Wednesday, 21 May 2014 18:30

Pennsylvania Body Shop Files RICO Class Action Against Multiple Insurers

Crawford Auto Center of Downington, PA, has asked the U.S. Northern District Court of Illinois, Eastern division, to approve a national class action under the Racketeer Influenced and Corrupt Organizations Act (RICO) against State Farm, Allstate, Geico, and dozens of other insurers for allegedly “long-running unlawful conduct to suppress compensation to repair facilities for automotive collision repairs covered by insurance.”

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Like the cases filed in Florida and Indiana, this lawsuit has potential implications for multiple industry segments, including glass repair where companies allege similar issues with third-party administrators (TPAs), which handle glass claims for insurers.

“To achieve this suppression of compensation, defendant insurers and conspirator insurers have all established and enforced an artificial market value for collision repairs, known in the industry as the ‘prevailing rate,’ which dictates the compensation paid to repair facilities for labor, the costs incurred for paint, parts, and materials used in repairs, and the scope and extent of compensable repair procedures,” the attorney for the repair center claims in court documents.

“These so-called prevailing rates, however, are lower than market rates for repairs would have been, and would be, in a market free of fraud, deception, and artificial restraint. Rather, these are fixed rates set by insurers, and incorporated into their respective nationwide direct repair programs, consisting of repair facilities willing, or economically forced, to agree to accept these fixed rates in exchange for referrals of repair work—as, indeed, the defendant insurers and conspirator insurers have the leverage to steer and withhold business to control and enforce these rates,” the attorney writes.

“The imposition of these wrongfully and artificially suppressed rates has injured plaintiff and the members of the classes by reducing the compensation that they received for repairs below the levels that would have existed but for the unlawful conduct of the defendant insurers and their co-conspirators,” the attorney claims.

The insurers have not responded to the complaint in court at press time and the court has not issued any rulings.

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