Allowing car collision repair facilities to pay all or part of a deductible to an insured does not constitute a rebate prohibited under New York law, lawyers for the state’s insurance department have said.
The reasoning? Repair shops have no relationships with insurance carriers and are not licensees under the state’s insurance laws; therefore, deductible payments aren’t illegal.
The decision stems from a legal opinion issued by the department in response to an anonymous inquiry, and touches on an issue the department’s lawyers previously brought up in an October 2007 legal bulletin. That bulletin came in response to questions from an employee of a law firm who had seen advertisements for a collision repair facility that claimed it would pay back all or part of a deductible to customers who got their cars repaired at the facility.
Advertisements for the unnamed repair facility called it the “Home of the Deductible Rebate” and said the repair shop “will actually pay a portion of your deductible.”
Although the department said the rebate is not illegal, the practice of paying clients’ deductibles could become a sticky one for repair shops.
That’s because failure to inform an insurer of the accurate fee for the repair could in some case constitute insurance fraud, the department said.
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