Crawford Auto Center of Downington, Pa., has asked the U.S Northern District Court of Illinois, Eastern division, to approve a national class action under the Racketeer Influenced and Corrupt Organizations Act (RICO) against State Farm, Allstate, Geico and dozens of other insurers for allegedly “long-running unlawful conduct to suppress compensation to repair facilities for automotive collision repairs covered by insurance.” Like the cases filed in Florida and Indiana, this lawsuit has potential implications for the AGRR industry, as glass repair companies allege similar issues with third-party administrators (TPAs), which handle glass claims for insurers.
“To achieve this suppression of compensation, defendant insurers and conspirator insurers have all established and enforced an artificial market value for collision repairs, known in the industry as the ‘prevailing rate,’ which dictates the compensation paid to repair facilities for labor, the costs incurred for paint, parts and materials used in repairs, and the scope and extent of compensable repair procedures,” the attorney for the repair center claims in court documents.
“These so-called prevailing rates, however, are lower than market rates for repairs would have been, and would be, in a market free of fraud, deception and artificial restraint. Rather, these are fixed rates set by insurers, and incorporated into their respective nationwide direct repair programs, consisting of repair facilities willing, or economically forced, to agree to accept these fixed rates in exchange for referrals of repair work—as, indeed, the defendant insurers and conspirator insurers have the leverage to steer and withhold business to control and enforce these rates,” the attorney writes.
“[T]he imposition of these wrongfully and artificially suppressed rates has injured plaintiff and the members of the classes by reducing the compensation that they received for repairs below the levels that would have existed but for the unlawful conduct of the defendant insurers and their co-conspirators,” the attorney claims.
The body shop’s attorney goes on to allege, “Defendant insurers have each formed separate association-in-fact RICO enterprises with the respective information providers that they use. By virtue of these RICO enterprises, defendant insurers are able to fraudulently establish and misrepresent to plaintiff and the class members the so-called industry prevailing rates for: (1) labor; (2) paint and materials; (3) parts; and (4) the scope and extent of compensable repair procedures. These prevailing rates are, in actuality, simply the rates that defendant insurers’ require their respective direct repair facilities to accept for labor, paint and materials, and parts, and for preparing repair estimates in accordance with each insurer’s ‘estimating profile’ and company-wide estimating protocol, which outline the fixed limits for the time, scope and cost of compensable repairs paid by each insurer.”
The insurers have not responded to the complaint in court at press time and the court has not issued any rulings.
To view a copy of the complaint, click here.