facility to commence any additional repairs beyond the original amount estimated and authorized, including the ordering of parts, unless the repair facility has obtained another additional authorization, either written or verbal. Again, the verbal authorization is only acceptable if it contains a notation of the date, time, telephone number if any and the name of the customer that granted the verbal authorization. Again, the customer must be given a copy of the estimate containing these notations.

IMPORTANT NOTE: Each time the shop finds more additional or supplemental repairs or parts beyond the amount previously authorized either on the original estimate or any supplement authorized, the shop must obtain another authorization either written or verbal that is in compliance with the rules laid out above.

IMPORTANT NOTE: If the shop finds additional repairs or parts that are needed ten times, the shop must go through this process ten additional times.

ADDITIONAL NOTE: Test Drive Provision

N.J.A.C. 13:21-21.11 (d) Provides that customers or insurers may test drive the repaired vehicle before paying for the repairs if the repairs made by the body shop is directly related to the operation of the vehicle and providing that the repaired vehicle can be safely operated on the highways of the state of New Jersey.

NOTE: This is not a notice that is required to be on the repair facility estimate. However, it is a provision of the New Jersey Auto Body Licensing Law that shops should be aware of. This notice can also be found on the “Notice to Customers” sign that is supplied by NJ DMV and required to be posted in the office or waiting area of the auto body shop in a conspicuous location.

ESTIMATE INFORMATION (Plain Language)

N.J.A.C. 13:21-21.10 Estimates and Repairs

• If a shop is going to do a job, the shop must provide every customer with his or her own written estimate
• Every shop must have his or her state license number on the estimate
• The person that writes the estimate must sign the estimate
• Each estimate must have the date the estimate was written
• Each estimate must have the customers name on it
• Each estimate must list the parts required with the cost of each part and must indicate any parts that are not new parts
• Each estimate must list the labor charge for each repair together with the total labor chargeOR
• The total number of hours estimated to perform the repairs along with the hourly labor rate the shop is charging
• Each estimate must contain a description of the vehicle being estimated
• Each estimate must contain an estimated or approximate date of delivery, if any is given
• Each estimate must contain the terms and limit of any guarantee given on the repairs
• Each estimate must contain the odometer reading of the vehicle at the time the estimate is given
• Each estimate must contain a statement or notice of the customers right to receive the replaced parts and must contain a statement that the customers signature or initials on the following line means that the customer is waiving this right. The estimate must then have a line for the customer to sign or initial to waive this right.

NOTE: The repair facility may charge a storage and removal fee to any customer that request the replaced parts and fails to pick up the replaced parts when the vehicle is picked up or the repairs are paid for, which ever comes first. However, if the shop charges such a fee, the fee must be disclosed to the customer in writing at the time the request for the replaced parts is made.

• Each estimate must contain a statement or notice that the customer or his or her insurance company has the right to inspect the repaired vehicle before paying for the repairs.NOTE: A shop can charge a reasonable fee for written estimates. However, if a fee is charged, the shop must disclose the amount of the fee to the customer in writing before the written estimate is prepared.

ADVERTISING REQUIREMENTS & INFORMATION

Advertising

Printed or Published Material

Every New Jersey Auto Body Repair Facility must prominently display the license number of the facility on any and all printed or published material.

Radio Broadcast

Every New Jersey Auto Body Repair Facility that advertises on radio must disclose that the facility is licensed by the state of New Jersey.

Television Broadcast

Every New Jersey Auto Body Repair Facility that advertises on television must disclose and prominently display the license number of the facility at the end of the broadcast.

STORAGE RATES REQUIREMENT INFORMATION (Plain Language)

N.J.A.C. 13:21-21.14 Storage Rates

NOTE: It is suggested that shops who intend to charge a fee for storing a vehicle should post a notice to customers in the office in a conspicuous location laying out the circumstances under which a storage fee might be incurred and post the amount of the fee on the notice on a per diem basis.

NOTICE AND RECORD KEEPING REQUIREMENT INFORMATION

N.J.A.C. 13:21-21.12 Notice and Record Keeping Requirements

Outdoor Auto Body Sign

Every New Jersey Auto Body Repair Facility must display an outdoor sign which, reads “Registered State of New Jersey – Licensed Auto Body Repair Facility.” The sign must contain letters at least two inches high with a stroke of approximately one half inch. The sigh must be visible from the road and must be located in a conspicuous location for the general public to see.

Posting of License Documents Issued by DMV

Every License document issued by NJ DMV must be posted in the office or waiting area in a conspicuous location, which is accessible to the public.

Posting of Notice to Consumers Sign

Every New Jersey Auto Body Shop must a “Notice to Consumers” sign concerning violations of the Auto Body Repair Facility Act and the fact that consumers or insurers have the right to inspect the repaired vehicle before paying for the repairs that is furnished by the New Jersey Division of Motor Vehicles. This sign must be posted in a conspicuous location, which is accessible to the public.

Record Keeping Requirements

Every New Jersey Auto Body Repair Facility must maintain copies of all estimates, work orders, invoices, parts purchase orders, appraisals and or other documents prepared by the repair facility or repair work performed by the facility or by sub-contractors. Such documents must be kept for a period of two years and must be available for inspection by the director of the Division of Motor Vehicles or by any person designated by him during normal business hours. Failure to permit such an inspection can result in administrative action being taken against the shop.

Providing the Director with List of Employees

Upon the request of the director of the Division of Motor Vehicles or by any person designated by him, every New Jersey Auto Body Repair Facility must provide the Director or his designee with a list of its employees in such form and detail as may be requested by him or his designee. Failure to comply with this provision when requested can result in administrative action against the repair facility.

