A Rhode Island State Superior Court ruled that auto insurers in the state must conduct a "labor rate survey" and use the results as the sole factor in determining prevailing auto body labor rates.

In reaching this determination, the R.I. Providence/Bristol County Superior Court in Providence, R.I., ruled that a 2006 legislative statute on the matter was unambiguous, contrary to the arguments of the state's Department of Business Regulation (DBR).

According to the court's decision, the statute states, in part, "Each insurer must conduct an auto body labor rate survey, in writing, annually to determine a prevailing auto body labor rate for fully licensed auto body repair facilities."

In establishing a regulation on the statute, the department did not interpret the legislative intent to mean that the survey should be used as the sole factor in determining and setting the prevailing auto body labor rate, according to a ruling by the DBR.

An auto body trade group, the Auto Body Association of Rhode Island (ABARI), filed a petition with the department which requested a declaration that the survey results be used as the sole mechanism in determining the labor rate.

The department issued a decision rejecting that request, saying "the clear legislative intent is to require insurers to consider information submitted by auto body shops on labor rates and to provide public information on how labor rates are set."

The department also held that language in the statute, including the multiple uses of the word "survey" and references to "motor vehicle liability insurance," is ambiguous, and therefore open to interpretation.

ABARI appealed the department's decision to the Superior Court.

The court ruled that the statute is not ambiguous and that its intent is clear.

"The court determines that [the statute] applies to every insurance carrier authorized to sell motor vehicle liability insurance in Rhode Island," the court said, adding that all insurers must perform the labor rate survey and use it to determine rates.

The Property Casualty Insurers Association of America (PCI) expressed disappointment in the ruling. Frank O'Brien, vice president and regional manager for PCI, said in a statement, "The ruling has the potential to mandate a badly flawed scheme for calculating the prevailing rate that could result in inflated rates and higher repair costs. ABARI wants to circumvent the role of competition in setting prices and force insurers to pay whatever amount is reported to them.

"Efforts to make sure repair costs are reasonable benefit all consumers because they help contain the cost of auto insurance."

Mr. O'Brien told NU Online News that the survey requirement was put in place by the legislature because of heavy ABARI lobbying of the General Assembly, which was part of the association's effort to obtain a greater labor rate in Rhode Island.

DBR did not return calls for comment.