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Sunday, 26 January 2014 18:34

Insurance Companies Manipulate Repair Costs Says Shop-Sponsored Complaint in Mississippi Court

A host of body shops has alleged in Mississippi federal court that a group of insurance providers, including State Farm Mutual Automobile Insurance Co. and GEICO General Insurance Co., of conspiring to manipulate car repair costs in order to reduce their payments.
The complaint was filed in the U.S. District Court for the Southern District of Mississippi, Northern Division-Jackson. Defendants named included: State Farm; Progressive; Allstate; Nationwide; GEICO; United Services Automobile Association; USAA; Safeco; Shelter Mutual Insurance Co.; Direct General Insurance Company of Mississippi; Mississippi Farm Bureau; and Shelter General Insurance Co.
The repair shops are represented by John Arthur Eaves Jr. of John Arthur Eaves Attorneys At Law in Jackson, MS.
The suit named 16 separate insurance firms as defendants, but repeatedly alleges that State Farm largely orchestrated the scheme, which the body shops said involves the artificial suppression labor, repair and material costs and the enactment of harsh punitive measures against non-cooperating repair providers.

One of the main cogs of the alleged scheme is the abuse of direct repair program agreements under which the body shops agree to certain price concessions in favor of preferential treatment from the insurers, according to the complaint.
“The concessions demanded by the individual in exchange for remaining on the direct repair program were not balanced by the purported benefits,” the suit alleged. “The defendants, particularly State Farm, have utilized these agreements to exert control over plaintiffs' businesses in a variety of manners, well beyond that of an ordinary business agreement.”
“The entire collision repair industry is caught between a rock and a hard place," said Eaves. “On one hand, they're trying to maintain the safety and quality of repairs for the customers in a time when the manufacturers are trying to develop more sophisticated, more fuel efficient and safer cars, but yet the insurance industry is trying to force them to cut corners on their repairs. So Mississippi repairers have felt like they have been backed into a corner, and now they have to start to reclaim some of these costs and send a message to the insurance industry."
Eaves said the complaint is currently being modified for use in seven other states. Meanwhile, 22 other states are preparing to join the fight. While his law firm is leading the effort, it's also partnering with “talented” attorneys in each state who have experience in asbestos, tobacco and natural disaster litigation.
“We're looking to go to all 50 states," Eaves said. “What we need is a few committed shops in each of the 50 states that are willing to take the industry back and join us."
Collectively, insurers named in the suit control nearly 70 percent of the automobile insurance business in Mississippi, a dominant position they have used to create a vertical conspiracy in violation of the Sherman Act, the complaint said.
The suit accuses State Farm and the other companies of employing various tactics to artificially set rates for repairs, labor and parts used in the restoration of vehicles damaged in accidents, such as refusing to compensate shops for replacement parts when repair is possible though strongly not recommended based on the shop's opinion.
Insurers have also routinely engaged in the practice of  “steering” in order to punish noncompliant shops, the suit said, elaborating that insurers will urge customers not to seek repairs from a certain shop because quality or customer service issues have cropped up.
Used/recycled parts are also mentioned in discussing the insurers going against the repairers’ expert opinions and therefore “compromising the safety of both the driver and passengers as well as other members of the traveling public.”
Another count in the complaint references “quantum meruit,” a concept that states that a party is not allowed to enrich itself at the expense of another.
“These statements have been made about certain plaintiffs without any attempt to ascertain the truth thereof,” the suit said. “Not only that, some of the ills recited which implicitly criticize the shops are wholly attributable to the insurer itself.”
“Plaintiffs have performed valuable services and expended material resources with the reasonable expectation of payment/compensation for those services and materials. This is their business,” the complaint reads. “Performing said services and expending material resources benefitted Defendants and Defendants’ insured/claimants for whom Defendants are required to provide payment for repairs.” 
The complaint added that several of the plaintiffs attempted to raise these issues with insurance industry representatives at a meeting held in April.
At the meeting, the insurers said that repairs and subsequent payments should be consistent with the estimates prepared through the companies' database software. But the suit said that little has changed since, with State Farm and the other defendants continuing to refuse to make full payments for necessary repairs.
The suit seeks treble damages and injunctive relief, along with any other relief the court deems proper.
Among the other insurers named in the suit are Progressive Gulf Insurance Co., Allstate Insurance Co. and Nationwide Property And Casualty Insurance Co.
An attorney for the repair companies and a representative for State Farm did not immediately respond to requests for comment Wednesday.
Counsel information for the insurance companies was not immediately available for comment.
The case is Capitol Body Shop, Inc. et al v. Lewis et al., case number 3:14-cv-00012, in the U.S. District Court for the Southern District of Mississippi.

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