OGC Opinion No. 06-08-18

The Office of General Counsel issued the following opinion on August 25, 2006, representing the position of the New York State Insurance Department.

Motor Vehicle Physical Damage Claims – Agreed Price

QUESTION PRESENTED

With respect to the settlement of motor vehicle physical damage claims, must an "agreed price" agreed to by an insurer and their insureds, or their representatives, to repair damages to the motor vehicle by the insured's intended repair facility, be in writing?

Conclusion

No. There is no requirement under N.Y. Comp. Codes R. & Reg. tit. 11 § 216.7 that the "agreed price" must be in writing.

Facts

The inquirer represents an insurance company that is requiring that the "agreed price" must be evidenced in a written agreement signed by the parties and is thereby determining that a verbal agreement is insufficient in the absence of a written agreement. It is not specified what the language of such written agreement would include. In the event that the repair facility will not sign the written agreement, the insurer would issue a prescribed Notice of Rights letter to the insured.

Analysis

N.Y. Comp. Codes R. & Reg. tit. 11 § 216.7 (Regulation 64) governs standards for prompt, fair and equitable settlement of motor vehicle physical damage claims. Section 216.7 (a)(1) defines an "agreed price" as meaning "the amount agreed to by the insurer and the insured, or their representatives, as the reasonable cost to repair damages to the motor vehicle resulting from the loss, without considering any deductible or other deductions." Section 216.7(a)(2), permits an insured to designate a representative, which means "an insured's broker of record or an insured's intended repair shop designated by the insured to represent the insured shop in negotiations with the insurer in an attempt to settle the claim. Such designated representative may legally act on the insured's behalf."

N.Y. Comp. Codes R. & Reg. tit. 11 § 216.7(b)(7) requires that "Negotiations must be conducted in good faith, with the basic goal of promptly arriving at an agreed price with the insured's designated representative. If the insured's intended repair shop is not a designated representative of the insured, the insurer may also reach an agreement with that repair shop on the cost to repair the damaged vehicle, but that agreement shall not be binding upon the insured or the designated representative." In the event that there is no price agreed to, Section 216.7(b)(14)(i) requires that the insurer furnish the insured with a prescribed notice of rights letter (NYS ARD 1), which initiates the process whereby the insurer must provide the insured with alternate repair facilities.

Under the factual situation presented herein, it is the insurer's requirement that when there is an agreed price reached between the repair facility and the insurer, such agreed price must be expressed in writing, as opposed to a verbal agreement. It is not clear what specific language of agreement would be required by the insurer, or if such language would impose any conditions upon the agreed price. Further, it is the insurer's practice that the failure of the intended repair facility to sign the written agreement, even where there has been verbal agreement, will serve as a non-agreement so as to invoke the insurer's obligation to send the insured the Notice of Rights letter required under Section 216.7(b)(14)(i).

It is the Department's view that in the absence of a requirement in the regulation that there be a written signed agreement between the two parties, there is no obligation on the part of an intended repair facility to enter into a written agreement after a verbal agreement has been reached and an insurer may not unilaterally impose such requirement. It is the Department's understanding that verbal agreements have constituted standard practice in the industry. To permit an insurer to unilaterally require a written agreement in the manner proposed by your company could cause delays in the prompt processing of claims, in violation of the goal of Section 216.7(b)(7) to promptly arrive at an agreed price, and would possibly lead to situations where an insured does not have his or her vehicle repaired in the intended facility, despite prior verbal agreement between the parties as to what constitutes a reasonable cost to repair the vehicle.

For further information you may contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.