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Body shops sue insurers, allege push to drive down prices

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Indiana body shops and auto insurers are on a collision course over repair compensation practices, a dispute that could cost millions of dollars to patch up.

In a federal lawsuit, 14 Indiana shops accuse State Farm Insurance and competitors of extracting “unreasonable and onerous” concessions on vehicle repair costs. When a shop doesn’t comply with price ceilings, the insurers dissuade policyholders from choosing that shop for repairs by telling them it has quality issues or gets lots of complaints, the shops allege in the suit filed April 2 in U.S. District Court for the Southern District of Indiana.

“There’s going to be a battle,” said Tony Passwater, executive director of the Indiana Auto Body Association, the lead plaintiff.

The suit seeks unspecified financial damages and names 27 insurers including Illinois-based State Farm, which has the largest market share in the state at about 25 percent. Others with large market share include Ohio-based Progressive Insurance and locally based Indiana Farmers Mutual Insurance Co.

The suit is just the latest brought by the collision-repair industry, which has filed similar cases this year in Florida and Mississippi.

At the core of these cases is the relationship body shops have with insurers under what are known as “direct repair program agreements.”

When introduced more than a decade ago, many shops initially embraced such agreements for the prospect of insurers’ steering more business their way in exchange for giving them some breaks on pricing, Passwater said.

Today, however, shops allege such agreements have evolved in favor of insurers—a big problem as shops on average receive 75 percent to 95 percent of their revenue from customers with insurance.

When insurers don’t cover the full cost of repairs, “it’s such a difficult thing to pass on to a customer,” said Kevin Wells, who operates Quality Collision Inc. in Bloomington and is a plaintiff in the suit.

Wells said he often just eats the cost the insurance company won’t pay.

“I’m taking it in the shorts by about $6 an hour for every job I do,” Wells said.

State Farm ‘spearheading’

The lawsuit takes aim at State Farm, which uses its dominant and influential position among other insurers in “spearheading efforts to control and artificially depress damage repair costs,” the suit alleges.

State Farm spokeswoman Missy Dundov denied the allegations but declined to elaborate.

“This suit has no merit and in no way accurately describes the business relationship State Farm has with thousands of body shops across the country,” she said.

A spokeswoman for Indiana Farmers said the company had not received notice it had been named in a suit.

A search of complaints against State Farm filed with the Indiana Department of Insurance did not reveal any filed by body shops, said department spokeswoman Alexandra Peck.

Body shops say State Farm conducts surveys of the going labor rate shops charge in a given area. The data and methodology are not disclosed, shops complain. “Shops are simply required to blindly accept State Farm’s pronouncements regarding these matters.”

The insurer attempts to prohibit shops from discussing the labor rates they provide as part of the surveys, “asserting any discussion may constitute illegal price fixing.”

Shops that complain the labor rate is inadequate are often told they are the only body shop in the area to say so and that they don’t conform to the “market rate.”

In fact, “State Farm knew multiple shops had attempted to raise their labor rates and advised State Farm of such,” the suit alleges.

Boxed out of business

The shops allege insurers have failed to abide by industry standards for auto repairs and repair-estimating databases. At the same time, many insurers pressure shops to reduce costs by using recycled parts. But used parts like doors can require hours of additional labor to be made to fit properly and to recondition.

Ultimately, shops are required to either make “less than quality” repairs or suffer a financial loss. Taking shortcuts raises the specter of safety issues, but once a vehicle is repaired it’s not easy to spot problems such as improper welds that might be hidden by seam sealer.

Neither scenario is palatable to many body shops.

“There are a lot of them that have hung it up and said, ‘That’s it. I can’t take it anymore,’” Passwater said.

“The guys can’t make it. It’s not that they are bad businesspeople,” said Scott Blake, of Blake’s Carstar Collision Center, in LaPorte, who also is president of the IABA.

Some shops have survived cost pressures by adding additional services such as applying sprayed-on bed liners for pickup trucks. Some shops have purchased others through a rollup strategy intended to improve efficiencies.

Passwater said the state once had about 2,000 shops; there are now 800 to 1,000.

Collision industry battle growing

The 34-page suit alleges insurers have violated the federal Sherman Act, both in price-fixing and through boycotting tactics.

They contend the boycotting efforts include insurers telling policyholders that a certain shop will be more expensive and that choosing it also means they’ll be responsible for additional rental-car charges.

Another tactic, body shops allege, is to tell consumers the work won’t be guaranteed by using a shop that doesn’t conform to a repair program agreement. That’s misleading, however, because insurers require all shops to stand behind their work for a period of time.

The collision shops seek unspecified compensatory damages for under-payments as well as damage for lost business opportunities.

