Indiana Auto-Body Shops Accuse Insurers Of Collusion
By Jeff Swiatek, The Indianapolis Star | |
McClatchy-Tribune Information Services |
Now Johnson is feeling the pain of losing business from
To cope, the longtime collision shop owner might have to trim his 12-person staff or cut out other expenses, but he's adamant about not letting
"They're a force to be reckoned with. You don't want to argue with them. But sometimes you have to stand your ground," he said, looking out a shop window at his parking lot along busy Ind. 39.
Johnson's stand-off with
Body shops in at least six states, including
Body shops are seeking damages from the suits that could amount to billions of dollars.
The coming court clashes have implications for consumers. Body shops contend insurance company dictates to body shops can create increased hazards for drivers and passengers by putting substandard parts in vehicles.
For instance, the used and non-brand parts that many insurers' policies pay for in order to save money -- even for critical parts -- are sometimes not as effective, safety-tested or right-sized as original, factory-built parts.
Non-brand radiator supports in a repaired car, for example, might not resist the force of a crash as well as original parts. Some after-market windshields are half the thickness of originals. And replacement panels in a dashboard might not fit as well, which could slow the speed at which an air bag inflates.
Insurance company dictates are "placing the driving public at harm," says the lawsuit filed in federal court in
Insurers defend policies
Insurance companies have defended their programs for body shops as a key way to keep repair costs under control, so premiums don't ratchet up on auto policies.
"These lawsuits are another attempt to undermine programs insurers have put together" to hold down vehicle repair costs, said
"The programs have been around 20-plus years, and they are time-tested. People like them. They achieve desired results" to get vehicles repaired quickly by repair shops vetted by the insurer and at reasonable cost, he said.
Over the years, insurers have persuaded body shops to agree to cost-cutting efforts by putting the shops on their lists of favored or vetted repairers. It's critical for many independent body shops to get on insurers' most-favored lists because most drivers have crashes so infrequently -- once every 10 years, industry estimates say -- that few know enough about body shops to want to choose one on their own.
Once signing onto an insurer's favored programs, a body shop must go along with the cost-shaving dictates or risk being delisted. However, the body shops' lawsuits charge that insurers illegally "steer" customers away from using non-favored body shops by saying they aren't certified, their work can't be guaranteed, or other persuasive reasons.
"They trusted me for 20 years, and now I'm nothing," Johnson said of
He said the big insurer took Brothers Body & Paint off its Select Service list of favored body shops when he wouldn't agree to use its PartsTrader program.
Johnson, who's repaired cars in
"They don't tell you not to (perform certain routine repair tasks)," Johnson said. "They just don't pay for it. If they went to
On average, insurers won't reimburse for
Passwater has been talking up the lawsuit among auto body shops around the state and expects that the 24 current plaintiffs will swell by 15 to 20 in the next several months.
But some shop owners, he said, are reluctant to join because "they're concerned about any retribution the insurance companies might do."
Controversial wage survey
The
"The shops are simply required to blindly accept
"This suit has no merit and in no way accurately describes the business relationship
Dundov said State Farm built its Select Service network by listing body shops that provide warranties on their work and meet performance standards set by
When it comes to parts, Dundov said,
PartsTrader, which
She said State Farm pays labor rates based on surveys it does of the body shops themselves, including those that aren't in its Select Service program.
As for allegations in the lawsuit that
A spokesman for Progressive,
A
The only
Hard fight expected
Eaves said he thinks the numerous lawsuits he and co-counsel are filing could eventually be consolidated in one court. He said he expects to present testimony from "whistle-blowers" who worked for insurance companies and will give evidence of collusion among companies in their business tactics.
But the litigation could be fierce, Eaves said."We're anticipating extensive pushback. They're making billions of dollars by these practices and they're not willing to give it up easily."
Even so, Eaves said, several insurance companies have approached him to ask about settling the claims to avoid lengthy litigation and a possible high-stakes jury trial. "We are already in discussion with three insurance companies that are willing to discuss resolving it. I was kind of shocked. I never had a case where somebody came so quickly and wanted out."
Body shops and insurers tangled in court decades ago over many of the same issues, and it resulted in a 1963 federal consent decree between the nation's top auto insurers, their trade associations and the federal government. Insurers agreed in the decree to avoid a host of anti-competitive measures, including conspiring to hold down prices paid for repair claims.
Eaves said he thinks courts can order that 51-year-old decree to be enforced again today.
Johnson, whose shop repairs about 60 vehicles a month, said he'd be happy if insurance companies dropped their approved-shop lists and repair mandates and paid for claims without dictating through reimbursements how body shops like his should do their job.
"I don't tell them how to sell insurance," he said. "All I want to do is fix cars."
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