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Several Arizona auto body shops have filed a price fixing lawsuit against State Farm Insurance and several other Arizona car insurance companies who have paid for repairs on behalf of policy holders, alleging that there is an illegal effort to depress and fix repair costs.
There are 41 defendants, including the subsidiaries of major insurance companies, listed in the price control lawsuit including State Farm, Farmers Insurance, Progressive, Geico, Allstate, American Family, Liberty, and Nationwide. The named insurance companies make up almost 90 percent of the private car insurance market in Arizona, with State Farm holding a more than 17 percent share, putting it in the dominant position, the price control lawsuit explains.
The plaintiffs include Legends Collision, LLC, Raintree Auto Body, Inc., Jan’s European Auto Body, New Image Paint and Body Shop, Inc., Airport Auto Center, and Orlando Auto Body. They filed the price fixing lawsuit in the Arizona federal court.
“Over the course of several years, the defendants have engaged in an ongoing, concerted and intentional course of action and conduct with defendants State Farm . . . acting as the spearhead to improperly and illegally control and depress automobile repair costs to the detriment of the plaintiffs and the substantial profit of the defendants,” the auto insurance lawsuit alleges.
According to the auto body shops, the auto insurance companies are able to “exert control over” shops “by way of entering program agreements with individual body shops,” known as “direct repair programs (DRP).”
The DRPs are considered “a mutually beneficial opportunity. In exchange for providing certain concessions of price, priority and similar matters, the defendants would list a body shop as a preferred provider.”
However, the insurance companies and “particularly State Farm, have utilized these agreements to exert control over the plaintiffs’ businesses in a variety of manners, well beyond that of an ordinary business agreement.”
In addition, the price fixing lawsuit continues, ” this control even extends to and is applied upon body shops without DRPs.”
The auto body shops allege that all the named insurance companies, but especially State Farm, have pressured the auto body shops by making threats against the profitability of the shops if they don’t comply with the insurance companies’ demands.
“Failure to comply results in either (or a combination of) removal from the program(s) (where applicable), improper steering of customers away from the plaintiffs’ businesses, or simply punishment to decrease the number of customers utilizing plaintiffs’ services,” the auto body shops explain in the price fixing lawsuit.
This can be devastating to auto body shops who don’t comply with the insurance companies since a large majority of the business these auto body shops see is from customers in which the named insurance companies are required to pay for the repairs, the auto body shops explain in the price fixing lawsuit.
Such price fixing applies to both labor costs as well as cost for materials.
The charges against the insurance companies includes violating the price fixing and boycott parts of the Sherman Act, the tortious interference with business relations, unjust enrichment, the doctrine of quasi-estoppel, and conversion.
The auto body shops are asking for compensatory damages, damages for lost revenue, punitive damages and injunctive relief.
The plaintiffs are represented by Eric. D. Zard, Elaine A. Ryan, and Van Bunch of Bonnett, Fairbourn, Friedman & Balint, P.C.
The Price Fixing Lawsuit is Legends Collission, LLC et al. v. State Farm Mutual Automobile Insurance Company et al., Case No. 2:14-cv-02401-SRB, in the U.S. District Court for the District of Arizona.
3 thoughts onBody Shops Hit State Farm, Others With Price Fixing Lawsuit
My parents in their early 70’s have chosen to gift their first grandchild, diva #1 (now in her 20’s) with excessive presents. They have provided her a new car (at 17), a condo (at 19) and are now buying her a house. She is recently married but her husband is on the free ride also and just loves all the free gifts. My parents pay her condo fees, her car insurance, her electric bills, etc. Meanwhile their other grandchildren get minimal. My child (6) recently got her college fund cut off by them because “no one was using it correctly.” They are talking about my sister’s other kids-especially diva #1. She has never attended college, doesn’t work and is a stay-at-home mom of one with another on the way. I recently got mad (again) about this excess and now no one in the family is talking to me. I just think it is totally unfair but this diva told the whole family how mean I was being (because I simply said stop taking their money) and now my mom won’t talk to me and canceled her big birthday party at my house AND ignored me entirely on her birthday and went to the beach with diva #1. I simply am so hurt. I made a fuss before and my parents didn’t talk to me for months. They do not see the damage it is doing to the family nor to the other grandchildren. My sister tried to talk to my dad and was yelled at. My mom talks about my sister and how she shouldn’t have bought her new house because she is complaining about money yet totally doesn’t mind that diva #1 is always taking all of their money!!! Diva #1 is the favorite and always has been and always will be. I am a college educated married, working woman in my 40’s and don’t want my parents’ money yet I think there should be some equity with the grandchildren. My child is basically ignored and diva #1’s child is given everything too. It is so hurtful that my parents don’t value me and want to spend time with me. It is very, very hurtful. What can I do? Last time I became angry I just had to ignore my feelings and just go along with diva #1 getting everything but I am really just tired. I give my parents nice gifts, treat them well, take them places and am just totally not treated well back by them. My parents are getting old and this is just getting worse and worse. Help!.
Amen
I have owned a auto body shop since 1987 and have seen this from the beginning, when it started. At one time the auto body labor rate was higher then a mechanical labor rate and auto body technicians were paid higher too because it was considered a talent, now the average labor rate is so below what it should be because of the drp thing. Electricians and plumbers are even higher now then we are. Yes the drp idea was also designed to make it easier for the insured to receive repairs, but the bottom line it was really for to save money. The drp thing was set up to control the labor rate plain and simple, If a shop owner feels they need x amount of dollars for a labor rate to meet their expenses, no matter how much proof is provided, it’s not going to happen because the insurance companies will pull the drp thing away from that shop. If a shop does not belong to a drp program, that shop will only get paid from what is called the prevailing labor rate in your area, other words average labor rate from drp and non drp shops, but as a non drp shop you can charge what ever you want for a labor rate, you just have to collect the difference from the insured on top of their deductible, that does not go over very well and does not happen. So in a round about way a drp and a non drp shop will accept the labor rate that is offered from a insurance company in order to survive and keep their technicians working and the lights on. Us body shop owners are the reason why this has happened, because we all want work and some shops have choose to belong to a drp program to get work, but the majority have not. I am proud that there is a group of shops that have gotten together to do this for this industry, wish it would have happened sooner. Oh ya, the idea that a insurance company will stand behind a drp shops repairs for life, and not for a non drp shop is not steering then tell me what is. Only a repair shop can warranty their work, not a second party payee, after all that is what a insurance company really is.