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
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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