N.Y. Court Ruling OKs Body Shop Referral
By Daniel Hays
NU Online News Service, May 2, 3: 37 p.m. EST?A recent decision by New York's highest court upholding an insurer's right to recommend autobody shops to policyholders with damage claims helps set an important precedent, an insurance trade group said.
The American Insurance Association, reacting to an April 30 decision by the New York State Court of Appeals, said the ruling is "good for consumers."
"This ruling benefits both insurers and policyholders because it allows insurers to provide consumers with more choices and more efficient ways to have their vehicles repaired," said David Snyder, assistant general counsel of the Washington-based AIA.
Michael Moran, another AIA representative, said the issue is due for more litigation, but that the decision is important. He noted that the prohibition against bodyshop referrals had not been enforced since an earlier ruling by a federal court in 2000.
The case arose in 1992 when the New York insurance department interpreted Section 2610 (b) of the state's insurance law to say that insurers could not recommend where policyholders should have their damaged vehicles repaired, unless specifically asked by the policyholder.
In 2000, U.S. Southern District Judge Richard Casey ruled in Allstate Insurance v. Serio that the law violated constitutionally protected free speech since the state was seeking "to control the dialogue insurance companies have with insureds."
On appeal, the 2nd U.S. Circuit Court of Appeals asked New York's highest court for guidance on statutory authority for the department's prohibition under state law.
New York's Court of Appeals ruled that the department had exceeded its authority, finding it unnecessary to rule on the free speech issue because the regulation was not authorized by statute.
The appeal of the case to the 2nd circuit is still pending.
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