Dear Victor: Shutting Down Insurer Misinformation on Paint & Materials Reimbursement for Good

by Coverall Law and Victor A. Fanikos, Esq.

Three insurers – MAPFRE, Hanover and Safety Insurance – are alleged to be sending a November 29, 2006 letter from the Auto Damage Appraisers Licensing Board (ADALB) to repair shops as justification for refusing full paint & materials (P&M) reimbursement.

The letter claims that shops must prove that the “dollars times hours” formula does not adequately cover their P&M costs before they can use an alternative method.

This argument is completely baseless. First, the 2006 letter was never an official advisory ruling or regulatory change. It was never formally adopted as binding guidance, yet insurers have taken this document and are using it as a weapon to suppress legitimate P&M reimbursement claims. Second, and more importantly, the language of 212 CMR 2.04(e) has changed since 2006, making this letter even less relevant than it was before. Insurers who continue to cite it are either willfully ignoring the updated law or relying on misinformation to shortchange shops.

The Language Has Changed – The 2006 Letter is Irrelevant

The 2006 language insurers are relying on stated:

“With respect to finishing material, if the formula of dollars times hours does not adequately reflect the cost of a particular repair, a published manual or other form of documentation shall be used.”

By contrast, the current version of 212 CMR 2.04(e) reads:

“With respect to paint, paint materials, body materials and related materials, if the formula of dollars times hours is not accepted by a registered repair shop or licensed appraiser, then a published manual or other documentation shall be used unless otherwise negotiated between the parties.”

This change is critical. The phrase “if the formula does not adequately reflect the cost” has been completely removed, meaning that shops no longer have to “prove” the formula is inadequate. The updated language makes clear that if the formula is not accepted by the shop or appraiser, they simply move to a published manual or other documentation – no burden of proof is required. Insurers citing the 2006 letter are pushing a legal argument that no longer exists in the current regulation.

The bottom line is simple: The 2006 letter has no legal standing under today’s regulation, and no shop should be pressured into proving what the law no longer requires.

Getting Paid Fairly for Paint and Materials

The first step is to know the law. The rule 212 CMR 2.04(e) clearly states that shops do not have to accept the insurer’s formula. If a shop does not accept it, they can use other documentation. There is no requirement to prove that the formula is wrong. If an insurer says otherwise, they are ignoring the law.

Next, challenge the false burden of proof. Insurers may say that shops have to prove the formula is not enough, but that’s not true anymore. The Advisory Ruling ADALB #97-98-1 (November 5, 1997) says that P&M must be listed at full retail price and must include sales tax. The law no longer indicates that shops may have to prove the insurer’s formula is wrong. The shop can choose not to use it – end of story.

Then, use your own documentation. If a shop does not accept the formula, they can use:

•  Industry-recognized guides like MOTORS or Mitchell.

•  Invoices from paint and material suppliers that show real costs.•  Paint manufacturer recommendations that detail the proper materials needed.

•  P&M invoices from body shop management systems, such as: PMCLogic™, 3M RepairStack™ and EagleMMS™.

There is no rule that says a shop must use the insurer’s preferred guide. If an insurer says only one guide is allowed, they are wrong. A shop’s documentation is just as valid as what the insurer uses and two shops don’t have to use the same guide or accept the same rates.

Shops must also demand full retail pricing. Paint and materials are goods that are sold as part of the repair, not just a service. This means:

•  They are taxable at full retail price under Massachusetts law.

•  Insurers cannot force shops to take a lower rate just because they want to save money.

It is also important to hold appraisers accountable. 212 CMR 2.04(e) says that appraisers must list all materials needed to bring the car back to its pre-accident condition. If an insurer tells an appraiser to ignore this rule, the appraiser may be breaking the law. Shops can file a complaint with the ADALB or seek legal remedies against the appraiser and/or insurance carrier under M.G.L. c. 93A.

