You Can Charge Whatever You Want

by James A. Castleman, Esq.

If you own a collision repair shop, then you can charge whatever you want for your services. Insurers don’t set your labor rate, don’t set your storage policy and don’t determine how you should make repairs. You do.

Yes, I know that insurers pay for the bulk of collision repair work, but that doesn’t mean they can dictate what you charge for your work or how to run your business.

You may think that I am naïve to say these things, and that my statements are overly simplistic and do not reflect the reality of your business. But my statements are true: You, and only you, can determine what you want to charge for your work. If you agree to accept whatever an insurer says they are willing to pay for a repair, then YOU have made the decision that this is what you are going to charge, not the insurer. But if you do it correctly, then you can charge more – or less, if you so choose – than an insurer tells you that they are willing to pay.

The Legal Basis for Setting Your Charges

You have the right to contract directly with your customer for whatever you want to charge, for whatever repairs you are going to make and in whatever manner you are going to make them; however, the key is that you need to establish a mutual and legally enforceable contract with your customer.

You cannot just take a car in, start repairs and then hand your customer a bill when repairs are completed. Your customer must be informed in advance of what you are going to charge, and they must knowingly agree to it. That is the nature of a contract, i.e. that both parties involved must have agreed with the other as to its terms. If someone shows up at your house and paints it without you requesting the service and agreeing to their charges, then they cannot force you to pay them. By the same token, unless your customer agrees to have you repair their car and has approved the cost of the repair, then you cannot force them to pay you.

As has been explained in depth in this column before, the Massachusetts Attorney General has issued regulations that govern auto repairs, and those regulations tell you what you must do to have a binding repair contract with your customer. If you do not follow the rules set out in those regulations, then it is a per se unfair and deceptive business practice for you to charge your customer for the repairs. Essentially, except for certain emergency repairs, you must do one of the following:

(1) Obtain written authorization signed by your customer listing the specific repairs to be performed and the total price to be paid for those repairs, including parts and labor. Or:

(2) Obtain written authorization signed by your customer listing the specific repairs to be performed, while having your charges for the repairs, including parts and labor, displayed in a clear and conspicuous manner on your premises. (This option usually does not apply to collision repairs and is more relevant to services with standard prices, such as an oil change.) Or:

(3) If you are unable to obtain written prior specific authorization from your customer (as when you have not yet had a chance to fully determine the cost of repairs to be performed at the time the vehicle is delivered to you), then you subsequently can notify your customer, but still prior to starting repairs, of the specific repairs to be performed on the vehicle and the total price to be charged for the repairs, including parts and labor, and obtain your customer’s written or oral authorization at that time to perform the repairs. If you get oral authorization, then you must record the date and time of when that occurred, who you spoke to and exactly what was authorized. Or:

(4) Get your customer to knowingly, voluntarily and intelligently sign a waiver form containing language set out in the regulation, agreeing to pay for repairs so long as they do not exceed a specific dollar amount. It is key that your customer fully understands what they are doing when they sign the waiver form.

In addition to this, you can charge any amount that you want and for any period of time, for storage of your customer’s vehicle. But you must disclose IN ADVANCE both the conditions under which you will charge for storage and the daily (or hourly) rate for storage. You can disclose this information either in your original customer signed repair order or by clearly and conspicuously posting the information in your shop.

The point is that, if you follow these rules, you will have a binding and enforceable contract with your customer for your repair and storage charges – no matter what your charges may be, and no matter what your customer’s insurer wants to pay. You can set your own hourly labor rate, you can charge a mark-up on parts, you can charge for ALL of the procedures needed to repair your customer’s car to pre-accident condition, and you can charge your stated daily storage rate for whatever periods of time you have disclosed in advance that you are going to charge for. If you follow the rules, then your customer will be obligated to pay you those charges, and you will have an enforceable garage keeper’s lien against their vehicle for your charges.

So, Why Doesn’t It Seem to Work This Way?

It does work this way for some repair shops. If you do specialty repairs and do not rely on insurance reimbursement, or if you do restoration work, or even if you are a MAACO shop selling a basic paint job for an old jalopy without collision coverage, then you actually are (or should be) doing it this way. Further, any other repair shop that contracts with their customer for their repair charges, and that doesn’t accept whatever lesser amount their customer’s insurer is going to pay, is also doing it this way.

The problem is that most collision repairs are paid for by insurers and that most repair shops think that they need to accept what their customer’s insurer is going to pay in order to stay in business. And just because your customer has contracted for repair of their vehicle and has obligated themselves to pay your charges does not mean that their insurer is going to pay that amount.

Additionally, a large number of repair shops participate in insurer referral programs, where they contractually agree to accept whatever their referring insurer dictates for repair costs, so that these shops cannot charge their customers anything more than that. (By the way, being a referral shop does not relieve you of your legal obligation to obtain your customer’s advance authorization for repairs to their vehicle. If you are a referral shop and do not follow the Attorney General’s regulatory rules, then your customer legally can direct their insurer to pay them directly and never pay you for your work.)

As long as you agree to be controlled by insurers – and that is really what is happening – you are never going to be able to charge your customer more than their insurer is offering to pay. In order for things to change, you are going to need to view your customer as they truly are, i.e. your customer. Get it through your head: Your obligation is to your customer, not to their insurer. And the party obligated to pay you for your charges is your customer, not their insurer.

It is my belief that the only time insurers agree to pay a higher labor rate, or agree to pay for a procedure that they have not previously paid for or agree to pay for anything else new, is when some number of repair shops insist that they get paid these amounts and start charging their customers for these items. There is no other reason that an insurer would voluntarily pay these charges. Why should they, if almost all repair shops will accept what they are offering? Out of the goodness of their heart? I don’t think so.

Maybe, it is a specialty repair that only a few repair shops currently have the expertise and equipment to accomplish. Perhaps, it is a new procedure that OEMs say is necessary to properly repair a vehicle. Or in rare circumstances, it could be a repair shop that is in an isolated area that can set a higher labor rate, knowing that there are no other local shops able to make proper repairs. Whatever it is, when these shops start insisting on what they need to get paid, and start looking to their customers to get paid the extra amounts and start educating their customers as to why these additional charges are necessary, then things start to change for all repair shops.

By the same token, if a significant number of insurer referral shops were to independently decide to remove themselves from insurer referral lists unless they start getting paid a certain labor rate or for certain procedures, etc., then the referring insurers would need to change what they pay in order to have enough referral shops available to repair their insureds’ cars. Is it realistic to think that this is going to happen? Maybe not.

And if not – and if you ever want to collect more than your customers’ insurers are willing to pay – then you better be prepared to hold yourself out as an independent shop that educates its customers and looks to their customers to get paid. Otherwise, things are not going to change, and at best, you will forever be trying to hone your appraising and negotiating skills, while trying to retain good help for salaries that are lower than those in other industries, in the hope that you somehow are going to make enough money to be able to support your family and to make it worthwhile for you to stay in business.


Please understand: No matter what insurers try to tell you, you can charge whatever you want for the repairs that you perform. Just be aware of what you need to do in order to legally collect those charges. And always be aware of who your true customer is – the vehicle owner, not their insurer.


Want more? Check out the November 2022 issue of New England Automotive Report!