Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Ohio Sup. Ct.: Insurer’s issuance of repair estimate not a consumer transaction, (Dec 30, 2015)

By Michael Menzhuber, J.D., LL.M.

An insurer’s issuance of a vehicle repair estimate based on non-original equipment manufacturer parts, allegedly in violation of the Ohio Consumer Sales Practices Act, was not a consumer transaction governed by the Act, according to the Ohio Supreme Court. Thus, a judgment that the insurer violated the Act and an award of damages were vacated, and the action was dismissed (Dillon v. Farmers Insurance of Columbus, Inc., December 29, 2015, O’Connor, C.).

After a couple damaged their vehicle, a claim representative of Farmers Insurance inspected the vehicle and prepared a written estimate for repairs, based on the use of non-original equipment manufacturer parts. Although the husband wanted only original equipment manufacturer (OEM) parts used in the repair, he was informed that the couple’s insurance policy permitted only the use of non-OEM parts. About a week after their phone conversation, the claims representative mailed a copy of the paper estimate to the couple. By that time, the husband had already instructed the repair of the vehicle with the understanding that it would cost $1,500 more than the Farmer’s estimate.

The couple filed a complaint, containing eight causes of action related to Farmers’ estimate and its refusal to pay for OEM parts. The trial court granted the couple summary judgment on their claim that Farmers violated the Consumer Sales Practices Act by failing to obtain one of their signatures on the bottom of the estimate, in violation of R.C. 1345.81(B)(1) of the Act, and awarded damages, statutory treble damages, attorney fees, and expenses.

The appellate court affirmed the trial court’s judgment. In doing so, it focused on: (1) R.C. 1345.02, which provides that an unfair or deceptive act or practice in connection with a consumer transaction violates the Consumer Sales Practices Act; (2) R.C. 1345.01, which excludes transactions between insurers and the customers from the definition of a “consumer transaction”; and (3) R.C. 1345.81, which imposes requirements on insurers issuing motor vehicle repair estimates based on the use of non-OEM parts and provides that any violation of this section, in connection with a consumer transaction, is an unfair and deceptive act or practice.

The appellate court found that R.C. 1345.01 and R.C. 1345.02 conflicted with R.C. 1345.81 with respect to their application to insurers and could not be applied so as to give effect to all of the provisions. Noting that R.C. 1.51 instructs that an irreconcilable conflict between provisions should be resolved by giving effect to the one most recently enacted, the appellate court determined that R.C. 1345.81 should be given effect.

Consumer transaction. The Supreme Court determined that the plain meanings of R.C. 1345.01 and R.C. 1345.02 did not irreconcilably conflict with R.C. 1345.81 and, therefore, the appellate court’s reinterpretation of R.C. 1345.01 was unnecessary. Although R.C. 1345.81 imposed requirements on insurers issuing motor vehicle repair estimates based on the use of non-OEM parts, the statute’s remedial section expressly limited unfair and deceptive acts or practices to violations in connection with a consumer transaction. Consequently, the Court determined that Farmers could not commit an unfair and deceptive act or practices under R.C. 1345(E) because, as an insurer, it could not be a party to a consumer transaction.

In connection with a consumer transaction. The Supreme Court noted that prior precedent established that an insurer’s provision of a repair estimate: (1) does not render the insurer a party to the transaction between the consumer and the repair facility or installer; and (2) does not occur “in connection with” that transaction. The Court further noted that Farmers’ only role in the actual repair of the vehicle was writing checks. Since the service provided by Farmers was the insurance coverage service, and the sale of that service happened well before the accident or subsequent repair, it was explicitly exempt from the application of the CSPA by R.C. 1345.01(A).

Dissent. While agreeing with almost everything said in the majority opinion, the dissenter took the position that once an insurance company undertakes the role of adjuster in a collision repair, there is no justification to shield it from liability for its actions in connection with a consumer transaction merely because it is an insurer.

The case is No. 2015-Ohio-5407.

Attorneys: Thomas F. Glassman, Mathew J. Smith, and Andrew L Smith (Smith, Rolfes & Skavdahl Co., L.P.A.) for Farmers Insurance of Columbus, Inc.; James M. Skelton, Robert A Skelton, and Joseph R. Skelton (Pomerene, Burns, & Skelton) for Jerry and Nancy Dillon; Jamey T. Pregon and Lynnete Dinkler (Dinkler Pregon, L.L.C.) for Ohio Association of Civil Trial Attorneys; Stephanie M. Chmiel and Elizabeth B. Wright (Thompson Hine, L.L.P.) and Adam H. Charnes and Chris W. Haaf (Townsend & Stockton, L.L.P.) for Alliance of Automobile Manufacturers; Peter D. Traska (Traska Kimbrell, Ltd) for Automotive Education Policy Institute and Choice Auto Body Repair Association; and Todd L. Willis (Willis & Willis Co., L.P.A.) for Ohio Association for Justice.

Companies: Farmers Insurance of Columbus, Inc.

Cases: StateUnfairTradePractices OhioNews