Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Louisiana accuses State Farm of monopolizing, controlling automobile repair practices, (Aug 22, 2014)
Organizations Mentioned:State Farm Fire & Casualty Co. | State Farm Fire and Casualty Company | State Farm General Insurance Co. | State Farm General Insurance Company | State Farm Insurance | State Farm Mutual Automobile Insurance Co. | State Farm Mutual Automobile Insurance Company
By Edward L. Puzzo, J.D.
The State of Louisiana has filed a lawsuit, challenging State Farm Insurance’s automobile repair claims practices in the state, the Office of Attorney General James D. “Buddy” Caldwell has announced. A complaint filed in Louisiana’s 19th Judicial District Court accuses State Farm of engaging in business practices aimed at controlling the auto repair industry, in violation of the Louisiana Monopolies Law, and engaging in a pattern of unfair and fraudulent business practices, forcing unsafe repairs on vehicles without the knowledge or consent of Louisiana consumers, in violation of the Louisiana Unfair Trade Practices Law (State of Louisiana v. State Farm Fire and Casualty Co., August 19, 2014).
The lawsuit alleges that State Farm used “scare tactics” to steer consumers to their preferred repair providers, who are forced by their agreements with State Farm to perform vehicle repairs cheaply and quickly, rather than in accordance with consumer safety and vehicle manufacturer performance standards. Those tactics allegedly include making misrepresentations to consumers that they will be responsible for increased costs if they use repair facilities that do not participate in State Farm’s direct repair programs, or that work done by preferred repair providers was “guaranteed,” in contrast to work by non-preferred repair facilities, when no such guarantee existed.
The agreements between State Farm and the preferred repair providers allow State Farm to dictate how long the repair should take, what types of repairs are made, and the quality of replacement parts, according to the complaint.
“In some cases, we’ve found that these parts are nothing more than used junk yard parts,” said Caldwell. In others, we’ve found them to be foreign knock-off parts of questionable quality. Auto repair is not an industry where you can cut corners to save a little money. It could be a matter of life and death.”
The complaint accuses State Farm of attempting to discourage consumers from using non-preferred repair facilities by creating delays to repairs by failing to promptly and timely dispatch adjusters and appraisers to those facilities, by falsely informing consumers that they have encountered problems with non-preferred repair facilities in the past, by using standardized labor times for repairs and refusing to pay for additional time necessary to actually complete such repairs, and by otherwise systematically attempting to divert customers away from repair facilities that do not participate in their direct repair programs. These practices, the Attorney General alleges, were for the purpose of controlling, manipulating, and monopolizing the automobile repair industry.
State Farm currently holds the largest share of auto insurance policies in Louisiana, Caldwell’s office reported. In 2012, State Farm wrote one third of all auto insurance policies in the state totaling over $1 billion in premiums.
Companies: State Farm Mutual Automobile Insurance Company; State Farm Fire and Casualty Company; State Farm General Insurance Company
News: Antitrust StateUnfairTradePractices LouisianaNews