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718The Rogak Report: 03 Oct 2005 ** Auto Physical Damage - Repairs **

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  • Lawrence Rogak
    Oct 3, 2005
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      McNulty v. Allstate Ins. Co., NYLJ 10/03/05 (District Court, Nassau
      County) (MILLER, j)

      Plaintiff, insured by Allstate, suing under her comprehensive
      coverage in relation to a vandalism incident involving her 2002
      Mercedes Benz SL500. "As is well-known in the community," stated the
      Court, "an SL500 is a very expensive car. The Defendant presumably
      collected substantially more than an average premium on the vehicle,
      arising out of its elevated market value."

      After the vandalism incident, Plaintiff notified Allstate that she
      wished to have her vehicle repaired at Mid-Island Collision, a
      facility that purports to be authorized by Mercedes Benz to perform
      body work. Apparently Allstate contacted Mid-Island. "The nature of
      the Defendant's contacts with Mid-Island are disputed, but it is
      clear that Defendant and Mid-Island reached no agreement to repair
      the Plaintiff's vehicle. It seems relatively clear that no agreement
      was likely to be reached, because Defendant apparently has a policy
      of paying no more than $40 per hour for labor, and Mid-Island alleges
      that it will not work for less than $65 per hour."

      "In the end, Defendant alleges that it notified the Plaintiff that it
      could not agree on a repair contract with Mid-Island, and it gave her
      several choices of repair shops where she could obtain repairs at $40
      per hour, including Master Collision, whose work Defendant said it
      would guarantee. Plaintiff's witness alleges that Master is not
      authorized by Mercedes to perform body work, and that allegation is
      uncontested by Defendant. Defendant tendered a check based on
      Master's estimate. Plaintiff endorsed the check under protest, and
      now sues for the difference between Mid-Island's estimate and
      Master's estimate."

      Allstate moved for summary judgment, arguing that an April 16, 2002
      opinion letter from the New York State Insurance Department
      conclusively establishes its rights. In that letter, an Insurance
      Department Supervising Attorney opined, in reply to an ex parte
      inquiry from Allstate, that when an insurer makes a bona fide offer,
      the insurer need not pay more than the amount of the offer.

      "While the Court is charged with giving deference to administrative
      agencies when they interpret their own regulations, the Court does
      not believe that it must abdicate its own authority to interpret
      regulations. That is particularly so when the agency in question is
      responding to an ex parte inquiry, rather than making a determination
      that it has been statutorily charged with making after holding a
      public hearing."

      "The Court need not reach the question of whether the Insurance
      Department correctly interpreted its regulations, however, because
      the fundamental issue of fact in this case is whether the Defendant
      made a bona fide offer in the first place. If it did not, the premise
      of the opinion letter does not hold. Defendant's argument assumes
      that issue has already been resolved in their favor. It has not. It
      is a triable issue of fact whether it is reasonable to expect
      Plaintiff to accept the offer of a non-Mercedes-approved body shop to
      repair a late-model SL 500. The Court acknowledges the possibility
      that a car of such value cannot be repaired at an unauthorized
      facility without substantially affecting its market value. Whether
      that is true or not must be determined on the basis of evidence to be
      submitted at trial."

      Accordingly, Allstate's motion to dismiss was denied.

      Comment: What happens now? I have tried such cases. Plaintiff will
      likely bring in an expert auto appraiser, and maybe even a Mercedes
      Benz dealer, to testify that a repair by an unauthorized dealer
      impairs the value of the car. Allstate will likely counter with its
      own expert who will say that as long as the repairs are expertly
      done, the value should be the same. I predict Allstate will lose.
      The Court of Appeals has already held that insurers may not steer
      policyholders to particular body shops, and $65 per hour to repair a
      Mercedes is not out of line with typical rates on Long Island.

      Larry Rogak