Appeals court sides with auto body shops
Decision allows shops nationwide to move forward with antitrust lawsuits against State Farm, other insurers
A federal appeals court in Atlanta has reversed a decision by a Florida district judge and will allow auto body shops nationwide to move forward with antitrust lawsuits against State Farm and many other vehicle insurance companies.
“It’s allowing the suits to move forward. I think it’s good. This has been long overdue,” said Ron Perretta, the owner of Professionals Auto Body at 419 E. Pleasant Valley Blvd. and 1109 Plank Road, Duncansville.
Perretta has been in business for 38 years, and he said his struggle against the policies and tactics of insurance companies has been ongoing for 35 years.
He is one of the plaintiffs in the lawsuit that includes at least 15 auto body shops in Pennsylvania and more than 500 shops nationwide.
In view of the decision by a three-judge panel from the 11th Circuit Court of Appeals, Perretta predicts the number of auto body shops joining the lawsuit will quadruple.
The lawsuit contends that the insurance companies, led by State Farm Indemnity Co. and State Farm Guaranty Insurance Co., have conspired to fix the prices they will pay for labor and materials to repair vehicles to the detriment of motorists whose vehicles often end up with “inferior parts” and to auto body shops who end up making repairs, sometimes at a loss, because they risk cancellation of Direct Repair Program agreements they have with the insurance companies.
Under these agreements, insurance companies allegedly direct motorists to local garages that will abide by the prices established by the companies.
The insurance firms also attempt to smear the reputations of those shops that will not comply with the rates they set, the lawsuits contend.
They will tell customers the noncompliant shops “offer lower quality services,” take longer to make repairs and that the company “cannot guarantee the body shop’s work,” it is charged.
U.S. District Judge Gregory A. Presnell for the Central District of Florida had dismissed the cases against the insurance companies, ruling among other things that the shops did not provide details, such as when or how the multitude of insurance companies entered into the alleged agreement.
The 11th Circuit panel stated that “allegations directly supporting the existence of an agreement, such as form (written or oral) and date of entry, are unnecessary for a plausible claim of horizontal price fixing.”
Horizontal price fixing would be an agreement to fix prices.
The lawsuits contend the insurance companies use a “parallel system” to fix prices, meaning the companies simply adopt a system of uniform rates established by State Farm.
The present system of price fixing, enforced by Direct Repair Program agreements, violates the federal Sherman Antitrust Act, it is contended.
The shops also maintain that insurance companies violate state regulations barring “unjust enrichment,” interference with the businesses of the noncompliant shops and by refusing to pay the full value for the services provided by the shops.
The three-judge panel ruled that based on the facts presented in the lawsuits and drawing inferences from them, “We determine that the shops have pleaded enough facts to plausibly support their federal antitrust and state tort claims.”
Perretta said Tuesday he is pleased the auto body shops nationwide will finally be able to have their day in court and be able to present a massive amount of documentation they have collected.
The Altoona area businessman said at one point he had a badly damaged vehicle totally dismantled and the legitimate costs of repairs was estimated at $15,000. The insurance company refused to pay more than $10,000.
These practices, according to the lawsuits, force body shops to repair, rather than replace faulty parts and to install recycled parts, creating artificial market rates for repairs.
Perretta said he had collected more than 400 affidavits from customers who have stated they were warned to stay away from his shop.
He said he will not sign Direct Repairs Program agreements with the insurance companies.
“Moving forward, it’s definitely going to be interesting,” he said.
Although State Farm has yet to answer the lawsuits in court, a State Farm spokesman, when the lawsuit was filed in 2014, stated, “The allegations in this (Perretta) lawsuit, and others like it, are not in line with State Farm’s mission to serve the needs of its customers, and our long, proud history of achievements in advancing vehicle safety.”
The Professionals Auto Body lawsuit was initially filed in 2014 by Altoona attorney James Huff in the Western District of Pennsylvania, Johnstown, but was moved to Florida as all the lawsuits nationwide were consolidated.
Perretta said that lawsuit is now being handled by attorney William Stokan of Altoona.