Monday, 24 August 2015 23:26

Undercover State Farm Employee Reveals Suppression of Labor Rates

A year and a half after the first complaint was filed by body shops in Mississippi against the nation’s top insurers, the plaintiffs’ claims were dismissed yet again by a Florida judge on August 17. Although it can be viewed as a set back by some, Eaves Law Firm continues to gather more information to help its case, including comments from a State Farm employee.

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There are now more than 500 body shops in 19 states part of the multi-district lawsuit in Florida, alleging the suppression of reimbursement rates for collision repairs in violation of the Sherman Antitrust Act.

“The delays in this case have been unprecedented,” said Allison Fry, the litigation director and designated plaintiffs’ liaison counsel at Eaves Law Firm, the lead attorneys on the case. Fry said this has occurred repeatedly throughout the litigation.

“Even though the delays are tremendously difficult and hard on the plaintiffs, the benefits that have arisen as a result of the lengthy delays is that we have more information from defendants’ inside sources,” she said, referring to the Tennessee and Louisiana amended complaints.

Fry said the Tennessee complaint included statements from a State Farm employee that said, “…they do intentionally falsify and suppress body shop labor rates, that they do set the rates for the entire insurance industry and everyone else follows along and joins in on that suppression.”

Filed in May, the complaint stated that a State Farm employee admitted to the plaintiff that “…State Farm deliberately suppresses labor rates and the purported survey results in a ‘prevailing competitive price’ [that] is actually ‘whatever State Farm wants it to be.”

According to court documents, “This employee has further admitted State Farm purposefully asserts reliance upon out-of-date information, such as labor rates ‘about 20 years old,’ entered into the ‘survey” long ago.

The Louisiana amended complaint, also filed in May, stated that “…a State Farm employee has admitted that State Farm sets the rates for the entire industry, that it “dictates the market,” that State Farm stands for ‘controlling the market,’ and the other insurers follow its ‘lead.’”

In regard to Louisiana Attorney General “Buddy” Caldwell’s action against State Farm, court documents said “…this same employee has admitted that everything in the complaint is true, ‘we do all that,’ ‘every iota is the truth . . . . when you read [the complaint], it’s like, ‘that’s us.’”

Fry said Eaves Law Firm, based in Jackson, Mississippi, also has statements from USAA employees stating that State Farm sends out their labor rate survey and USAA changes their rates based upon that.

The first lawsuit alleging “steering and price fixing” was filed in Florida on February 24, 2014. The initial complaint was dismissed June 11, 2014 and an amended complaint was filed June 28 of that year. The multi district lawsuit was created on August 8, 2014 and four cases were transferred to the U.S. District Court, Orlando division from the states of Indiana, Mississippi, Tennessee and Utah.

Since then, the amended complaints have been dismissed several times “without prejudice” meaning they can be refiled.

Earlier this year in June, Magistrate Judge Smith prepared a report in regards to the 14 cases filed in 12 different states: Alabama, Arizona, California, Illinois, Kentucky, Michigan, Missouri, New Jersey (2), Oregon, Pennsylvania (2), Virginia and Washington. Smith recommended that all of the claims be dismissed.

Although the plaintiffs filed an objection, Judge Presnell upheld Smith’s recommendations. “We don‘t believe it was correctly determined,” said Fry. “That’s why we filed the objections in the first place."

Eaves Law Firm was notified that September 18 is the deadline to refile an amended complaint. “I fully anticipate additional information to be forthcoming,” said Fry.

The next hearing with Judge Presnell is scheduled on September 24. Fry said it is limited to the first six complaints filed in Florida, Indiana, Louisiana, Mississippi, Tennessee, Utah; as well as the federal antitrust claims, rather than the state law claims.

When Autobody News contacted State Farm, the magazine was told the following:

“The judge’s rulings are consistent with those involving other related lawsuits that have also been dismissed.

The description is not in line with the State Farm mission to serve the needs of its customers, and our long, proud history of achievements in advancing vehicle safety.

Our customers choose where their vehicles are going to be repaired. We provide information about our Select Service program while at the same time making it clear they can select which shop will do the work.

A vibrant, profitable auto collision repair industry is in the interest of State Farm. At the same time, we are advocates on behalf of our customers for reasonable repair costs. We believe repairer profitability and quality auto repairs that are reasonably priced can both be achieved."

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