Calibration margin is a risk premium

I just spent two days in Detroit at the United ADAS Collective leadership summit, in a room full of people who calibrate vehicles for a living. I came home stuck on one argument I keep hearing in this industry, and I want to take it apart carefully, with sources, because it deserves more than a hot take.

The argument goes like this. Calibration carries so much liability that independent shops should sublet it to the dealer and let the OEM's people carry the risk.

The liability doesn't leave

I'm not a lawyer, so I'll lean on the people who are. Rebekah Cooper, a product liability attorney at The Cooper Firm, laid this out in an interview with BodyShop Business that Repairer Driven News covered last August. Her read: litigation over missed and improper calibrations is rising nationwide, and the shop that sublets the calibration is still liable under an agency theory. The shop delivered the vehicle, so the shop is who the customer and a jury look to. Trying to point at the sublet vendor is, in her words, "not likely to be compelling to a judge."

Subletting brings in a second party who carries exposure for their own work. It doesn't take the delivering shop off the hook. Shops also carry responsibility for vetting the vendor they chose. The liability gets distributed, and the delivering shop keeps its full share.

That should sound familiar, because it's the rule shops have always lived with. Shops sublet mechanical, alignment, and glass work every day, and nobody believes subletting a brake job absolves the shop if the brakes fail. The stakes run higher with ADAS. The rule is the same.

The case that should end the dealer argument

Here's the detail from Cooper's interview that stopped me. Her first ADAS case involved a vehicle that went to an OEM-approved, authorized dealership after a minor collision. The forward collision warning system needed recalibration. It didn't work in a secondary crash, and a woman was left quadriplegic.

The first documented catastrophe in her own caseload happened on the exact path the outsourcing argument recommends. "Send it to the dealer" assumes the dealer reliably gets it right, and that assumption deserves scrutiny. I've talked with a dozen dealership principals over the last several years, and most of them didn't know what ADAS was. No knock on dealers, plenty of shops don't touch calibration either, and that's a fine choice. But handing safety-critical work to whoever looks best positioned on paper only works if they can actually do the work.

The argument proves too much

There's one more problem with "the lawyers are coming, so don't do calibration." If litigation risk means you shouldn't calibrate, the same logic says you shouldn't do structural repair, airbags, or brakes. Taken seriously, it shuts down collision repair itself. Every safety-critical repair carries the possibility of a courtroom. The industry's answer has never been to stop repairing cars. It's been to do the work right and document it.

The finance read: a risk premium

The liability argument usually travels with a second complaint, that calibration has gotten too lucrative. This part actually is my lane, so here's what I see. That margin is a risk premium. The liability can't be handed away, the work is safety critical, and the people doing it well are pricing real risk that the rest of the industry keeps trying to set down. Markets pay a premium for exactly that combination. When safety-critical work with non-transferable liability pays well, that's the market getting it right.

The operators I met in Detroit hit calibrations nobody has seen before, pull the OEM position papers, document as they go, and compare notes. They walked into the liability storm with their eyes wide open. Sidestepping it never entered the equation.

Where I land

My goal in this industry has always been simple. Get as many cars back on the road, safely, as possible. After years around the ADAS space, I believe that's these operators' goal too. I'll generalize here, but I doubt many would push back. Handing this work to dealers right now doesn't get more cars back on the road safely. The people doing it well, wherever they sit, do.

One more thing, and I mean it. Nothing in this post is legal advice, and I'm the wrong guy to give it. If you want to know where your shop actually stands on calibration liability, that's a conversation for your attorney and your insurance carrier, and it's worth having this year, not someday.

If you want this kind of operator finance read every Friday, my email is here: collisionadvisory.com/subscribe.