Requirement to Notify DMV of Any Change in Address of the Repair Facility or Any Person or Entities Required To Be Listed On the Auto Body License Application

Every New Jersey Auto Body Repair Facility is required to notify NJ DMV of any change in address of the repair facility or any person or entities required to be listed on the auto body license application within 10 days of the change. Such notice is required to be made either in person or by certified mail to the Auto Body Repair Facility Licensing Unit.

Requirement to Notify DMV of Any Person or Entities Required To Be Listed On the Auto Body License Application That Is No Longer Associated With the Auto Body Repair Facility

Every New Jersey Auto Body Repair Facility is required to notify NJ DMV within 10 days of any person or entities required to be listed on the auto body license application that is no longer associated with the auto body repair facility. Such notice is required to be made either in person or by certified mail to the Auto Body Repair Facility Licensing Unit.

Requirement that an amended application be filed with the NJ DMV where there is a substitution and/or addition of persons or entities required to be listed on the application

Every New Jersey Auto Body Repair Facility must file an amended application with the NJ DMV where there is a substitution and/or addition of persons or entities required to be listed on the application and must meet the requirements of N.J.A.C. 13:21-21.6(a) and N.J.A.C. 13:21-21.4(d)

Important Information regarding action or process against a New Jersey Auto Body Repair Facility

Any process issued by NJ DMV to a licensed shop including but not limited to subpoenas, orders and orders to show cause, may be served by certified mail, or ordinary mail, to the business address of the auto body repair facility or to counsel’s address on record with NJ DMV.

NEW JERSEY ADMINISTRATIVE CODE

TITLE 11. DEPARTMENT OF BANKING AND INSURANCE DIVISION OF INSURANCE

CHAPTER 2. INSURANCE GROUP

SUBCHAPTER 17. UNFAIR CLAIMS SETTLEMENT PRACTICES

11:2-17.1 Purpose

N.J.S.A. 17:29B-4(9) and 17B:30-13.1 prohibit insurers from engaging in unfair claims settlement practices. The purpose of this subchapter is to promote the fair and equitable treatment of claimants by defining certain minimum standards for the settlement of claims which, if violated with such frequency as to indicate a general business practice, would constitute unfair claims settlement practices in the business of insurance.

11:2-17.2 Scope

This subchapter applies to all persons and all policies except the following: ocean marine, fidelity and surety, boiler and machinery and workers’ compensation. It shall also not apply to commercial property and liability policies for which the annual premium is more than $10,000 and where the claim is made by the commercial insured. This subchapter is not exclusive, and other acts, not herein specified, may also be found to constitute unfair claims settlement practices. This subchapter is not intended to supersede any other rule or regulation.

11:2-17.3 Definitions
The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise:

• “After market part” means sheet metal or plastic parts which constitute the exterior of an automobile, including inner and outer panels, manufactured by any manufacturer other than the original manufacturer of the part. Examples of after market parts include, but are not limited to, the following: doors, hoods, fenders, trunk lids, grills and bumper components.
• “Catastrophe” means a calamity or other disastrous event that causes widespread losses resulting in excessive claims volume.
• “Claimant” means either a first party claimant, a third party claimant, or both and includes such claimant’s designated legal representative and includes a member of the claimant’s immediate family designated by the claimant.
• “Claims settlement” means all the activities of an insurer relating directly or indirectly to the determination of the extent of liabilities due or potentially due under coverages afforded by the policy, and which result in a claim payment or acceptance, compromise or rejection.
• “Commissioner” means the Commissioner of the Department of Banking and Insurance.
• “Department” means the Department of Banking and Insurance.
• “First party claimant” means an individual, corporation, association, partnership, or other legal entity asserting a right to payment under an insurance policy or insurance contract arising out of the occurrence of the contingency or less covered by such policy or contract.
• “Insurer” means any person, corporation, association, partnership, company, fraternal benefit society, eligible unauthorized surplus lines insurer and any other legal entity engaged as an indemnitor or contractor in the business of insurance. For the purposes of this subchapter, “insurer” shall include any individual, corporation, association, partnership or other legal entity authorized to represent an insurer with respect to a claim.
• “Investigation” means all activities of an insurer related directly or indirectly to the determination of liabilities under coverages afforded by an insurance policy.
• “Notification of claim” means any notification, whether in writing or other means acceptable under the terms of an insurance policy or insurance contract, to an insurer or its agent, by a claimant, which reasonably apprises the insurer of the facts pertinent to a claim.
• “Pertinent communication” means all correspondence as well as conversations or other forms of communication that are materially related to the handling of a claim.
• “Policy” means any contract of insurance and includes, but is not limited to, all policies, contracts, certificates, riders and endorsements which provide insurance coverage.
• “Proof of loss” means the necessary documentation required from a claimant to establish entitlement to payment or benefits under a policy.
• “Third party claimant” means any individual, corporation, association, partnership or other legal entity asserting a claim against any individual, corporation, association, partnership or other legal entity insured under an insurance policy or insurance contract of an insurer.
• “Workers’ compensation” includes, but is not limited to, Longshoreman’s and Harbor Workers’ Compensation.

11:2-17.4 Miscellaneous rules

(a) Every insurer shall distribute copies of this subchapter to every person directly responsible for the handling and settlement of claims subject to this subchapter. Every insurer shall satisfy itself that all such responsible persons are thoroughly conversant with and are complying with this subchapter.

(b) All correspondence to a claimant required of an insurer pursuant to this subchapter shall be written in easy to read and understandable terms. This subsection shall not apply to correspondence to a claimant’s legal representative.

11:2-17.5 Misrepresentation of policy provisions

(a) No insurer shall fail to fully disclose to first party claimants all pertinent benefits, coverages or other provisions of an insurance policy or insurance contract under which a claim is presented.

