Is the NJ DOBI Protecting Insurers or Consumers?

by Chasidy Rae Sisk

The New Jersey Department of Banking and Insurance (DOBI) is responsible for regulating the state’s insurance industry (along with its banking and real estate industries), yet insurance companies’ abuses run rampant in the Garden State.

And despite attempts to alert the agency to disregarded regulations and other evidence of poor behavior on the part of carriers, DOBI continues to willfully ignore these abuses that negatively impact New Jersey consumers.

Attorney Michael Jurista (Jurista Law LLC) has been in contact with DOBI on numerous occasions on behalf of his clients. While initially hopeful that DOBI would be neutral in investigating complaints, his interactions have left him flabbergasted by “how little DOBI seems to care about investigating any of the auto repair issues that insurers are taking advantage of which unabashedly affect the public at large. Taxpayers need to realize they are helping to fund an agency that appears unwilling to protect them, even when claims of bad faith are brought to their attention.”

“Clearly the state is unwilling to do the job funded by taxpayers and protect the consumer,” agrees AASP/NJ President Jerry McNee (Ultimate Collision; Edison). “This issue impacts our entire industry, but more importantly, it creates safety concerns for every driver in the state.”

Jurista’s suspicions regarding the non-neutrality of DOBI reached a peak earlier this year when he submitted an OPRA (Open Public Records Act) request which was subsequently denied as OPRA Custodian Gatien Laurol determined the files to be nonpublic records in accordance with New Jersey Administrative Code, categorizing the records as “investigative files in any matter pending investigation, or in any completed investigation in which no formal disciplinary action was taken;” however, Jurista had requested documents where violations were found to have occurred (which would not fall under the exclusion cited).

Specifically, Jurista sought records showing violations of New Jersey’s Unfair Claims Settlement Practices and the Auto Physical Damage Claims regulations respectively. He also asked for any communications or requests made by DOBI to any insurer pursuant to the Unfair Claims Settlement Practices regulations, which indicates “If the Department observes that an insurer’s claims settlement practices are not meeting the standards established by statute or by this subchapter, the Department may require such insurer to file periodic reports.”

Despite the fact that the regulations specifically state that DOBI will investigate insurers as needed to ensure compliance with the rules, Laurol confirmed that “since January 1, 2020, the Department has not requested any insurer of motor vehicle collision and comprehensive coverage to file periodic reports. Therefore, no records responsive to this request are made, maintained, recorded or on file with the Department.” And despite directing Jurista to DOBI’s enforcement activity page to locate orders or violations found, Jurista states that he “could not find any orders or findings of violations against an insurance company relating to these regulations.”

Jurista goes on to state that this exchange makes it “increasingly clear that DOBI is not going to be helpful in pursuing these companies.” It is important to him that “the public is made aware that (a) DOBI – the only agency authorized to enforce these regulations – is not enforcing them and will never help consumers; (b) the insurance companies are free to do what they want, including not paying claims, raising rates, etc. because of DOBI’s refusal to enforce their regulations; and (c) their tax money is being wasted by going to investigators who are clearly not doing anything.”

Jurista’s conclusion is also based on his own first hand experience in addressing consumer’s complaints directly with DOBI and the “investigators” who are supposed to be looking into these complaints. For example, Jurista specifically addressed a consumer’s complaint with DOBI as related to State Farm wherein numerous regulatory violations were found in connection with State Farm’s attempts at resolving a claim, asserting that “it is without dispute that [State Farm’s initial] estimate was made in bad faith.”

As set forth in his communications with DOBI, State Farm wrote an initial estimate of $2,737.70 based purely on a photo estimate and never conducted a physical inspection within seven days following the notice of loss to identify visible damages. Even though the regulations make clear that physical inspections must be done within seven days and that State Farm “remains liable for all damage directly related to the loss giving rise to the claim subject to policy terms, conditions and limits,” DOBI did not care at all about State Farm’s indifference to these regulations.

One such area that insurers are repeatedly taking advantage of, which is causing a vast majority of these issues, is their ability to rely upon photos to initially determine the values of claims – which is completely contrary to the regulations imposed upon auto repair shops which prohibit anything other than in-person inspections and solely relies on the insurer’s experience, which is little to none when it comes to repairing vehicles today.

“This ongoing pattern of conduct by insurers in relying only upon photos to determine initial estimates is resulting in egregiously low first estimates and putting consumers at risk with a false sense of security, continually driving their vehicle, which is something the Department should strongly investigate and rectify,” Jurista wrote. “Since it would be easy for the Department to investigate these absurd ‘photo-based’ initial estimates by comparing them to the supplemental estimates the insurers submit thereafter, there is no reason for the Department not to put the safety of the consumers above all else by investigating this ongoing and dangerous practice.”

Furthering his argument that insurers using the photos for their estimating with little to no training or experience at the expense of the consumer will in fact lead to major safety issues in which consumers will undoubtedly get hurt, Jurista insists that DOBI could easily investigate how egregious these photo estimates are by simply looking to the insurer’s own supplemental estimates thereafter. ”The Department should start with State Farm in this matter which clearly participated in this purposeful scheme as evidenced by nothing more than their own supplemental estimate which – while still not sufficient to cover the damages on this claim – was over five times more than their unsubstantiated initial one.