They also seek an injunction that would require insurers modify their practices.

This template for the collision repair industry’s battle against State Farm and other insurers was drawn by Mississippi attorney John Eaves Jr.

In January, Eaves brought a suit on behalf of Mississippi’s collision shops. The following month, a case was brought in Florida on behalf of 21 shops.

Local counsel for Indiana body shops is Mark Sniderman, of Sniderman Nguyen LLP.•

 

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  1. A high ranking Indiana supreme Court operative caught red handed leading a group using the uber offensive N word! She must denounce or be denounced! (Or not since she is an insider ... rules do not apply to them). Evidence here: http://m.indianacompanies.us/friends-educational-fund-for-negroes.364110.company.v2#top_info

  2. A high ranking bureaucrat with Ind sup court is heading up an organization celebrating the formal N word!!! She must resign and denounce! http://m.indianacompanies.us/friends-educational-fund-for-negroes.364110.company.v2#top_info

  3. ND2019, don't try to confuse the Left with facts. Their ideologies trump facts, trump due process, trump court rules, even trump federal statutes. I hold the proof if interested. Facts matter only to those who are not on an agenda-first mission.

  4. OK so I'll make this as short as I can. I got a call that my daughter was smoking in the bathroom only her and one other girl was questioned mind you four others left before them anyways they proceeded to interrogate my daughter about smoking and all this time I nor my parents got a phone call,they proceeded to go through her belongings and also pretty much striped searched my daughter including from what my mother said they looked at her Brest without my consent. I am furious also a couple months ago my son hurt his foot and I was never called and it got worse during the day but the way some of the teachers have been treating my kids they are not comfortable going to them because they feel like they are mean or don't care. This is unacceptable in my mind i should be able to send my kids to school without worry but now I worry how the adults there are treating them. I have a lot more but I wanted to know do I have any attempt at a lawsuit because like I said there is more that's just some of what my kids are going through. Please respond. Sincerely concerned single parent

