When Part of the Repair Bill Remains Unpaid
When a vehicle is repaired after an accident and the bill has been submitted to the comprehensive insurance provider, the policyholder assumes that everything is settled. Often, however, a nasty surprise follows: The insurance company reduces its payout because certain repairs were allegedly unnecessary or the repair shop overcharged.
This is particularly frustrating for the policyholder. They hired their regular repair shop precisely because they are often unable to assess the necessary repair steps on their own. Nevertheless, they may be left to foot part of the bill.
The Federal Court of Justice has now, for the first time, issued a ruling at the highest judicial level determining who bears the so-called “repair shop risk” in comprehensive auto insurance. The outcome is unfavorable for policyholders: In principle, this risk remains with them.
What is the “repair shop risk”?
The “repair shop risk” describes the danger that a repair shop will bill for work or costs that later turn out to be unnecessary or unjustified. This includes, for example, unnecessary repair steps, inflated rates for materials and labor, or work that was billed but not actually performed.
The policyholder is often unable to either detect or prevent such errors. However, according to the new ruling, this alone does not obligate comprehensive auto insurance to cover every item on the repair shop’s bill.
The Case Before the Federal Court of Justice
In the case at hand, the plaintiff’s vehicle was covered by comprehensive insurance and had been repaired following an accident. The insurance company deducted 389.01 euros from the repair shop’s invoice. An expert opinion obtained during the court proceedings confirmed that several items on the invoice were unjustifiably inflated.
The policyholder nevertheless demanded payment of the remaining invoice amount. Her lawsuit was unsuccessful before the Local Court, the Regional Court, and ultimately the Federal Court of Justice.
The insurance terms and conditions are decisive
Claims against one’s own comprehensive auto insurance are based on the insurance contract. Which costs the insurer must cover is therefore determined by the agreed-upon General Conditions for Auto Insurance, known as the AKB.
In the case at hand, reimbursement of the “costs necessary for the repair” had been agreed upon. According to the official notice, this includes only expenses that a policyholder acting in an economically reasonable manner would incur for a professional repair. Accordingly, the insurance company is generally not required to reimburse items that are objectively unnecessary, were not performed, or were inflated due to uneconomical work practices.
Comprehensive insurance is not liability insurance
In the event of a traffic accident not caused by the policyholder, different rules generally apply. In such cases, the claim is directed against the party responsible for the accident and their liability insurance. Under liability tort law, the party causing the damage generally bears the repair shop risk. The injured party should not normally be held liable for errors made by the repair shop, over whose working methods they have no control.
With comprehensive insurance, however, the policyholder is seeking coverage under their own policy. The principles of liability law therefore cannot be applied directly.
This leads to an important distinction: The same repair shop invoice can be treated differently depending on the basis of the claim. In the case of a third-party liability claim, the repair shop risk generally lies with the party responsible for the damage. In the case of a comprehensive insurance claim, it depends on the insurer’s contractual promise of coverage.
Not every reduction is justified
The ruling does not give comprehensive insurance providers carte blanche to apply blanket reductions. Whether an invoice item is actually unnecessary or excessive may depend on technical findings and the respective insurance terms and conditions.
In the case at hand, the policyholder had also failed to follow the insurer’s instructions regarding the selection or engagement of the repair shop. If the insurer specified a particular repair shop or if a rate tied to a specific repair shop was agreed upon, a different assessment may be required.
If the insurance company applies a reduction justifiably, the repair shop’s claim is not automatically voided. The insurance policy and the repair contract must be examined separately. If work was not ordered, not performed, or incorrectly billed, the policyholder may be entitled to raise objections to the repair shop’s invoice.
What Policyholders Should Keep in Mind
Before having repairs done, it is advisable to review the insurance policy terms and conditions. In particular, you should clarify whether approval is required or if there is a requirement to use a specific repair shop. The repair order, cost estimate, invoice, and all correspondence should be kept in their entirety.
If the insurer reduces the invoice amount, a specific justification should be requested. Subsequently, it should be verified whether the disputed costs were in fact unnecessary and whether there are any claims or objections against the repair shop.
Conclusion
After a comprehensive insurance claim, submitting a repair shop invoice does not automatically result in full reimbursement. If the repair shop charges for work that is objectively unnecessary, not performed, or unreasonably expensive, the comprehensive insurance provider may reduce its payment in accordance with the terms of the policy.
Those affected should then have both the insurer’s justification and the repair shop invoice, the repair order, and the agreed-upon insurance terms reviewed.
The information provided here is preliminary and was current at the time of initial publication. The legal situation may have changed since then. Furthermore, this information cannot replace individual advice regarding a specific case.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.