(b) No agent, broker, or insurer shall conceal from first party claimants benefits, coverages or other provisions of any insurance policy or insurance contract when such benefits, coverages or other provisions are pertinent to a claim.

(c) No insurer shall, except where there is a time limit specified in the policy, make statements, written or otherwise, requiring a claimant to give written notice of loss or proof of loss within a specified time limit and which seek to relieve the company of its obligations if such time limit is not complied with unless the failure to comply with such time limit prejudices the insurer’s rights.

(d) No insurer shall request a claimant to sign a release that extends beyond the subject matter that gave rise to the claim payment.

(e) No insurer shall issue checks or drafts in partial settlement of a loss or claim using language which releases the insurer or its insured from its total liability.

11:2-17.6 Rules for replying to pertinent communications

(a) All claims must be reported to the designated insurer by a broker no later than three working days following receipt of notification of claim by the broker. For the purposes of this subsection, “broker” shall include a producer of record with respect to any residual market mechanism created by statute.

(b) Every insurer, upon receiving notification of claim shall, within 10 working days, acknowledge receipt of such notice unless payment is made within such period of time. This acknowledgement shall include the address and telephone number of the insurer claims office or authorized claims representative which will handle the claim. Notification given to an agent of an insurer shall be considered notice to the insurer.

(c) Every insurer, upon receiving notification of claim, shall promptly provide first party claimants with necessary claim forms, instructions, and reasonable assistance so that such claimants can comply with the policy conditions and the insurer’s reasonable requirements. Compliance with this subsection (c) within 10 working days of notification of a claim shall constitute compliance with (b) above.

(d) Every insurer, upon receipt of any inquiry from the Department respecting a claim shall, within 15 working days of receipt of such inquiry, furnish the Department with, based on the information available to the insurer, a complete and accurate written response to the inquiry.

(e) An appropriate reply shall be made within 10 working days on all other pertinent communications from a claimant which reasonably suggest that a response is expected.

11:2-17.7 Rules for prompt investigation and settlement of claims

(a) Every insurer shall commence an investigation on all claims other than auto physical damage within 10 working days of receipt of notification of claim.

(b) The maximum payment period for all personal injury protection (PIP) claims shall be 60 calendar days after the insurer is furnished written notice of the fact of a covered loss and of the amount of same; provided, however, that an insurer may secure a 45-day extension in accordance with N.J.S.A. 39:6A-5.

(c) Unless a clear justification exists, or unless otherwise provided by law, the maximum payment periods for property/liability claims shall be as follows:

1. For all first party claims other than personal injury protection (PIP) and auto physical damage (see N.J.A.C. 11:3-10.5(a)), 30 calendar days from receipt by the insurer of properly executed proofs of loss.

2. For all third party property damage claims, 45 calendar days from receipt by the insurer of notification of claim.

3. For all third party bodily injury claims, 90 calendar days from receipt by the insurer of notification of claim.

(d) Rules for the payment of health insurance claims may be found at N.J.A.C. 11:22-1.

(e) If the insurer is unable to settle the claim within the time periods specified in (c) through (e) above, the insurer must send the claimant written notice by the end of the payment periods specified in (c) through (e) above. The written notice must state the reasons additional time is needed, and must include the address of the office responsible for handling the claim and the insured’s policy number and claim number. This notice shall also include a telephone number which is toll free, or which can be called collect, or which is within the claimant’s area code. This number shall provide direct access to the responsible claims office or shall enable the claimant to gain such access at no greater expense than the cost of a telephone call within his or her area code. An updated written notice setting forth the reasons additional time is needed shall be sent within 45 days after the initial notice and within every 45 days thereafter until all elements of the claim are either honored or rejected. The written notifications required under this subsection shall not continue to apply to that aspect of a claim for which the claimant has become represented by an attorney, as evidenced by a letter of representation.

(f) Unless otherwise provided by law, every insurer shall pay any amount finally agreed upon in settlement of all or part of any claim not later than 10 working days from either the receipt of such agreement by the insurer or the date of the performance by the claimant of any conditions set by such agreement, whichever is later.

(g) Where there is a reasonable basis supported by specific information available for review by the Department that the first party claimant has fraudulently caused or contributed to the loss by arson, or other fraudulent schemes, the insurer shall be relieved from the requirements of (c) through (f) above. Provided, however, that the claimant shall be advised of the acceptance or denial of the claim within a reasonable time for full investigation after receipt by the insurer of a properly executed proof of loss.

(h) Unless otherwise provided by statute or unless otherwise provided by the policy, all life insurance claims shall be paid within a maximum period of 60 calendar days. The payment period is defined as the period between the date proof of loss is received by the insurer and the date of claims settlement.

1. If a claim or a portion of a claim for benefits under a policy requires additional investigation or is denied by the insurer, the insurer shall notify the claimant of such fact in writing within 45 days of due proof of death. The insurer shall also notify the claimant of the reason the claim is being investigated or denied, except in certain cases involving fraud.

2. Any uncontested portion of a claim shall be paid within 60 days of receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer under the terms of the policy.

3. The insurer, upon receipt of any document or information requested relating to a claim or portion of a claim under investigation, shall pay the benefits for which the claim is made or deny the claim within 90 days of the receipt of the requested documentation.

4. Payment of a claim or a portion thereof that is not under investigation by the insurer shall be overdue if not remitted to the claimant by the insurer within 60 days following receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer.

5. Payment of a claim or a portion of a claim under investigation or denied that becomes eligible for payment shall be overdue if not remitted to the claimant by the insurer within 90 days following receipt of due proof of death, proof of interest of claimant or any other document or information requested by the insurer.

