Court Reverses $17 Million Decision Regarding American Family's Payment for Aftermarket Parts
May 27, 2009

The Missouri Court of Appeals for the Western District recently reversed a court decision involving American Family's payment for aftermarket parts. The decision involved a class action suit and was reversed by Judge Edith L. Messina. The damages totaled more than $17 million.

A jury had originally ruled in favor of the plaintiffs, but a trial court later granted American Family's motion for "judgment notwithstanding the verdict." The recent decision re-instates the jury's decision to rule in favor of the plaintiffs, who claimed that "American Family breached its contracts with policyholders to restore their vehicles to pre-loss condition by devising and implementing a practice that results in payment of claims based on the (1) systematic specification of 'inferior' non-OEM crash parts for repairs."

In the case, the plaintiffs note that adjusters with American Family "are encouraged to specify the use of non-OEM crash parts or salvage OEM parts" when writing estimates for vehicles of an earlier model year. The case defines OEM parts as "those parts made by the original automobile manufacturers or suppliers." Non-OEM parts are defined as parts "made by outside companies without access to the design specifications of the OEM parts."

Plaintiffs also argued that American Family participated in the "systematic omission of specific 'necessary' repairs from estimates."

The damages for the breach of contract claims regarding aftermarket parts totaled $13,118,325; and the omitted repairs breach damages totaled $4,274,112.

In the jury trial, the court notes that "the plaintiffs presented sufficient evidence for a reasonable juror to conclude that aftermarket parts are not of like kind and quality to OEM parts and that American Family breached its contracts with its policyholders when it paid to return the damaged vehicle to pre-loss condition based on the nature and cost of aftermarket parts."

The court adds, " … Breach occurred at payment of an insufficient sum to return the vehicle to pre-loss condition and damages were suffered upon payment."

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