A group of Florida collision repair shops have banded together to file an antitrust lawsuit against State Farm and dozens of other insurers, alleging the insurers use their direct repair programs to “illegally control and depress” repair rates and if the shops don’t comply, customers are steered away. This case has potential implications for the AGRR industry, as independent automotive glass repair shops allege similar issues with third-party administrators (TPAs), which handle automotive glass claims for insurers.
“Over the course of several years, the defendants have engaged in an ongoing, concerted and intentional course of action and conduct with State Farm acting as the spearhead to improperly and illegally control and depress automobile damage repair costs to the detriment of the plaintiffs and the substantial profit of the defendants,” write attorneys for A&E Auto Body Inc., the lead repair shop listed as plaintiff in the lawsuit filed in the U.S. Middle District of Florida Court, Orlando Division.
“Defendants, particularly State Farm, have engaged in an ongoing pattern and practice of coercion and implied threats to the pecuniary health of the individual plaintiff business in order to force compliance with unreasonable and onerous concessions,” the attorneys claim. “Failure to comply results in removal from the [direct repair agreement] programs, combined with improper ‘steering’ of customers away from the plaintiffs’ businesses, simply punishment to decrease the number of customers utilizing the plaintiffs’ services, and/or increasing ongoing and improper refusals to pay for certain repair procedures and/or charges without valid or reasonable justification.”
Insurance customers account for between 70 to 95 percent of business for each shop, attorneys claim.
Discussing labor rates, the attorneys allege that if a shop tries to raise its rate, State Farm representatives will inform the shop that it is the only one in the area to have made the change and that the higher rate does not conform to the “market rate” agreed to. The shop is informed that raising its rates is a violation of the direct repair program agreement.
The other insurers listed as defendants in the lawsuit follow State Farm’s lead, the attorneys claim.
“The remaining defendants intentionally and by agreement and/or conscious parallel behavior, specifically advised the plaintiffs they will pay no more than State Farm pays for labor. These defendants have not conducted any ‘surveys’ of their own in which the plaintiffs have participated to determine market rates,” the repair shop attorneys’ allege.
When a repair shop is deemed noncompliant to the direct repair agreement, the insurer will tell its clients “a particular chosen shop is not on the preferred provider list, advising that quality issues have arisen with that particular shop, that complaints have been received about that particular shop from other consumers, that the shop charges more than any other shop in the area and these additional costs will have to be paid by the consumers, that repairs at the disfavored shop will take much longer than at other, preferred shops and the consumer will be responsible for rental car fees beyond a certain date, and that the defendant cannot guarantee the work of that shop as it can at other shops.”
The repair shops are seeking a trial by jury and have asked for compensatory damages for all non-payment and underpayment of work, compensation for lost revenue through “artificial suppression of labor rates,” damages to compensate for lost business opportunities, as well as treble damages and “reasonable” attorneys fees and costs for violations of the Sherman Act. The plaintiffs are also seeking the court to put a plan into effect that will force the insurers to stop steering.
Attorneys for the insurers have not responded to the repair shops’ claims at press time.
To read a copy of the lawsuit, click here.