Agency move on repair service at issue
The Schwarzenegger administration is facing questions about a flip-flop in which it barred a major insurance company from running an auto repair service, then reversed course and let the company operate the program after all.
The issue was expected to come up today during a scheduled Senate confirmation hearing for one of the governor’s political appointees: Sherry Mehl, head of the bureau that oversees the car repair industry.
But Mehl’s hearing was postponed until June 20, in part because lawmakers want more answers about why her bureau took the steps it did, Senate officials said.
In advance of the hearing, Sen. Mark Ridley-Thomas (D-Los Angeles) sent Mehl a series of questions about the bureau’s actions with respect to Progressive Group of Insurance Cos., the nation’s third-largest auto insurer.
In August, the Bureau of Automotive Repair had made a ruling against Progressive’s interests, ordering that a “concierge” shop that arranges car repairs for its customers in San Diego be shut down because it lacked an auto repair license. Four months later, the office rescinded the order.
The reversal “warrants explanation,” Ridley-Thomas said.
He said that “the bureau seemed to have been falling down on the job with respect to enforcing existing policy.”
A state investigator who led the automotive bureau’s inquiry into Progressive’s practices said in a legal deposition last month that he opposed his bosses’ decision to overturn the order. Eugene P. Kendall said that as he was gathering evidence late last year that Progressive was operating as an unlicensed repair dealer, he was told abruptly to stop the probe.
In accommodating Progressive, the Schwarzenegger administration has drawn complaints from consumer groups and car-repair businesses alike.
Last week, the Consumers for Auto Reliability and Safety nonprofit group wrote to Senate President Pro Tem Don Perata (D-Oakland) asking that lawmakers examine the bureau’s actions while considering Mehl’s appointment.
Rosemary Shahan, president of the group, said a bill introduced in the Legislature in recent years would have authorized Progressive’s program, but it failed to pass. By approving the program through executive fiat, the Schwarzenegger administration circumvented the Legislature, she said.
Progressive “didn’t get what they wanted legislatively, so they’re getting it administratively,” Shahan said. “I suspect it has to do with access to the governor.”
Insurers, she added, “obviously have the governor’s ear.”
Ties are deep between Schwarzenegger and the insurance industry. The governor has collected more than $4.4 million in donations from insurers, Progressive among them. The company gave one of his political committees $10,000 in 2005.
A former insurance lobbyist, Dan Dunmoyer, is Schwarzenegger’s cabinet secretary and formerly represented a group that included Progressive. A former State Farm official, Kathleen Webb, is the governor’s advisor on insurance matters.
Mehl said no favoritism was shown to Progressive. After consulting with state officials, the company made changes to its program that made it comply with state law, she said.
The bureau’s “No. 1 objective is to protect consumers in the state,” Mehl said in an interview.
At issue is the role played by Progressive’s concierge center. Rather than find a body shop on their own, customers can take their cars to Progressive, which may remove bumper covers and headlights if necessary to inspect damage. The insurer then selects a body shop to do repairs.
About 3,500 cars have used the service since it opened in San Diego last year. The company said it wants to offer the service in other California cities. Progressive said it spares customers the headache of dealing with repair shops.
Car repair dealers contend that if Progressive wants to do such work, it needs an auto repair license. The Collision Repair Assn. of California has filed suit against the Schwarzenegger administration, alleging that the state is selectively enforcing the law by not demanding that Progressive get a license.
“What they [Progressive] are doing is acting as an automotive repair dealer -- taking money from the consumers and subletting the repairs out,” said Allen Wood, executive director of the association.
Under Mehl’s predecessor, Richard Ross, the bureau inspected Progressive’s operation and concluded that for the kind of work done under the concierge program, the company needs a license from the Bureau of Automotive Repair. Ross, also a Schwarzenegger appointee, transferred to the California Gambling Control Commission.
Mehl said the bureau reversed its decision after she took over because Progressive agreed to modify its program. For example, Progressive agreed not to disassemble vehicles to diagnose problems, she said. That work, Mehl said, is the responsibility of a licensed body shop.
Investigator Kendall was unhappy that Progressive was permitted to continue its concierge program. He gave his deposition as part of the lawsuit filed by the car repair association. A copy of the deposition was obtained by The Times.
Kendall said he was interviewing customers and car repair shops that took part in Progressive’s program late last year when his bosses told him to stop.
“I was told to stop going into repair shops associated with Progressive concierge program,” Kendall said in the deposition.
He said he protested: “I told them Progressive was operating without a license -- operating as an auto repair dealer.”
Three officials at the Bureau of Automotive Repair responded that the matter was “out of their hands,” Kendall said.
“And so after your protests, that was the end of your investigation?” Kendall was asked.
“Essentially, yes,” he replied.
On Dec. 6, the bureau rescinded its cease-and-desist letter.
Kendall declined to be interviewed. Russ Heimerich, spokesman for the state Department of Consumer Affairs, would not comment on Kendall’s deposition because the matter is in litigation.
Repair service pros, cons
Progressive said that customers like its program. A company survey showed that 93% of customers are at least satisfied with the results.
“They benefit from the standpoint of a hassle-free process,” said Stann Rose, California state claims manager for Progressive. “They don’t have the hassle of having to get the vehicle to the shop themselves and having to work with the shop directly. They get a high-quality repair, and get the vehicle back as quickly as we possibly can.”
But in a sworn statement provided last year in an Arizona court case, a former Progressive employee said auto repair shops used by the company were “graded on speed, which can negatively affect the quality of the repairs.”
John Nobile, who said he became familiar with the program in his six years with Progressive, also said in the statement that the company focused on “saving money” more than on vehicle repair. Nobile testified that insurance adjusters were given prizes and gift cards for directing customers to Progressive’s concierge centers.
Progressive spokesman Shawn Fergus said Nobile was mistaken, although Fergus could not say definitively that Progressive employees never received such prizes. The company’s practice is to “provide all customers the opportunity to choose the repair option that’s right for them,” Fergus said.
“One of the benefits of having a network of shops is that we understand their current workload and capacity,” he said. “We can identify shops that can get our customers’ cars in and can start to work on them right away, getting them back on the road as fast as possible.”