6. Overdue payments shall bear an annual rate of interest equal to the average rate of return of the State of New Jersey Cash Management Fund, established pursuant to N.J.S.A. 52:18A-90.4, for the preceding fiscal year rounded to the nearest one half percent. Insurers may choose either the Fund’s State or Other-than State rates. However, insurers shall not be permitted to change the rate once chosen.

11:2-17.8 Rules for fair and equitable settlements and reasonable explanations applicable to all insurance

(a) No insurer shall deny or offer to compromise a claim because of a policy provision, including any concerning liability, a condition, or an exclusion without providing a specific reference to such language and a statement of the facts which make that language operative.

(b) Any denial or offers of compromise to the claimant shall be confirmed in writing and shall be kept in the appropriate claim file.

(c) In any case where a first party claim is denied or a compromise is offered, the insurer shall notify the first party claimant of any applicable policy provision limiting such claimant’s right to sue the insurer.

(d) Insurer shall not fail to settle first party claims on the basis that responsibility for payment should be assumed by others except as may otherwise be provided by law or policy provisions such as Workers’ Compensation exclusions, or coordination of benefits provisions.

(e) If a claimant is actively negotiating with an insurer for settlement of a claim, and the claimant’s rights may be affected by a statute of limitations or a policy time limit, the insurer shall provide the claimant with written notice that the time limit may be expiring and may affect the claimant’s rights. Such notice shall be given to claimants 60 calendar days before the date on which such time limit may expire. This rule shall only apply if the insurer is negotiating a claims settlement with a person who is neither an attorney nor represented by an attorney.

(f) No insurer shall make statements which indicate that the rights of a claimant may be impaired if a form or release is not completed within a given period of time unless the statement is given for the purpose of notifying the claimant of any applicable law or policy provision.

(g) Unless otherwise provided by law, in any case where there is no dispute as to one or more elements of a claim, payment for such element(s) shall be made notwithstanding the existence of disputes as to other elements of the claim where such payment can be made without prejudice to either party.

(h) An insurer shall not compel claimants to institute litigation to recover amounts due under an insurance policy by offering substantially less than amounts recovered in actions brought by such claimants.

(i) No insurer shall deny payment of a claim when it is reasonably clear that either full or partial benefits are payable.

(j) No claim shall be denied or compromised based on an exclusion, reduction or limitation in a policy unless documentation of facts rendering the exclusion, reduction or limitation operative can be obtained. If such documentation is not made a part of the claim file, the insurer shall place in the claim file a written notation explaining how documentation may be obtained.

(k) With respect to first party claims, insurers shall make claim payments by check or draft with a statement setting forth the coverage under which payment is made and in sufficient detail so that first party claimants can reasonably understand the benefits included within the claim payment. The details should include an explanation of how the benefit payment was calculated. This subsection shall not apply to claims in which the claim payment figure was arrived at through negotiations between the insurer and the first party claimant.

(l) If a first party claimant or a third party claimant not represented by an attorney does not submit sufficient information to establish his or her entitlement to the benefits claimed, then the insurer shall provide the claimant with a general description of the information and documentation needed to establish such entitlement.

11:2-17.9 Rules for fair and equitable settlements applicable to life and health insurance

(a) No insurer shall indicate on a payment draft, check or in any accompanying cover letter that said payment is “final” if additional benefits relating to the claim for which benefits are being paid are payable under the policy.

(b) When it is apparent to the insurer that additional benefits would be payable under a policy upon receipt of additional proofs of loss from the claimant, the insurer shall explain to the claimant in writing or by telephone the additional proofs or information needed to establish entitlement to additional benefits.

(c) No insurer shall undertake any activity that has the effect of coercing the insured to settle a disability claim on a lump sum basis.

(d) No insurer shall pay a claim involving both a covered and noncovered condition on a percentage basis of contributing loss, unless said percentage is reasonable.

(e) Settlement of claims for a fraction of an indemnity period shall be on a pro rata basis unless the policy specifically excludes pro-rata payments.

(f) If it is found that an insured’s age is overstated on an individual life or health policy or understated on an annuity, benefits shall be adjusted upward under a policy which contains a misstatement of age provision specified in N.J.S.A. 17B:25-6 and N.J.S.A. 17B:26-18.

(g) No insurer shall request a claimant to sign an agreement which releases the insurer from all future claims under an insurance policy unless no other benefits are payable under it.

(h) Unless otherwise provided by the policy, no insurer may terminate disability benefits based solely on lack of regular medical attendance when the disability has been verified by a physician and can reasonably be expected to continue beyond the date through which benefits have been paid.

(i) No policy shall be rescinded and claim denied for loss incurred during the contestable period based on material misrepresentation by the applicant unless the application is a part of the contract.

(j) No policy shall be rescinded and claim denied for loss incurred during the contestable period based on omission of material information when such information is not specifically requested on the application.

(k) When an application for a life/health policy contains only one medical question or declaration as to general status of the insured’s health, such as, “Are you now in good health?”, an insurer shall not rescind a policy or deny a claim for loss incurred during the contestable period on the basis of material misrepresentation, if based on the totality of circumstances, the insured responded to the best of his/her knowledge and belief that the general status of his/her health was satisfactory.

11:2-17.10 Rules for fair and equitable settlements applicable to property and liability insurance

(a) This section, unless otherwise noted in this subchapter, is applicable to claims arising under all property/liability coverages. This section is organized so that the requirements for all lines of property/liability insurance are found in (a)1 through 6 below; for automobile insurance only, in (a)7 through 13 below; and for other than automobile insurance only, in (a)14 and 15 below. The requirements of this section with respect to motor vehicle claims are in addition to the requirements of N.J.A.C. 11:3-10. In addition to the provisions of this section, the requirements for auto physical damage first party claims found in N.J.A.C. 11:3-10.1 through 10.4 shall also be construed to apply to automobile property damage third party claims from the time that liability becomes reasonably clear. The requirements are as follows:

1. Where liability and damages are reasonably clear, insurers shall not recommend that third party claimants make claim under their own policies solely to avoid paying claims under such insurer’s policy.

