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Shop files class-action suit against insurance companies for suppressing compensation rates

Wednesday, May 28, 2014 - 07:00
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Crawford’s Auto Center has filed a class action suit against State Farm, Allstate, GEICO, Progressive, Farmers Insurance, Liberty Mutual and Nationwide insurance companies for allegedly violating the Racketeer Influenced and Corrupt Organizations Act (RICO) by dictating unfair compensation for collision repairs.

The Downington, Pa. shop’s suit alleges that because the defendants collectively hold 70 percent of the national auto insurance market, they are pivotal in establishing the prevailing rate for repairs. However, they have used “fraud, deception and artificial restraint” to drive down the compensation rates paid to their non-DRP shops for labor, paint, parts and materials.

The alleged insurance company tactics include pressuring direct-repair program shops to suppress rates, utilizing most-favored nation clauses, which ensure insurance companies are given the best rate afforded any other customer, and discussing rates among themselves to create an artificial market rate for compensation.

The independent information providers — CCC, Mitchell and Audatex — are deemed co-conspirators, according to the complaint, for their role in establishing the scope and extend of repair procedures necessary to restore vehicles to pre-loss condition.

“The information providers are simply not the independent authority of repair standards and costs. [They] furnish Defendant insurers with the framework and tools to accomplish their goal to suppress compensation to repair facilities,” the complaint states. The information providers are significantly influenced by insurers, as they earn the majority of their revenue from insurers or their direct-repair program network facilities, the suit says.

The current condition of the market is forcing shops to make a choice, the complaint alleges: “Sell their repair services into a rigged market at suppressed rates or do not sell at all — and go out of business.”

The plaintiffs are seeking compensatory and punitive damages, attorneys’ fees, suit costs and all other appropriate relief.

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