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Tuesday, 31 March 2009 09:42

Unfair Competition Law in California

Auto Body Shop vs. Insurer

Unbeknownst to the majority of consumers, auto insurance companies are unlawfully steering them away from the repair shop of their choice and dictating where they can go and what parts can be used in the repair process. Many shops are cognizant of this anti-competitive business practice, but are reticent to act for fear of Insurer retribution. Unfortunately, the law has also made it difficult for auto body repair shops to do anything about unlawful steering. The solution lies in the missing link—consumers.

   After the 2004 California voter initiative Proposition 64, insurance companies have become virtually bullet-proof from liability to repair shops for violating California anti-steering laws. Because of the protection Insurers have been granted, and the highly competitive nature of the auto industry as a whole, insurance companies offer consumers perceived low rates, while continuing to post high profits.

 Insurers achieve high earnings by stripping the profit from the backs of the auto body shops and leading the consumer to believe that their vehicles have been returned to pre-loss condition. In fact, Insurers are routinely forcing contracted shops to use non-OEM, used and other aftermarket parts that can be detrimental to the safety and integrity of the vehicle, void an original manufacturers’ warranty and leave the auto body shop liable for any future repercussions.
    Insurers will stop at nothing to steer Customers to shops that have direct repair contracts in place, forcing the auto repair shop to accept lower than market labor rates and dictating the use of non-OEM or aftermarket parts. Unfortunately several recent cases have found that auto body shops do not have standing to bring forth a suit for unfair competition, if the Insurer has not taken money directly from the auto body shop.
    This is where the customer comes in.  Where a customer has a contract with the Insurer, they can show the requisite loss to bring suit because they have paid premiums directly to the Insurer. Most consumers, even with the Auto Repair Bill of Rights and other mandatory disclosures, do not understand the problems with being steered and their inherent loss of their legal right to choose.
    Steering undermines the competitive process and the going market rates. Moreover, those auto repair shops who do not wish to create deals with insurance companies, or who cannot (either because they can’t risk the loss in revenue or because they are never offered such a deal) are backed into a corner.
    By saving consumers money upfront the insurance industry is often offering them a product which can never make them whole, and forces an entire industry to change its standards—lose money—and creates an overall detrimental process. Illegal steering must be addressed. The Law Offices of F. Edie Mermelstein are committed to investigating unlawful business practices while protecting consumers’ rights.
    Investigations into Insurer discounting practices, also known as 80/20 policies are ongoing. There is an immediate interest in finding consumers who have paid discounts based on choosing their own repair shop.
    Please contact Edie Mermelstein at (714) 596-0137 or email FEMermelstein@aol.com with any information or inquiries into Insurers’ unfair practices.         

Edie Mermelstein is seeking California automobile insurance customers holding policies by Topa, Delos, Nations, Sterling, Western General and Anchor General—from Dec. 26, 2003 to the present—who only received 80% of the cost of repair because they had their vehicle repaired at a non-DRP facility. They could become part of a class-action lawsuit against the insurers.
    Mermelstein is also interested in talking to body shops having DRP programs with these insurers regarding the labor rates and forced use of non-OEM parts. The department of insurance has not been effective enforcing anti-steering laws. “We need to put some heat on these laws so they can be enforced,” she says.

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