2. When the amount claimed is reduced because of betterment or depreciation, all information and calculations for such deduction shall be contained in the claim file. Such deductions shall be itemized and specified as to dollar amounts and shall be fair and equitable.

3. Unless the question has been specifically negotiated, the insurer remains liable for hidden damage directly related to the loss giving rise to the claim subject to policy terms, conditions and limits.

4. No insurer shall refuse to grant advance payments on a claim primarily because the claimant has retained an attorney for the purpose of facilitating recovery on his/her behalf.

5. No insurer shall deny a claim for failure to exhibit the property without proof of demand and unfounded refusal by a claimant to do so.

6. Unless the insurer is exercising a right under the policy to repair damaged property, it shall not require as a condition to payment of claims that repairs be made by a particular contractor or repair shop.

7. In all automobile physical damage claims, the first party claimant shall be notified at the time of the insurer’s acknowledgement of the claim, or sooner if inquiry is made, whether coverage exists for the rental of an automobile subject to policy terms and conditions.

8. When an insurer acknowledges receipt of an automobile property damage liability claim, or sooner if the claimant inquires, it shall inform the claimant whether and to what extent he or she will be entitled, if the insurer’s liability later becomes reasonably clear, to payment for the rental of an automobile or other substitute transportation. Such payment will ordinarily be for the rental of a vehicle comparable to the type of the damaged vehicle (for example, sedan, minivan, sport utility vehicle, etc.) at a reasonable price until the damaged vehicle is repaired or, in the event of a total loss, until the claim is settled. Nothing in this section shall be construed to require that the reimbursement cover costs of a rental vehicle of similar value or “status” to that of the damaged vehicle, but only a comparable type. When an insurer uses the doctrine of comparative negligence to determine its responsibility for the cost of substitute transportation, it shall, as soon as is practicable, advise the claimant of the extent of its liability.

9. An insurer shall provide notice to a claimant three working days prior to the termination of payment for automobile storage charges and place a copy of such notice in a claim file.

10. All after market parts manufactured after October 17, 1988 used in the repair of an automobile where insurance proceeds provide the basis of payment therefor shall carry sufficient permanent identification so as to identify the manufacturer thereof. Such identification shall be accessible after installation to the extent possible.

11. No insurer shall require the use of after market parts in the repair of an automobile unless the after market part is warranted by the manufacturer in a reasonable manner as to duration and coverage and at least equal in like kind and quality to replacement parts available from the original manufacturer of the part in terms of fit, quality and performance. Use of aftermarket parts which have been certified by an independent testing laboratory as being of like kind and quality to the original manufactured part will be deemed to be in compliance with the requirements of this paragraph.

12. Insurers specifying the use of after market parts shall pay for any modifications which may become necessary in making the repair.

13. Where the insurer specifies the use of after market parts, the insurer shall disclose to the claimant, in writing, either on the estimate or on a separate document attached to the estimate, the following information, which shall appear in print no smaller than 10 point type:

THIS ESTIMATE HAS BEEN PREPARED BASED ON THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. PARTS USED IN THE REPAIR OF YOUR VEHICLE BY OTHER THAN THE ORIGINAL MANUFACTURER ARE REQUIRED TO BE AT LEAST EQUAL IN LIKE KIND AND QUALITY IN TERMS OF FIT, QUALITY AND PERFORMANCE TO REPLACEMENT PARTS AVAILABLE FROM THE ORIGINAL MANUFACTURER.

The insurer shall clearly identify on the estimate of such repair all after market parts installed on the vehicle.

14. If the insurer intends to exercise its right to inspect, or cause to be inspected by an independent appraiser, damages prior to repair, it shall have 10 working days following receipt of notification of claim to inspect the claimant’s damaged property at a place and time reasonably convenient to the claimant, provided that the claimant has not refused to make the property available for inspection. For third-party property damage claims, this paragraph shall apply once the insured’s liability is reasonably clear. This paragraph does not apply to losses caused by a catastrophe.

15. If any loss other than a motor vehicle loss subject to N.J.A.C. 11:3- 10 is to be settled on the basis of a written estimate prepared by or for the insurer, the insurer shall supply to the claimant before beginning negotiations a copy of the estimate upon which the settlement is to be based.

i. Such estimate prepared by or for the insurer shall be reasonable, and of an amount which will allow for repairs to be made in accordance with generally accepted standards for safe and proper repairs, subject to policy conditions, such as limits, deductible, depreciation, and prior damage.

ii. If the claimant subsequently claims, based upon a written estimate which he/she obtains, that necessary repairs will exceed the written estimate prepared by or for the insurer, the company shall review the written estimate and respond to the claimant within 10 working days, and may provide or, if requested, must provide the claimant with the name of the repair shop or contractor that will make the repairs in accordance with generally accepted standards for safe and proper repairs.

11:2-17.11 Written notice by insurers of payment of claims

(a) Upon payment of $5,000 or more in settlement of any third-party liability claim, where the claimant is a natural person, the insurer or its representative (including the insurer’s attorney) shall mail to the third-party claimant written notice of payment at the same time payment is made to the third-party claimant’s attorney or other representative.

(b) Upon payment of $5,000 or more in settlement of any first-party property claim, the insurer or its representative (including the insurer’s attorney) shall mail to the first-party claimant written notice of payment at the same time payment is made to the first-party claimant’s public adjuster or other representative.

