Unlike a good neighbor, State Farm Insurance may be trying to undermine policyholders’ choices of who they want to perform their auto repairs.
And those Good Hands may not be so good, either.
Louisiana Attorney General Buddy Caldwell apparently is preparing to join other states, namely Indiana and Florida, in filing an antitrust lawsuit against State Farm and possibly other insurance companies for their attempts to artificially control and depress automotive damage repair labor rates by repair shops, according to information obtained by LouisianaVoice.
Caldwell’s office has been bombarded with complaints from automotive body shops that State Farm and other companies have attempted to get shops to sign “program agreements” with the insurance companies that would adversely impact profit margins of the repair shops. Those who refuse to sign the program agreements are removed from the insurance companies’ preferred lists, the complaints say, in effect, driving business away from those shops.
Attorneys in Florida and Indiana claim in their lawsuits that the insurance companies, particularly State Farm, have engaged in “an ongoing pattern and practice of coercion and of implied threats” to force lower hourly rates. “Failure to comply results in the insurance companies either “steering” customers away from the plaintiff’s businesses or, failing that, refusing to pay for certain repair procedures and/or charges.
By forcing the program agreements upon the shops, which count on insurance customers for 70 to 95 percent of their business, the shops’ profits are adversely affected but the shops have little choice but to comply.
While State Farm has been identified as the moving force behind the program agreements, other insurers follow State Farm’s lead, the Florida lawsuit claims, “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,” the lawsuit says, adding that the insurance companies have conducted no surveys of their own to determine market rates.
The Florida suit also claims that the insurance companies imply that the non-cooperating body shops perform inferior work. “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 ship, that complaints have been received about the 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 Florida petition says.
Trying to control auto repair prices is one thing but doing it by spreading innuendo and outright falsehoods about the reputations of auto body shops and the quality of their work borders on outright libel.
The Florida lawsuit was filed by 20 auto repair shops on Feb. 24 in that state’s Middle District Federal Court in Orlando and names more than 40 companies as defendants. A&E Auto Body, Inc., is the lead plaintiff in the Florida action.
Fourteen Indiana repair shops, led by lead plaintiff the Indiana Autobody Association, followed Florida in filing suit on April 2 in the Southern District of U.S. District Court in Indianapolis and named as defendants 29 insurance companies but also allege similar issues with third-party administrators (TPAs) which handle glass claims for insurers.
“…The concessions demanded by insurers in exchange for remaining on the direct repair program were not balanced by the purported benefits,” the Indiana petition says. “The defendants, particularly State Farm, have utilized these agreements to exert control over the shops in a variety of manners, and well beyond the constraints imposed by an ordinary business agreement.”
The Indiana plaintiffs claim that failure or refusal by a shop “results in either removal from the DRP (direct repair program) agreements, combined with improper ‘steering’ of customers away from the plaintiff’s business, or simply punishment to decrease the number of customers utilizing the plaintiff’s services.”
The suit ways if a repair shop persists in efforts to raise labor rates, “State Farm takes one or more ‘corrective measures.’
“It (State Farm) will go into the individual shop’s survey responses and unilaterally and wrongfully alter the labor rate listed without the knowledge or consent of the shop and use this lowered rate to justify its determination of the ‘market rate.’ It will threaten to remove the shop from the direct repair program to coerce compliance,” the petition said, adding that State Farm will actually remove a shop from the DRP.
Both the Florida and Indiana lawsuits are seeking compensatory damages and Florida is asking the court to order that insurers cease the practice of steering. In Indiana, plaintiffs are seeking compensatory, punitive and treble damages.
Caldwell and Randy Ishee, an investigator for the attorney general’s office, will attend the next meeting of the Louisiana Collision Industry Association (LaCIA), scheduled for May 22 at the Hilton Garden Inn in Monroe at 6:30 p.m.
LaCIA Executive Director Alysia Hanks said the association has been in contact with Ishee, who she said “has knowledge of what our industry is going through. “He isn’t happy with what he has come across so far and last week in informed me that, due to the huge amount of information he is gathering, (the attorney general’s office) has brought in another investigator for our cases.”