After more than 150 meetings with representatives and senators over a three-day period, the result was an outpouring of support for an industry faced with the challenge of insurance companies dictating how they run their body shops.
“We wanted to make the legislators aware of what the insurance companies are doing to the consumer,” said Matt Parker, owner of Parker Auto Body in Louisiana who is part of the lawsuit. “The insurance industry should not tell us how to repair cars. We’re the professionals here, not them. We have all the liability, they don’t,” he said.
Tony Passwater, Executive Director of the Indiana Autobody Association and President of AEII Consulting Services, said that what started as multi-district litigation in April with just five states, including Mississippi, Florida, Tennessee, Indiana and Utah, and later by Louisiana, is now part of a much bigger action to regain control that he termed “The Movement.”
He said, as part of “The Movement,” shop owners representing a dozen states went to Capital Hill “…to discuss the growing concerns for consumer safety, the mandating by insurers to require repair shops to use untested and unsafe parts on vehicles, and the intimidation tactics the insurers use when a repairer refuses to do so.”
“Most [members of Congress] have had their car repaired and were very empathetic and were already concerned about the issue, so we were very encouraged by the response,” said the lead attorney John Arthur Eaves, Jr. of Eaves Law Firm in Jackson, MS.
Eaves said many were still not aware of the Robert Kennedy-era 1963 Consent Decree and now is an excellent opportunity to ask them to help enforce what is the official public policy of the United States government. He said the body shops plan to visit Washington D.C. again in November when congress comes back into session and the hope is that a bill will be introduced at that time. “The law will really be a codification of the policy of the United States that was set in 1963.”
It was that year that the U.S. Department of Justice, under the direction of Attorney General Robert Kennedy, investigated the concerns of the collision repair industry and found 265 insurance companies, and the three major trade associations that represented insurers, were in violation of the Sherman Antitrust Act.
An Antitrust Consent Order was signed by these companies on October 23, 1963, requiring that insurers must refrain from “fixing, establishing, maintaining or otherwise controlling the prices to be paid for the appraisal of damage, or to be charged by independent or dealer franchised automotive repair shops for the repair of damage to automotive vehicles or for replacement parts or labor in connection therewith, whether by coercion, boycott or intimidation or by the use of flat rate or parts manuals or otherwise.”
“If you look at the Consent Decree and read it, it would look like somebody from today wrote it because all the things they’ve been doing since the 40s they are continuing to do,” said Parker. “To be honest with you, everything they’re doing is against the law.”
Parker, who has been in the business for 30 years, said the Consent Decree mandates that insurance companies are supposed to be in the business of insurance, “not telling us how to repair cars, not writing estimates, not telling people where to get glass put in their car. We’re the only business in the world that has to try to figure out how to make a profit when we can’t even set our own rates.”
Eaves originally filed the lawsuit in April on behalf of more than two dozen body shops that claimed 16 insurance companies manipulated labor rates and other charges and weren’t compensated for their work.
The Mississippi lawyer said the lawsuit is largely based on antitrust issues that surface when insurance companies get involved with body shops by telling them what labor rate they can charge, what percentages they’re not going to pay for, and what parts they have to put on a car. In the 1970’s, the labor rate was $16 and the mechanical rate was $15. Currently, Eaves said the body shop rate across the nation is usually half of the mechanical rate with no justification. He said this is due to insurance companies that have artificially suppressed the rate and is a clear violation of the Consent Decree.
Another main component of the lawsuit is against steering. “Most states in the country say it is illegal for insurance companies to purposely interfere in the business relationship of the customer and the body shop,” said Eaves. However, insurance companies do it regularly, telling customers they have to go to their DRP body shops or select service shops. “That’s a big part of our lawsuit and one of the things we think is pure violation of the proper balance between the two industries,” said Eaves. “By having the same practices exposed by all body shops in one litigation, the judge can more clearly see that this is a pattern of practice,” said Eaves.
Eaves said that in addition to these challenges faced by shop owners, the industry also has to adapt to new technology. “Only the shops that actually get paid for what they do will have the resources necessary to invest in all of this technology,” said Eaves. “That’s basically what the lawsuit component is all about… making sure that people who do the work and do it right get paid for it so they can continue to provide that service to the American customer.”
The next court date is set for November in Orlando, FL. “The allegations that are part of the multi-district litigation being heard in Florida are not in line with State Farm’s mission to serve the needs of its customers, and our long, proud history of achievements in advancing vehicle safety,” said Dick Luedke, spokesperson for State Farm Insurance.
“A vibrant, profitable auto collision repair industry is in the interest of State Farm,” said Luedke. “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.
“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,” he said.
Parker Auto Body was part of State Farm’s Select Service DRP until earlier this year. Since the business owner left the program in April, he said they have steered a substantial amount of business away from him. “Just in short pays alone I have over $150,000 worth of claims they won’t pay,” he said. “Operations that we actually do the vehicles to make the vehicles safe that they won’t pay us to do.
“These shops need to stand up for what’s right and quit letting the insurance industry run their business for them,” said Parker. “They are just terrified that the insurance companies are going to steer the work away.”
Parker acknowledges their concerns but said, “We’re just as busy now as we were because we’re educating consumers.” He has found it beneficial to explain to consumers what the insurance companies are doing. “They need to take their businesses back and they need to run their own businesses.”
When Autobody News went to press this month, an additional 25 states were in the process of filing lawsuits to meet an Oct. 31 deadline before returning to court in November. “What we want to achieve is number one, that the safety and the quality of repairs for the American public is restored,” said Eaves. “The industry will never be the same after this.”
When contacted by Autobody News, Allstate Insurance Company and Progressive both said that due to company policy, they do not comment on pending litigation. Stay tuned to Autobody News for more developments.