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Your Money : Arbitrators Unfair, Car Owners Say

Less than one-fifth of Toyota, Lexis and Porsche owners who participated in a program to resolve warranty disputes in 1993 thought they were treated fairly, a survey shows.

The program, administered by the American Automobile Assn., has been discontinued. As previously reported, AAA said it decided to get out of the arbitration business to focus resources on activities that served its members. The decision came as regulators in Florida and California questioned the fairness of the AAA program.

According to the survey, 19% of the car owners using the arbitration program thought they were treated fairly and 63% of participants said they did not get the award they wanted. The survey was conducted by the California Arbitration Review Board, which each year asks participants’ opinions of state-certified arbitration programs.

Arbitration programs are intended to settle warranty disputes without costly lawsuits. An arbitrator may order the manufacturer to replace or repair a vehicle under warranty or to offer the consumer restitution. The arbitrator may also deny the claim or propose some other settlement. The process is binding on the manufacturer but not on the consumer, who may go to court if dissatisfied.

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Ford owners were the group most satisfied with arbitration. According to the survey, 47% who went through arbitration thought the process was fair and received the results they were looking for.

The survey found that 35% of General Motors owners thought arbitrators had treated them fairly. The Better Business Bureau runs the GM program, and it tends to mediate a high percentage of cases before they reach arbitration. One-quarter of Chrysler owners said the arbitrators were fair.

The survey comes as the Legislature is considering a bill that would replace manufacturers’ programs with a state-run board. A Senate Judiciary Committee hearing on the bill is scheduled for Tuesday.

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Shock around the clock: Talk about scaring up business. In mail solicitations for its accidental-death policy, Allstate Insurance Co. traces the steps of a make-believe guy, A.J. Smith, as he narrowly escapes disaster 20 times.

Among A.J.'s close encounters: He is nearly killed crossing a street and feels threatened when a fired co-worker returns to the office to argue.

A.J.'s family is accident-prone. His wife nearly strikes a lamppost while driving. An electric socket at home is overloaded. A.J.'s kids gulp their food and risk choking--no doubt because they know the wiring is about to blow.

We can only hope that after such a charmed day, A.J. doesn’t settle into his recliner and croak from a heart attack. The accidental-death policy wouldn’t cover him then.

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Which brings us to what we see as the moral of this story: Accidental death policies are inexpensive because coverage is limited. Premium dollars are better spent on life insurance, which also covers accidental deaths.

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Sounding the alarm: The cost of having a security alarm service is likely to go up as a result of telephone rate increases tentatively approved by the California Public Utilities Commission.

Alan L. Pepper, an attorney representing the California Alarm Assn., said the state’s security alarm industry expects its costs to rise by $15 million to $20 million a year if the PUC adopts the rate increases next month.

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Pepper said the biggest increases will come in private-line services, in which the security company leases a separate dedicated phone line for each alarm system it monitors. High-risk establishments such as jewelry stores, drugstores and government agencies use private-line services.

For GTE customers, for example, installation charges for a private line are expected to jump to $253.87 from $92. Monthly charges would triple to $18.08 from $6.

Residential customers whose alarm services run on their regular phone lines may see a small boost in security charges because local phone rates are also rising, Pepper said.

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Holding the line: How’s this for encouragement? In mailings offering customers a $20 discount on phone installation, Pacific Bell warns that “installation charges may increase substantially as a result of rate proceedings currently under review by the California Public Utilities Commission.”

The warning appears outdated. In a tentative ruling issued last month, the PUC turned down PacBell’s request to raise installation rates. They are expected to remain at $34.75 for each residential line and $70.75 for each business line. The discount offer expires Aug. 14.

How They Did...

The state Arbitration Review Board examined how arbitrators settled auto warranty disputes in 1993. New-car owners can seek arbitration of disputes over defects or repairs if they are dissatisfied with the dealer’s response. The state-monitored program is intended to head off costly lawsuits.

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Decision AAA* BBB** Chrysler Ford Replacement or restitution 12% 21% 30% 39% Repair 20 43 25 33 No relief 64 35 26 23 Other -- 4 16 --

* American Automobile Assn. hears disputes for Toyota and Porsche.

** Better Business Bureau arbitrates disputes for General Motors and Nissan.

Notes: Numbers may not add up to 100 because of rounding. “Other” refers to awarding consumers extended warranties or compensation for suffering.

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Source: California Arbitration Review Board.


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