Penal Code 551 PC
PC 551 – Unlawful Referral to an Auto Repair Dealer
Unlawful Referral to an Auto Repair Dealer – Table of Contents
What is the definition of an unlawful referral to an auto repair dealer?
Any person, group or entity who operates as an automotive repair dealer, its contractors, its employees, or agents that offers an insurance company, its broker, agents or affiliates a fee, commission, profit agreement or consideration for a referral of an insured vehicle owner to its auto repair company for vehicle repair that is insured by that vehicle owner’s insurance policy.
Is a violation of Penal Code 551 PC like auto insurance fraud?
Yes. Auto insurance fraud occurs when an insurance company, its agents, adjusters, or its consumers deliberately deceive the insurance process for an illegitimate gain the insurance company is not otherwise entitled. The auto repair dealer desires to pay the insurance company a commission or fee to send its insured drivers to it for repair services that are covered by that insurance company. The repair company is not entitled to the services because it did not procure them itself. More important is that the insurance company cannot have an unaffiliated, unlicensed entity or person pay them a fee for an activity the insurance company is entitled by law to do for its clients.
The most basic incentives desired in committing auto insurance fraud are:
- High Interest Rates;
- High Premiums;
- No Coverage;
- Financial Gain.
How does an auto repair company by paying for referrals violate PC 551?
An auto collision service provider can pay an incentive to an insurance company for multiple clients, and provide those clients with substandard parts, then bill the insurance company standard rates. This allows each party to pocket the difference and make each client a repeat customer for defective service for profit.
The auto repair company can estimate the damages without a risk adjuster and pay the insurance company to allow the service provider to continue repairs without an estimation. This allows the service provider to induce service by providing a discount to the insured for cost repairs, or cash, to allow the insured to save on deductibles, out of the presence of the risk adjuster. The rate of service was then established by the service provider and not the insurance company creating an illegal market.
How does an auto insurance company by accepting payment for referrals violate PC 551?
The insured will get referred to an auto repair company who in turn pays the insurance company for the new client. The insurance company not only receives the referral fee, but also gets the option to deny coverage for parts not associated with the accident if its risk adjusters deem it necessary. In addition, the auto repair company has the option to replace standard parts with discount, junk or defective parts without the insured’s knowledge and bill the insured premium or standard rates for services. The incentive is also the insurance company’s need to open more facilities and get more customers. This is can lead to a profit scheme between the insurance company and auto repair company. The fee of referrals can also be paid to the risk adjuster to not be present for inspection or to file a fictitious report using the prices established by the service provider with the insurance company’s knowledge. This is deviates from the standards established by state and federal law.
What are the penalties associated with a violation of PC 551?
A violation of Penal Code 551 PC can be charged as a misdemeanor or felony. If the fraud does not exceed $950 dollars, it is a misdemeanor with the option of confinement not exceeding 6 months in jail. If the fraud does exceed $950 dollars it is a felony with confinement ranging from 16 months, 1, 2, or 3 in prison with fines not exceeding $10,000 dollars.
What is an example of a violation of Penal Code 551 PC?
- Fred got into an accident with a hit and run driver. Fred was unable to get the license plate. He went to Auto 1 repair shop. Auto 1 repair shop did an estimate of the damages to be $5000 dollars. Since Fred drivers an exotic SUV and has good insurance, the repair shop owner offered a discount of $300 dollars to cushion the $500 dollars he will pay for deductibles. Fred took the offer and signed an agreement for services. Auto 1 called Fred’s insurance company and offered it $1000 dollars in cash for each client that meets Fred’s profile. Auto 1’s manager accepted the offer. Auto 1’s owner gave the cash to the manager. Fred’s quote for damages with Auto 1 on contract was changed $10,000 dollars not the $5000 that was accurately estimated. The insurance company did not use a risk adjuster. The insurance documents after being sent to Fred for signature, was filed with the State for compliance. Auto 1 installed $800 dollars’ worth of used parts in the car. After service, Fred drove the car for a month and his transmission failed because the used parts did not electronically synchronize with the factory installed system of his SUV. Fred took the car to a specialist who confirmed the quality of parts used by Auto 1. Fred filed a grievance with his insurance provider. Fred also called the DA’s office to seek an arrest and investigation. Auto 1’s manager and the manager of the insurance were arrested.
What are defenses to a violation of Penal Code 551 PC?
- Withdrawal – as soon as the fraud scheme was discovered the insurance company, or the auto repair company called the police and refrained from further participation of the act.
- No consent – the parties involved in the fraud where not authorized to continue service, as the accused was the only party that had the authority to permit services.
- Mistake in Law and no nexus – the money that was paid for referrals involved independent contractors that did not represent the company, and the money was not received directly to the insurance company or auto repair dealer.
If you are arrested for a violation of Penal Code 551 PC, call The Esfandi Law Group. Contact Los Angeles criminal defense attorney Seppi Esfandi, principal attorney of The Esfandi Law Group.
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