Federal Lawsuit Filed Against 7 Insurers Alleging Conspiracy to Control the Cost of Collision Repairs

_ Collision Week –

Repair facility alleges violation of Racketeer Influenced and Corrupt Organization Act, Fraud and Unjust Enrichment by the largest U.S. insurers. Seeks class action status.

A lawsuit brought by a Pennsylvania-based collision repair facility was filed April 30 in the U.S. District Court for the Northern District of Illinois, Eastern Division, naming State Farm, Allstate, GEICO, Progressive, Farmers, Liberty Mutual and Nationwide and defendant insurers alleging they illegally conspire to control the collision repair process and the cost of repairs. The suit, Crawford’s Auto Center v. State Farm et al, also names USAA, Travelers and American Family as conspirator insurers, though not defendants.

The plaintiff seeks to have the suit granted class action status representing any repair facility that has done business with the defendant insurance companies since January 1, 2006.

According to the complaint, “Defendant Insurers and Conspirator Insurers, through various means but, in particular, their DRP relationships, have created an artificial market rate for repairs – the prevailing rate – that has been imposed upon repair facilities throughout the country (DRP and non-DRP), and has enabled Defendant Insurers and Conspirator Insurers to artificially suppress compensation to repair facilities for insured collision repairs.”

In a sweeping 164 page complaint, that describes in detail how insurance company direct repair relationships work as well as the estimating process, the plaintiff alleges that each of the defendant insurers violates the Racketeer Influenced and Corrupt Organization Act (RICO) by operating a separate enterprise in conjunction with the information providers, Audatex (AudaExplore), CCC or Mitchell, that they use internally, or require or recommend to their DRP networks.

The complaint alleges that “Defendants Allstate, GEICO, Progressive, Farmers, Liberty Mutual and Nationwide, together with the respective Information Providers with which they have a standing relationship, have each formed separate association-in-fact enterprises within the meaning of 18 U.S.C. § 1961(4). Thus, Allstate has formed an association-in-fact enterprise with CCC (the “Allstate Enterprise”), GEICO has formed an association-in-fact enterprise with CCC (the “GEICO Enterprise”), Farmers has formed an association-in-fact enterprise with CCC (the “Farmers Enterprise”), Progressive has formed an association-in-fact enterprise with Mitchell (the “Progressive Enterprise”), Liberty Mutual has formed an association-in-fact enterprise with Audatex and CCC (the “Liberty Mutual Enterprise”), and Nationwide has formed an association in- fact enterprise with CCC (the “Nationwide Enterprise”).”

“In addition, defendant State Farm has formed an association-in-fact enterprise within the meaning of 18 U.S.C. § 1961(4), comprised of State Farm, its respective Select Service facilities around the country, Mitchell and Audatex (the “State Farm Enterprise”).

The complaint states that, “Defendant Insurers conducted the respective enterprises through a pattern of racketeering activity by fraudulently establishing and misrepresenting the prevailing rate for collision repairs to vehicles covered by insurance, including: (1) hourly labor rates; (2) reimbursement for “paint and materials”; (3) the scope and extent of compensable repairs; and (4) parts prices.”

The injury to plaintiffs is “under-compensation for collision repair work and services on vehicles covered by insurance, including the suppression of hourly labor rates, suppression of compensation for “paint and materials”, suppression of compensation for parts, and suppression of compensation for the scope and extent of the repair procedures performed.

The complaint also alleges that “Defendant Insurers have made false and misleading representations of fact, and concealed and omitted facts regarding the prevailing rates for insured collision repair services and compensable repair procedures.”

Dick Luedke, spokesman for State Farm, in a response to CollisionWeek said his company believes the suit has no merit, like in other suits filed by collision repairers in recent months. “This suit has no merit and in no way accurately describes the business relationship State Farm has with thousands of body shops across the country,” stated Luedke.

Rick Tuuri, vice president of industry relations for AudaExplore, a Solera Company, stated, “AudaExplore is currently reviewing the lawsuit and is not named as a defendant. Therefore, it would not be appropriate to offer a comment at this time.”

Requests for comment from CCC and Mitchell were not received by deadline.

Advertisements