Hartford is asking the Connecticut Supreme Court to overturn a lower court verdict of $35 million in favor of more than 1,000 state auto collision repair companies who sued the company alleging the insurer violated Connecticut’s Unfair Trade Practices Act (CUTPA) by working to establish “price fixing” or artificially low labor rates. The Connecticut Supreme Court hearing is set for Tuesday, January 13, 2015.
Plaintiffs filed the class-action lawsuit in 2003 alleging that Hartford had “unfairly” lowered prices in two ways: by “suppressing” the hourly labor rate paid to independent body shops through its supervision of its employee-appraisers and “unfairly steering” its insureds to its preferred-provider direct repair program shops.
The jury decision came in November 2009 with a $14.7 million judgment against the defendant. The jury returned a verdict that rejected plaintiffs’ steering claim, according to Hartford’s attorneys. Stamford, Conn., Superior Court Judge Alfred Jennings added $20 million in punitive damages in June 2013. Hartford is now appealing the $35 million verdict.
“This is an appeal from a $34.77 million judgment in favor of a plaintiff class of auto body repair shops based on a finding that Hartford Fire Insurance Company (Hartford) violated CUTPA by negotiating with the shops to pay lower hourly labor rates for repairs,” Hartford’s attorneys write in court documents. “After Hartford offered certain rates to plaintiffs to perform auto body repair work, plaintiffs accepted the work at those rates and were paid for it, then sued under CUTPA, claiming that the rates represented an ‘unfair suppression’ of labor rates.’
“[T]he jury awarded $14.77 million in compensatory damages, after which the trial court awarded $20 million in punitive damages and entered a permanent injunction,” Hartford’s attorneys noted.
The auto insurance market and the auto body repair market are highly competitive, Hartford’s attorneys write in their court brief.
“Competition in both markets helps consumers. Market forces require Hartford, with only a 6 percent share of the auto insurance market, to work vigorously to keep down costs so it can compete effectively, which ultimately benefits its policyholders. Auto body shops must also compete to get work from insurers—who pay for over 90 percent of all auto body repairs. That, too, keeps prices down and benefits consumers,” attorneys write.
“Like any seller of goods or services, plaintiffs wanted to increase profits by charging more. Unable to convince their customers, including Hartford, to pay more, the auto body shops aimed to use CUTPA to force them to pay more—at the expense of consumers and competition. … Negotiating for lower prices is not ‘unlawful rate suppression,’ and it flies in the face of CUTPA’s animating principles to say that CUTPA forbids negotiating for lower prices,” attorneys add.
On the other hand, attorneys representing the collision repair companies argue that the lower court’s decision should be affirmed.
“This is an appeal from a judgment based on a jury verdict that The Hartford Fire Insurance Company (The Hartford) committed unfair acts and practices in violation of CUTPA by violating the public policy of Connecticut—clearly expressed in state regulations—that require an automobile physical damage appraiser to conduct ‘fair and impartial appraisals,’ to ‘disregard any efforts on the part of others to influence his judgment or the interests of the parties involved,’ and to prepare ‘an independent appraisal of damage,’” the attorneys write in court documents.
“After more than a decade of litigation, a prior appeal to this court on class certification and a 17-day jury trial, The Hartford does not assert a single error by the trial court in any evidentiary ruling, in its charge to the jury on the CUTPA standard that has been the law of this state for more than 30 years, or argue that the jury’s verdict was not supported by the evidence—the usual bases for attacking a judgment on appeal. Instead, faced with the jury’s finding that The Hartford violated public policy and well-settled law, The Hartford takes the approach that if you don’t like the verdict, change the facts, if your conduct violates the law, change the law, and if all else fails, argue against claims plaintiffs are not making. … Confronted with this verdict, a punitive damages award of $20 million and imposition of reasonable, limited injunctive relief, The Hartford now invites this court to nullify the verdict, overturn the trial court’s well-reasoned decisions, and provide it with what is, essentially, a retroactive pardon. … The jury verdict, punitive damages award and injunctive relief should be affirmed in all respects.”
To read the brief from the collision repair companies’ attorneys, click here.
To read the brief from Hartford’s attorneys appealing the lower court’s decision, click here.