ARIZONA STATE SENATE
Phoenix, Arizona
REVISED
original equipment
manufacturer parts; notice
Purpose
Requires
certain auto insurers to notify insureds, at the time a policy is entered into,
that they may be required to pay the difference between the cost of using
original equipment manufacturer (OEM) parts and aftermarket crash parts.
Aftermarket parts include everything from windshield wipers bought at a retail store to a new transmission and technically comprise both OEM and non-OEM parts. Generally, however, the term “aftermarket part” is used in connection with non-OEM parts. Non-OEM parts are ones manufactured by entities other than the company that made the automobile. Crash parts refer to outer shell items damaged or destroyed in collisions such as body panels, bumpers, grills and hoods. According to the Automotive Aftermarket Industry Association, non-OEM parts are 20 percent to 65 percent less expensive than OEM parts and as such are often used in repairs.
Arizona insurers and body
shop providers are required to disclose the use of non-OEM parts at the time of
repair. This bill requires front-end disclosure regarding the use of non-OEM in
addition to disclosures made at the time of repair. S.B. 1350 is partly in response to an Illinois class action
lawsuit (currently on appeal), which found that the use of non-OEM parts
constituted a breach of contract and consumer fraud.
1. Requires motor vehicle insurers that pay first party property damage claims based on cost of aftermarket crash parts or require the insured to pay the difference between OEM and non-OEM parts to provide a cost notification to insureds beginning January 1, 2001. The notification shall disclose that (1) the insured may be required to pay the difference between OEM and aftermarket crash parts and (2) applicable warranties for the non-OEM parts will come from the manufacturer or distributor of the part and not the manufacturer of the vehicle.
2. Requires that the notification be on a separate form or on the declaration page of the policy.
3. Permits insurers to use alternative notification language if approved by the Director of the Department of Insurance.
4. Stipulates insurers must provide notice either at the time of application or at the time an insured pays for the policy or executes a monthly premium payment plan.
5. Requires insurers to provide notification for existing policies no later than a year after the effective date of this legislation.
6. Requires insurers to pay for OEM parts if no aftermarket crash parts are available.
7. Provides for a general effective date.
Amendments Adopted by Committee of the Whole
1. Deletes the term “liability” and inserts clarifying language regarding first party property claims.
Senate Action
FIR 2/9/00 DP 4-0-3-0
3rd Read 2/23/00 30-0-0-0
Prepared by Senate Staff
March 1, 2000