“If the first initial estimate is done improperly and is purposefully low for no reason other than to protect the insurers’ bottom-line, why is the Department considering increases to these unsupportable first offers to be part of their good faith negotiation?” he asked, further noting that the insurer’s appraiser blatantly admitted that his employer gave him no authority to negotiate the claim. Jurista even offered to provide evidence with a State Farm supervisor demonstrating the insurer’s ongoing refusal to negotiate.

In response, DOBI Supervisor of Investigations Thomas Stanley indicated that insurers are not prohibited from basing estimates on photo inspections. Although he agreed that accounting for all damages is the purpose of the state’s rules for fair and equitable settlements applicable to property and liability insurance, DOBI still failed to find State Farm out of compliance with the state’s regulations, even when Jurista advised him that insurer’s appraiser blatantly admitted that his employer gave him no authority to negotiate the claim beyond a specified amount and that he had proof of a call with a State Farm supervisor demonstrating the insurer’s ongoing refusal to negotiate.

DOBI even dismissed 90-plus pages of documentation and OEM procedures setting forth how safe and proper repairs must be completed, as well as a line-by-line breakdown of the claim as to each amount at issue and why the labor/materials at issue were required, citing specific references to the estimating guidelines where needed. Even more egregious perhaps is that “we even sent DOBI an outlined list of claims where State Farm paid for the very items they are now refusing to pay for. How can anyone possibly consider that good faith?”

While being completely dismissive of these issues – and ignoring all of the written evidence provided – DOBI just simply took State Farm’s word for it that they did in fact negotiate this claim in good faith. As stated by DOBI’s investigator in reaching this conclusion, “State Farm responded that they maintain the position that they paid for all required repairs. As they based their payment on their estimate of repairs to meet the generally accepted standards for safe and proper repairs, then the response is adequate to demonstrate that they are in compliance.”

“They’ve done nothing,” Jurista told New Jersey Automotive. “New Jersey has implemented regulations to protect consumers and ensure insurance companies do the right thing, yet DOBI never does anything to enforce those regulations, even when presented with evidence that explicitly shows their unwillingness to negotiate and that consumers are at risk as a result. Rather than investigate complaints, DOBI just asks the insurer what happened and accepts their answer.

“The law requires auto body shops to conduct a complete, in-person inspection and to follow OEM procedures to ensure a safe and proper repair; else, the vehicle may not be restored to its pre-accident condition and might be unsafe to drive,” he continued. “Yet, an insurer is allowed to simply state that ’we don’t think you need to do that, so we won’t pay for it.’ What is the shop to do in this case? They want to (and must) fix the vehicle properly, but as a result of the insurer’s bad faith tactics, the repair shop must charge the customer the difference. Or worse, not do the proper repair. And while the customer starts off blaming the shop, they are often left in the dark by their insurance company that the entire reason they are paying out of pocket is because of the tactics of their insurance carrier in refusing to negotiate in good faith with the shop.“

In addition to the safety aspect that these situations create, there’s also the matter of under-indemnification with customers often being forced to pay the difference between the final invoice and what their carrier will pay the shop. In this case, that difference was $6,000! Jurista expressed concern about how these activities serve to “under-indemnify consumers while unjustly enriching insurance companies in the process.

“If the insurance company doesn’t pay, the shop has to charge its customers. While it is sometimes true that the customer goes back and gets compensated by their insurer, it’s a game to them because they realize that eight of 10 consumers probably won’t pursue the shortpay…they’ll just pay the difference to avoid hiring an attorney. And at the end of the day, the insurer never paid that amount to the shop, so they’re not setting a precedent or impacting their ‘prevailing rate,’ so they’re able to continue underbidding claims.”

It concerns Jurista that the average consumer has no clue what’s happening. “This system of regulations is in place to make consumers feel good, but when nothing effective is actually being done to address violations, it’s like putting lipstick on a pig. Nine times out of 10, consumer complaints are ignored, or DOBI responds that they spoke to the carrier, and everything is fine. We point out blatant violations and are told, ‘They are more like a guideline.’ So when do they need to do something? If no one is regulating the insurers, then our regulations mean nothing.

“Meanwhile, DOBI seeks feedback from the insurer but not the shop or consumer. Their refusal to review our evidence makes it seem like they don’t want to find a violation, but DOBI is supposed to be making sure the consumer is protected; they’re not supposed to be on the insurer’s side! And if there are any questions as to this, DOBI has not found a single violations in the past three years…yet I’ve received 20 complaints in the past month alone so clearly something is going on between DOBI and the insurers.” .

So, is DOBI being negligent?

“I wonder if it’s more than negligence,” Jurista ponders. “Negligence is unintentional, but when DOBI is ignoring evidence and questions about violated regulations, it seems like they don’t want to know what’s happening, like they’re choosing to ignore these violations. And all of this is because the insurers want to steer customers to their DRP shops, where the concern becomes whether those shops are repairing vehicles improperly to comply with the carriers’ demands. And if cars aren’t being fixed correctly because the insurance companies fight against the required procedures, people are going to die. I wonder if DOBI will care then?”

Has your shop experienced reticence from DOBI when filing complaints against insurers? New Jersey Automotive wants to know and invites you to share your story as we keep an eye on this dangerous situation.

Want more? Check out the May 2023 issue of New Jersey Automotive!