Suit Challenges State Farm’s Car Repair Policy
A jury in Marion, Ill., this week is set to begin hearing a lawsuit filed on behalf of 5.5 million current and former State Farm auto insurance customers who claim the insurer forces body shops to use substandard replacement parts to repair accident damage. The case could fundamentally change the way insurance companies pay for car repairs. It could also cost State Farm more than $2 billion and force the nation’s largest auto insurer to drop its policy of insisting on cheaper replacement parts. It involves door panels, hoods, fenders and other parts modeled on original equipment produced by auto makers, but made without benefit of the original specifications. Known in the industry as aftermarket replacements, these parts made up about 15% of all crash-repair parts used last year, according to the Inter-Industry Conference on Auto Collision Repair, a trade group. Plaintiffs contend that State Farm breached its contract with customers and violated Illinois consumer fraud laws when it required that cars be fixed with parts that don’t return the vehicles to the “pre-loss condition†called for in its policies. State Farm says aftermarket parts are just as good as the others and save customers money. Using such parts “allows for competition in the crash part replacement market and keeps the costs consumers pay through insurance for auto repairs lower,†spokesman Bill Sirola said.