(c) The written notice referred to in (a) or (b) above shall be mailed to the claimant by regular mail at the claimant’s last known address, and shall include at least the following information:

1. The amount of the payment;

2. The party or parties to whom the check is made payable;

3. The party to whom the check was mailed; and

4. The address of the party to whom the check was mailed.

(d) Nothing in (a) or (b) above shall create, or be construed to create, a cause of action for any person or entity, other than the Department, against the insurer or its representative based upon a failure to serve such notice, or the defective service of such notice. Nothing in (a) or (b) above shall establish, or be construed to establish, a defense for any party to any cause of action based upon a failure by the insurer or its representative to serve such notice, or the defective service of such notice.

11:2-17.12 Examinations

(a) Each insurer’s claim files are subject to examination and inspection by the Commissioner or by his duly appointed designees pursuant to N.J.S.A. 17:23-4, 17:29B-5, 17B:21-3 and 17B:30-16.

(b) Detailed documentation and/or evidence shall be contained in each claim file in order to permit the Commissioner or his designated examiners or investigators to reconstruct the company’s activities relative to the claims settlement. Such documentation shall include but is not necessarily limited to all investigative reports, payment vouchers, transactions, notices, memoranda and work papers. With respect to automobile damage claims, file documentation also shall include the name, address, telephone number and license number of any auto body repair facility that has been utilized by the insurer in the adjustment of the loss or repair of the automobile. All such documentation shall be properly dated and, for investigative reports, notes, memoranda and work papers, the parties preparing such documents shall be identified.

(c) Every insurer shall maintain records of all pertinent communications relating to a claim. The records must identify the date of the communication and the parties, and describe the substance of the communication.

11:2-17.13 Special claims reports

(a) If the Department observes that an insurer’s claims settlement practices are not meeting the standards established by statute or by this subchapter, the Department may require such insurer to file periodic reports. Depending on the nature and extent of an insurer’s deviations from such standards and with due consideration of the insurer’s data capabilities, the Commissioner in his discretion may require the report to include some or all of the statistics listed below:

1. The total number of claims submitted;

2. The original amount claimed;

3. The classification by line or insurance of each individual claim;

4. The total number of claims denied;

5. The total number of claims paid;

6. The total number of claims compromised;

7. The amount of each settlement;

8. The total number of claims for which lawsuits are instituted against the insurer, the reason for the lawsuit, and the amount of the final adjudication; and

9. An individual listing showing the disposition and other information for each claim.

11:2-17.14 Separability

If any provision of this subchapter or the application thereof to any person or circumstance is for any reason held to be invalid, the remainder of the subchapter and the application of such provision to other persons or circumstances shall not be affected thereby.

11:2-17.15 Penalties

(a) If, after notice and hearing, the Commissioner finds that a person has violated this subchapter, he shall make his findings in writing and shall issue and cause to be served upon the person charged with the violation an order requiring such person to cease and desist from engaging in such violation. The Commissioner may order payment of a penalty not to exceed $1,000 for each and every violation unless the person knew or reasonably should have known he was in violation of this subchapter, in which case the penalty shall not be more than $5,000 for every violation. The Commissioner shall collect the penalty in the name of the State in a summary proceeding in accordance with “the penalty enforcement law” (N.J.S.A. 2A:58-1 et seq.).

(b) Any person who violates a cease and desist order of the Commissioner under (a) above, after it has become final, and while such order is in effect, shall be liable to a penalty not exceeding $5,000 for each violation, which may be recovered in a civil action. In determining the amount of the penalty the question of whether the violation was willful shall be taken into consideration.

(c) The penalties provided herein shall be in addition to any other penalties authorized by law.

DEPARTMENT OF BANKING AND INSURANCE – DIVISION OF INSURANCE

New Jersey Automobile Physical Damage Claims

Effective Date: February 21, 2006

3. If the insurer is deducting salvage from the settlement, notification of theinsured’s rights as set forth in (j)2 above must be provided to the insured in writing at thetime the offer of settlement is made and a copy retained by the insurer in the claim file.

NEW JERSEY ADMINISTRATIVE CODE

TITLE 11. DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

CHAPTER 2. INSURANCE GROUP

8. When an insurer acknowledges receipt of an automobile property damage liability claim, or sooner if the claimant inquires, it shall inform the claimant whether and to what extent he or she will be entitled, if the insurer’s liability later becomes reasonably clear, to payment for the rental of an automobile or other substitute transportation. Such payment will ordinarily be for the rental of a vehicle comparable to the type of the damaged vehicle (for example, sedan, minivan, sport utility vehicle, etc.) at a reasonable price until the damaged vehicle is repaired or, in the event of a total loss, until the claim is settled. Nothing in this section shall be construed to require that the reimbursement cover costs of a rental vehicle of similar value or “status” to that of the damaged vehicle, but only a comparable type. When an insurer uses the doctrine of comparative negligence to determine its responsibility for the cost of substitute transportation, it shall, as soon as is practicable, advise the claimant of the extent of its liability.

NEW JERSEY ADMINISTRATIVE CODE

TITLE 11. DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

CHAPTER 3. AUTOMOBILE INSURANCE

SUBCHAPTER 10. AUTO PHYSICAL DAMAGE CLAIMS

(a) If the insurer intends to exercise its right to inspect, or cause to be inspected by an independent appraiser, damages prior to repair, the insurer shall have seven working days following receipt of notice of loss to inspect the insured’s damaged vehicle, which is available for inspection, at a place and time reasonably convenient to the insured; commence negotiations; and make a good faith offer of settlement.

NEW JERSEY ADMINISTRATIVE CODE

TITLE 11. DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

CHAPTER 3. AUTOMOBILE INSURANCE

SUBCHAPTER 10. AUTO PHYSICAL DAMAGE CLAIMS

(c) If the insurer inspects the damaged vehicle or causes it to be inspected, the insurer shall promptly upon completing the inspection furnish the insured or the designated representative of the insured with a detailed written estimate of the cost of repairing the damage resulting from the loss, specifying all appropriate deductions.

