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I'm in Colorado (USA)... in case it varies by state, which I suspect it does.

Long story short is that I have 2 options for repairing the hail damage done to my car in a recent storm, for which I have filed a claim on my comprehensive insurance. One shop is telling me they'll waive my $750 deductible, saying that it's completely legit because they're just absorbing the cost and are free to do so at their discretion and the other is telling me that by definition, the deductible is the 1st amount paid to the garage before insurance makes any payment to them and that any savings incurred (such as the garage reducing my bill by $750) belongs to the insurance company.

They both make a little sense to me, and I'm not really convinced that 1 shop is lying while the other is being truthful. i'd like to think 1 is just less informed... or that it's not a black and white answer, but maybe not.

I know the true answer probably lies with my insurance company and policy, but I don't trust them not to be misleading (without actually lying) any more than I do a business. BEFORE i listen to wha anyone else has to say, I'd like to know the actual law, then read through my policy and see what seems like the right answer to me AND THEN run it by both garages AND my insurance company to see what each has to say.

Anyone with any knowledge in this realm or who can help me find where in the books this thing is covered would be greatly appreciated.

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  • My policy has a provision that explicitly says no deductible is due for glass repair. (This is to encourage the customer to be willing to repair damaged glass instead of insisting on having it replaced, thus saving money for everyone.) Yours might have a similar provision for hail damage. Jul 14, 2023 at 18:09

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Suppose the shop bills you $2000 and you have a $750 deductible. You pay them $750, your insurance company pays $1250. Now suppose instead that the shop purports to waive the deductible. In order to get the insurance company to pay $1250 they still have to bill $2000. Then they don't collect the $750 from you. Presumably they write it off as bad debt.

It smells like insurance fraud to me, on two counts: first, the shop expects to receive $1250 for a service but they produce a bill of $2000 for the insurance company's benefit and then do not seek payment from the insured party for any balance purportedly due beyond $1250. Second, the insured party has a contract with the insurer undertaking to pay the first $750 of the claim but has conspired with the shop to avoid paying that amount through deception.

Had the shop played by the rules, they would have billed $1250 and the insurer would have paid $500. The shop isn't waiving your deductible; it's getting it out of the insurance company by fraud, with your collusion.

Another way of handling this is that the auto body shop submits an estimate for the cost necessary to restore the car to a certain degree but then restores the car to a lesser degree. If everyone is aware that this is happening then it might be acceptable, depending on the terms of the insurance policy.

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  • +1 Not sure why this got down voted. This makes sense (at least logical) to me.
    – Daveh0
    Jul 14, 2023 at 22:35
  • If this is how the plan was executed then it would be fraud. I don't know if it's a Colorado law, or an insurance company policy, but I have never seen an automobile claim where the repair shop invoices the insurance company directly. Jul 16, 2023 at 0:06
  • @MichaelHall true enough. I've edited accordingly.
    – phoog
    Jul 16, 2023 at 12:51
  • FWIW, my comment wasn’t intended as a critique, more a neutral observation. It was a really good answer before, even better now… Jul 16, 2023 at 15:29
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This is legitimate because the insurance company is unilaterally determining the value of the repair.

What happened when you got into an accident? You reported the claim and the adjuster inspected your vehicle. The adjuster then used parts price lists, standardized labor guides and a locale-specific labor rate to come up with a value of the repair and hence loss. You may dispute the insurer's assessment, but note that no body shop has become involved yet. You then took the insurance estimate to a body shop.

A body shop, barring specific "one-stop" contracts with the insurer, has no obligation to accept the estimate and repair work. I could open a shop that charged $1000/labor hour, which would blow past any insurance. More realistically, this occurs when an owner wants factory parts and the insurer is only willing to pay for aftermarket parts, so the owner is billed the difference.

Conversely, they could charge less than what the insurer estimates, which is what happened here. For example, a shop could use aftermarket or junkyard parts.

In fact, if you completely own the car, you may choose to spend the money on a vacation instead of repairing the car. Or perhaps you may choose to sell the car as-is or junk it and use the money towards a new one. Another option that people take is to repair the car themselves and keep the difference. In this case, you get the same check.

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Although this is expressly prohibited in the case of hail-caused roof damage, Colorado has not enacted any such prohibition w.r.t. car repairs. A shop might have a direct contractual relation with an insurance company and their contract might preclude waiving the deductible, so if they did it would be breech of contract on their part (illegal). If they have no direct relation with the insurance company, then they can do as they see fit, except fraud is not legal.

The repair shop can submit a damage analysis estimating that the cost to restore will be $2,000, and the insurance company will pay them $1,250. Whether or not the insurance company requires the customer to pay $750 is up to the repair shop. There is no fraud if they do not demand the $750, since $2,000 was the true, actual and honest cost of repair. The customer has no contractual obligation with the insurance company to pay $750, the only potential obligation is with the repair shop, for the particular level of repair done on the car. It would be fraud if the insurance company falsely claimed that the cost of repair would be $2,750. The repair shop's statement is simply "this is how much it costs to restore the vehicle to pre-damage condition", so the insured can get a cheaper repair job and not be fully-restored – that is their right.

This analysis may be useful to understanding the legal issues.

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This doesn’t directly answer the question for Colorado, or address specific claim procedures your policy may require, but every time I have made an insurance claim, (in Washington state) my insurance company, (USAA) has paid me, not the repair shop.

Each time they have asked me to submit 3 written estimates, determined a fair payment amount, and cut me a check minus the deductible. I believe that early claims in decades past the amount was an average, while the last claim I submitted they paid me the full amount of the most expensive estimate.

I was then free to negotiate with whichever shop I chose to do the work, make the repair myself, or choose to not repair the vehicle. I have exercised all three options at various times and never had a reason to question whether or not this was legal.

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    I am not sure how this answers the question Jul 15, 2023 at 4:17
  • @RohitGupta, maybe it doesn’t definitively answer, but is is anecdotal evidence of a reputable company, (USAA) operating in a manner that would allow the sort of thing shop #1 in the question is suggesting. Sometimes the weight of testimony can overcome questions around the probability that a law might exist. Jul 15, 2023 at 14:57
  • P.S. I edited for jurisdiction to provide perspective. Often on this site, (since it is for education, not legal advice) perspectives from other jurisdictions are offered as a comparison. I’m not going to research either Washington or Colorado law on this, just relaying personal experience FWIW. Jul 15, 2023 at 15:07

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