  5. California Sex Offender Management Board (CASOMB) End of Year Report 2014. (page 13) Under the current system many local registering agencies are challenged just keeping up with registration paperwork. It takes an hour or more to process each registrant, the majority of whom are low risk offenders. As a result law enforcement cannot monitor higher risk offenders more intensively in the community due to the sheer numbers on the registry. Some of the consequences of lengthy and unnecessary registration requirements actually destabilize the life’s of registrants and those -such as families- whose lives are often substantially impacted. Such consequences are thought to raise levels of known risk factors while providing no discernible benefit in terms of community safety. The full report is available online at. http://www.casomb.org/index.cfm?pid=231 National Institute of Justice (NIJ) US Department of Justice Office of Justice Programs United States of America. The overall conclusion is that Megan’s law has had no demonstrated effect on sexual offenses in New Jersey, calling into question the justification for start-up and operational costs. Megan’s Law has had no effect on time to first rearrest for known sex offenders and has not reduced sexual reoffending. Neither has it had an impact on the type of sexual reoffense or first-time sexual offense. The study also found that the law had not reduced the number of victims of sexual offenses. The full report is available online at. https://www.ncjrs.gov/app/publications/abstract.aspx? ID=247350 The University of Chicago Press for The Booth School of Business of the University of Chicago and The University of Chicago Law School Article DOI: 10.1086/658483 Conclusion. The data in these three data sets do not strongly support the effectiveness of sex offender registries. The national panel data do not show a significant decrease in the rate of rape or the arrest rate for sexual abuse after implementation of a registry via the Internet. The BJS data that tracked individual sex offenders after their release in 1994 did not show that registration had a significantly negative effect on recidivism. And the D.C. crime data do not show that knowing the location of sex offenders by census block can help protect the locations of sexual abuse. This pattern of noneffectiveness across the data sets does not support the conclusion that sex offender registries are successful in meeting their objectives of increasing public safety and lowering recidivism rates. The full report is available online at. http://www.jstor.org/stable/full/10.1086/658483 These are not isolated conclusions but are the same outcomes in the majority of conclusions and reports on this subject from multiple government agencies and throughout the academic community. People, including the media and other organizations should not rely on and reiterate the statements and opinions of the legislators or other people as to the need for these laws because of the high recidivism rates and the high risk offenders pose to the public which simply is not true and is pure hyperbole and fiction. They should rely on facts and data collected and submitted in reports from the leading authorities and credible experts in the fields such as the following. California Sex Offender Management Board (CASOMB) Sex offender recidivism rate for a new sex offense is 0.8% (page 30) The full report is available online at http://www.cdcr.ca.gov/Adult_Research_Branch/Research_Documents/2014_Outcome_Evaluation_Report_7-6-2015.pdf California Sex Offender Management Board (CASOMB) (page 38) Sex offender recidivism rate for a new sex offense is 1.8% The full report is available online at. http://www.google.com/url?sa= t&source=web&cd=1&ved= 0CCEQFjAA&url=http%3A%2F% 2Fwww.cdcr.ca.gov%2FAdult_ Research_Branch%2FResearch_ documents%2FOutcome_ evaluation_Report_2013.pdf&ei= C9dSVePNF8HfoATX-IBo&usg=AFQjCNE9I6ueHz-o2mZUnuxLPTyiRdjDsQ Bureau of Justice Statistics 5 PERCENT OF SEX OFFENDERS REARRESTED FOR ANOTHER SEX CRIME WITHIN 3 YEARS OF PRISON RELEASE WASHINGTON, D.C. Within 3 years following their 1994 state prison release, 5.3 percent of sex offenders (men who had committed rape or sexual assault) were rearrested for another sex crime, the Justice Department’s Bureau of Justice Statistics (BJS) announced today. The full report is available online at. http://www.bjs.gov/content/pub/press/rsorp94pr.cfm Document title; A Model of Static and Dynamic Sex Offender Risk Assessment Author: Robert J. McGrath, Michael P. Lasher, Georgia F. Cumming Document No.: 236217 Date Received: October 2011 Award Number: 2008-DD-BX-0013 Findings: Study of 759 adult male offenders under community supervision Re-arrest rate: 4.6% after 3-year follow-up The sexual re-offense rates for the 746 released in 2005 are much lower than what many in the public have been led to expect or believe. These low re-offense rates appear to contradict a conventional wisdom that sex offenders have very high sexual re-offense rates. The full report is available online at. https://www.ncjrs.gov/pdffiles1/nij/grants/236217.pdf Document Title: SEX OFFENDER SENTENCING IN WASHINGTON STATE: RECIDIVISM RATES BY: Washington State Institute For Public Policy. A study of 4,091 sex offenders either released from prison or community supervision form 1994 to 1998 and examined for 5 years Findings: Sex Crime Recidivism Rate: 2.7% Link to Report: http://www.oncefallen.com/files/Washington_SO_Recid_2005.pdf Document Title: Indiana’s Recidivism Rates Decline for Third Consecutive Year BY: Indiana Department of Correction 2009. The recidivism rate for sex offenders returning on a new sex offense was 1.05%, one of the lowest in the nation. In a time when sex offenders continue to face additional post-release requirements that often result in their return to prison for violating technical rules such as registration and residency restrictions, the instances of sex offenders returning to prison due to the commitment of a new sex crime is extremely low. Findings: sex offenders returning on a new sex offense was 1.05% Link to Report: http://www.in.gov/idoc/files/RecidivismRelease.pdf Once again, These are not isolated conclusions but are the same outcomes in the majority of reports on this subject from multiple government agencies and throughout the academic community. No one can doubt that child sexual abuse is traumatic and devastating. The question is not whether the state has an interest in preventing such harm, but whether current laws are effective in doing so. Megan’s law is a failure and is destroying families and their children’s lives and is costing tax payers millions upon millions of dollars. The following is just one example of the estimated cost just to implement SORNA which many states refused to do. From Justice Policy Institute. Estimated cost to implement SORNA Here are some of the estimates made in 2009 expressed in 2014 current dollars: California, $66M; Florida, $34M; Illinois, $24M; New York, $35M; Pennsylvania, $22M; Texas, $44M. In 2014 dollars, Virginia’s estimate for implementation was $14M, and the annual operating cost after that would be $10M. For the US, the total is $547M. That’s over half a billion dollars – every year – for something that doesn’t work. http://www.justicepolicy.org/images/upload/08-08_FAC_SORNACosts_JJ.pdf. Attempting to use under-reporting to justify the existence of the registry is another myth, or a lie. This is another form of misinformation perpetrated by those who either have a fiduciary interest in continuing the unconstitutional treatment of a disfavored group or are seeking to justify their need for punishment for people who have already paid for their crime by loss of their freedom through incarceration and are now attempting to reenter society as honest citizens. When this information is placed into the public’s attention by naive media then you have to wonder if the media also falls into one of these two groups that are not truly interested in reporting the truth. Both of these groups of people that have that type of mentality can be classified as vigilantes, bullies, or sociopaths, and are responsible for the destruction of our constitutional values and the erosion of personal freedoms in this country. I think the media or other organizations need to do a in depth investigation into the false assumptions and false data that has been used to further these laws and to research all the collateral damages being caused by these laws and the unconstitutional injustices that are occurring across the country. They should include these injustices in their report so the public can be better informed on what is truly happening in this country on this subject. Thank you for your time.

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