NEW JERSEY ADMINISTRATIVE CODE

TITLE 11. DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

CHAPTER 3. AUTOMOBILE INSURANCE

SUBCHAPTER 10. AUTO PHYSICAL DAMAGE CLAIMS

11:3-10.3 Adjustment of partial losses

(d) No insurer shall negotiate the settlement of any physical damage claim involving an automobile as defined at N.J.S.A. 39:13-1b with an unlicensed auto body repair facility or in any manner utilize an unlicensed facility in the adjustment, negotiation or settlement of such a claim.

It shall be the responsibility of the insurer to make a reasonable and diligent effort to determine whether the facility is properly licensed.

NEW JERSEY ADMINISTRATIVE CODE

TITLE 11. DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

CHAPTER 3. AUTOMOBILE INSURANCE

SUBCHAPTER 10. AUTO PHYSICAL DAMAGE CLAIMS

(e) Subject to the requirements of (d) above, (The Repair Facility Must Be Licensed) the insured may use any repair facility of his or her own choice. With respect to automobile damage claims, the insurer shall notify in writing any insured who elects to use his or her own repair facility that, pursuant to law, any entity engaged in the business of auto body repairs must be duly licensed. The notice shall further advise the insured that the insurer is prohibited by law from negotiating, adjusting or settling an automobile damage claim with an unlicensed facility. The written notice shall be furnished at the time of acknowledgment of the claim as provided atN.J.A.C. 11:2-17.6 or upon the furnishing of its written estimate, as specified at (c) above, whichever is sooner. The insurer must make all reasonable efforts to obtain an agreed price with the facility selected by the insured.

NEW JERSEY ADMINISTRATIVE CODE

TITLE 11. DEPARTMENT OF BANKING AND INSURANCE

DIVISION OF INSURANCE

CHAPTER 3. AUTOMOBILE INSURANCE

SUBCHAPTER 10. AUTO PHYSICAL DAMAGE CLAIMS

11:3-10.3 Adjustment of partial losses

(i) Deductions for betterment and depreciation are permitted only for parts normally subject to repair and replacement during the useful life of the insured motor vehicle.

Deductions for betterment and depreciation shall be limited to the lesser of an amount equal to the proportion that the expired life of the part to be repaired or replaced bears to the normal useful life of that part, or the amount by which the resale value of the vehicle is increased by the repair or replacement. Calculations for betterment, depreciation and normal useful life must be included in the insurer’s claim file.

• Maximum allowable Volatile Organic Compound (VOC) limits for surface-coating products
• VOC content Record-keeping requirements
• Surface coating application methods
• Cleaning of surface coating application products
• Housekeeping measures

Click to download pg. 1 of brochure Click to download pg. 2 of brochure

VOC COMPLIANCE INSPECTIONS UPDATE

The AASP/NJ has recently participated in a series of VOC Compliance Training Meetings held at various auto body shops in different locations around the state. The purpose of the training was to help educate DEP and County Health Inspectors on how body shops use, store, mix, and handle voc containing products and the equipment used to apply and store the coatings. During the series of training meetings Joe Cole of Till Paint and Tom Semtanka of Central Paint presented very professional and in-depth Power Point Presentation relating to the recently enacted VOC Compliance rules and a real world look at the collision industry that will no doubt be instrumental to the inspectors when conducting the compliance inspections at local body shops. The direct involvement of the AASP/NJ and the paint distributors in this effort will assure that we are all on the same page and provided us with invaluable information to bring the members of the AASP/NJ in terms of how to fully comply with these new rules. The NJ-DEP and County Health Inspectors are now out inspecting for VOC Compliance in auto body shops. Both Central Paint and Till Paint have agreed to put on similar presentations to assist the members of the AASP/NJ to come into compliance with these new rules. While preparations for the meetings are in the works we have decided to provide our members with an updated checklist of compliance items in case a member receives an inspection before the meetings can be planned and held.

The following is an updated list of some but possibly not all of the major items the inspectors will be checking for in the shops:

• New Item – The inspectors will be checking to see if the shop has a current and valid auto body license posted in the shop. The inspectors will be recording the shops license number and reporting any shop without a license or any shop operating on an expired license to the NJ Motor Vehicle Commission for administrative action. The inspectors will also look for shops that have obtained a limited no-paint license, yet providing painting services at the facility.

• Is the shop spraying more than 1/2 gallon in any one hour, and if so, does the shop have a current stack permit

• What paint Products/Systems have been used at the facility since 6/29/04 (e.g. BASF, Dupont, PPG) NOTE: If shop using a system inspector will most likely assume compliance

• Inspectors will look for a report or special sheet showing the VOC content of all paints and coatings as applied ( when the product is mixed and ready to be sprayed).

