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AIG Fined $20,000 for Minnesota's Short Pays

AIG Personal Lines Claims has been issued a Consent Order by the Minnesota Commissioner of Commerce stating in part that AIG and others "paid an alleged 'prevailing rate' to Minnesota body shops that was less than the total charged by the body shops for certain repair costs." The Consent Order has imposed a civil penalty of $20,000 and a cease and desist order from any continued violations of Minn. Stat. § 72A.201, subd. 6(2)(a) (2006), the statute the order cited AIG violated.

Minn. Stat. § 72A.201, subd. 6(2)(a) (2006) requires insurers "…to pay all costs for the satisfactory repair to the insured's or claimant's vehicles."

Commissioner Glenn Wilson also ordered AIG to reimburse all the insured and claimants referenced in the order for their out-of-pocket expenses paid to the body shops.

The order correcting the short pay is in part the work of the Alliance of Automotive Service Providers, Minnesota (AASP-MN). Over the past year, AASP-MN submitted dozens of unfair claims practice reports to Wilson's office. Many of the reports documented "short pays" from AIG to the body shops for their hourly paint and material rates. The association and its members have been documenting these cases of short pays. AASP-MN has also urged its membership to stop absorbing short pays and instead to inform their customers that they will be responsible for their insurance company's failure to pay reasonable rates.

"When these practices result in harm to consumers, regulatory agencies are much more likely to intervene and take corrective action," stated AASP-MN executive director Judell Anderson in a press release issued by the organization. "Unfortunately, in an effort to protect their customer, shops inadvertently perpetuate insurer practices that are detrimental to the repair industry and consumers in the long run. This is an example of how the repair industry can make a difference-provided they're willing to take the time to document instances of insurer misconduct."

AIG agreed to informal disposition of the matter without a hearing and has accepted the terms of the Commissioner's Consent Order.

CLICK HERE to read the AASP-MN press release.

CLICK HERE to read the Consent Order.

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