Finally, use the final bill to the customer as proof. The most important document for P&M reimbursement is the final invoice because it shows what was actually used on the repair and passed onto the customer. Shops should:

•  List all P&M charges clearly at retail price.

•  Help customers demand full payment from their insurer.

Insurance companies are more likely to quickly settle with the vehicle owner rather than pay the shop correctly. This is why supporting the customer in getting the right payment is critical.

With the law on their side, repair shops should not allow insurers to manipulate outdated documents to deny proper P&M reimbursement. The November 29, 2006 letter from the ADALB holds no legal weight under today’s regulations, yet some insurers continue to misuse it in an attempt to shift the burden of proof onto shops. The reality is simple: shops do not have to prove that the “dollars times hours” formula is inadequate. If they don’t accept it, they can use a published manual or other documentation – end of discussion.

To provide historical context and legal clarity, we turned to Victor Fanikos, former legal counsel to the ADALB and a key figure in shaping 212 CMR 2.04(e). With decades of experience navigating the evolution of P&M reimbursement, Victor breaks down the real history behind these regulations, debunks the insurers’ false arguments and explains exactly how shops should respond when faced with these bad-faith tactics.

Dear Victor,

Some insurers – Hanover, MAPFRE and Safety – are apparently circulating a 2006 letter from the ADALB to argue that repair shops must prove the “dollars times hours” formula is inadequate before using alternative Paint & Materials documentation. One glaring issue? The language it relied on in 212 CMR 2.04(e) has since been amended.

Given this, could you clarify how the ADALB became involved in P&M reimbursement and how this issue developed over time? Now that the regulation has been updated, does this 2006 letter hold any relevance today? Looking forward to your thoughts.

Victor Fanikos: The Board should have never gotten involved in P&M outside of their scope in regulating the appraisal process. In my opinion, it was a mess then, and it’s still a mess now. The ADALB’s role is to regulate appraisers, not to dictate pricing or reimbursement methods. But shops were getting short-paid, and insurers weren’t keeping up with rising costs, so the issue kept coming back to the Board.

It all started over sales tax. Back in the 90s, shops were being told that P&M weren’t taxable, which made no sense. There was a push, and the Board issued Advisory Ruling 97-98-1, which clarified that P&M had to be listed at full retail price and taxed accordingly – because they weren’t just a cost of doing business; they were a product being sold. That ruling was revised in 1998, but the principle stayed the same.

And let’s be honest. Those three insurers, MAPFRE, Hanover and Safety, have always been a problem when it comes to P&M. They’ve been fighting reimbursement increases for decades. Back in the 1990s, they used an arbitrary $25-per-paint-hour formula, completely ignoring how material costs were changing. Shops were dealing with the shift from single-stage paints to two- and three-stage refinishing, plus higher costs for toners, clear coats, blending, and regulatory requirements that they upgrade their spray practices. But insurers kept using outdated numbers and refusing to adjust.

Now, looking at this 2006 letter – I’ve never seen that letter in my life. I’m familiar with the other two rulings, but this? This is not an advisory ruling. There is no CMR change. If it had been a real regulatory change, it would have gone through public hearings and been properly documented. It wasn’t. And yet now, these same insurers are waving it around like it has authority. It doesn’t.

The best thing shops could do back then – the only thing they really could do – was take their invoices and prove that the amounts they were getting paid were insufficient.That still might be the best thing you can do today, shops should be saving all their receipts and invoices. Show what you actually pay for materials. The insurers have never liked it, but the law is on your side.

Shops need to educate the Board. That’s how the Board has historically been able to guide the regulations. If shops don’t push back, these issues won’t get addressed. That’s why it’s important to file complaints, submit documentation and make sure the Board sees what’s really happening.

But as for this 2006 letter? It was never an official ruling. And even if it had been, it’s meaningless today. The language of 212 CMR 2.04(e) has changed. Shops do not have to prove anything. If they don’t accept the insurer’s formula, they can use a published manual or their own documentation – end of story.

Want more? Check out the March 2025 issue of New England Automotive Report!