• Are products from different systems being intermixed – If yes, the inspector will likely check to see if VOC Calculations demonstrate compliance – If no, the inspector will check to see if Products/Systems being used meet the compliance standards

• Inspector will note where VOC content information was obtained – i.e.- Paint Supplier Tech. Data Sheet, MSDS Sheets, Facility Calculations or Other

• In heated booths, is the burner rated at 1 million or more BTU’s and if so, does the shop have the required permit for the burner

• Are there any fuel combustion sources rated at or greater than 1 million BTU’s, and if so, does the shop have the required permit

• Does the shop have a contract for the proper disposal of hazardous waste or is the shop recycling hazardous waste. If recycling, is the equipment properly vented

• Is the shop using HVLP or Approved Equivalent Paint Guns – If using equivalent paint guns, shop must have written approval from the Environmental Protection Agency

• Does the shop have a paint gun cleaner

• Is the shop’s gun cleaner enclosed

• Is the shop’s gun cleaner kept closed when not in use

• Are materials stored in nonabsorbent, non-leaking containers

• Are containers kept closed unless being filled or emptied

• Have employees met training requirements

• If shop has a funnel in waste container inspector will look for the type of funnel that has a cap to keep closed when not in use

• Are rags kept in a closed container

NOTE: Your Paint Company or jobber should be able to supply you with information regarding the VOC content of products when mixed and ready to spray. You may not be able to rely on material safety data sheets for this information because some may not show the VOC content as mixed. Most paint manufacturers have a chart listing the VOC as applied contents for all their Federal rule compliant products. Again, this information must show the VOC content as applied or when mixed.

You can also get help by calling the Small Business Assistance Program at 609-292-3600

THE INSPECTORS ARE OUT VISITING SHOPS IN MANY COUNTIES NOW!

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Title 39 – New Jersey law pertaining to the signing of insurance checks issued or allocated for the payment of auto body repairs.

39:13-8. Inspection of Motor Vehicle Repairs

a. When a motor vehicle is repaired by an auto body repair facility as a result of damage to the vehicle and

(1) the damage is reimbursable under a policy of insurance under physical damage coverage, property damage coverage, or comprehensive coverage; and (2) the proceeds of the reimbursement are in the form of a negotiable instrument issued by an insurer which is payable jointly to the insured and a lienholder or lessor, the auto body repair facility shall provide the lienholder or lessor with a statement of the repairs which have been made to the vehicle, which statement shall be attested by an authorized representative of the auto body repair facility. The statement shall constitute proof to the lienholder or lessor that all repairs have been made by an auto body repair facility. A color photograph of the repaired vehicle shall accompany the statement.

b. In the event that any lienholder or lessor should wish to inspect any motor vehicle to which repairs have been made as provided in subsection a. of this section, the lienholder or lessor shall conduct the inspection upon the premises of the auto body repair facility within seven business days after receipt of the notice by certified mail that the repair has been completed. If an inspection is not made by a lienholder or lessor within the seven-day period provided herein, the lienholder or lessor shall forfeit the right to make an inspection.

c. In the event a lienholder or lessor shall sell any motor vehicle to which repairs have been made as provided in subsection a. of this section prior to the payment or reimbursement of the auto body repair facility which repaired that motor vehicle, except for the amounts due that lienholder or lessor under the provisions of a perfected lien or security interest, the amount due the auto body repair facility for those repairs shall supersede and have priority over all other liens or outstanding interests, including those payable by an insurer to the person who insured the repaired motor vehicle. In such cases, if the insurer has received a statement and request demanding payment from the auto body repair facility, the proceeds, or portion thereof, shall be directed by the insurer to that auto body repair facility.

d. No lienholder or lessor shall deduct any amount from the aggregate proceeds of a negotiable instrument that was issued by an insurer to reimburse an auto body repair facility which, pursuant to the provisions of subsection a. of this section, repaired a damaged motor vehicle, but which is payable jointly to the insured and the lienholder or lessor, for the purpose of paying any delinquent amounts or outstanding installments that the insured may owe to the lienholder or lessor for the motor vehicle that has been repaired, nor shall any lienholder or lessor unreasonably withhold the endorsement of such instrument or, following endorsement, refuse to transmit the endorsed instrument to the insured.

For the purposes of this act, “auto body repair facility” shall mean an auto body repair facility as defined in section 1 of P.L.1983, c.360 (C.39:13-1).

(Chgd. by L.1989, c.273, eff. 1/8/90.)

The Path of Legislation in New Jersey: How a Bill Becomes Law

Bill Drafting

A legislator from either the Assembly or the Senate may sponsor a bill at the suggestion of a constituent, interest group, public official, public official or the Governor. The legislator may ask other legislators in the same House to join as co-sponsors. At the legislator’s direction, the nonpartisan Office of Legislative Services provides research and drafting assistance and prepares the bill in the proper technical form.

Introduction of the Bill

During a session, the sponsoring legislator gives the bill to the Secretary of the Senate or Clerk of the General Assembly, who reads the bill aloud. This is known as the first reading. The bill is them printed and released to the public.

Committee Reference and Action

When the bill is reported to the floor (or referred directly without committee review), its title is read aloud for the second reading. The bill may not be amended. When scheduled by the President or Speaker, the bill is given a third reading, debated and voted upon. To insure thorough consideration, rules prohibit a second and third reading on the same day except by an emergency vote of three-quarters of the members.

House Vote

A bill passes each House when approved by a majority of authorized members (21 votes in the Senate, 41 in the Assembly). When a bill is delivered to the second House, it will go through the same process of first reading, committee action, second reading and final vote. If the second House amends the bill, it is returned to the first House for a vote on the changes. A bill receives final legislative approval only when it passes both Houses in identical form.

Governor’s Action

A bill becomes law upon the Governor’s signature or 45 days if no action is taken. However, should no action be taken on a bill passes within the last 10 days of the legislative session, it fails to become law. If vetoed, a bill may become law if the legislature overrides the veto by a two-thirds vote (27 in the Senate, 54 in the Assembly). A law takes effect on the day specified in its text or, if unspecified, the July 4th following its passage.

New Jersey’s Motor Vehicles and Traffic statutes at N.J.S.A. 39:13 et seq. govern auto body repair facilities. N.J.S.A. 39:13-2b prohibits auto body repair facilities as defined in the statute from conducting business unless they are licensed by the New Jersey Motor Vehicle Commission (MVC).

Click here to view a printable version of the full NJ Department of Insurance Bulletin