GRAND RAPIDS, Mich. (CN) - State Farm and other insurers illegally depress car-repair costs, a dozen Michigan body shops claim in Federal Court.
Rodenhouse Body Shop is the lead plaintiff in the complaint filed Monday. That plaintiff's relationship to the lead attorney in the case, Andrew Rodenhouse of Rodenhouse Kuipers, is unclear.
The 40-page complaint alleges that State Farm exploited its position as the nation's largest auto insurer with more than 19 percent of the market share to spearhead a scheme of controlling labor and parts costs body shops face.
State Farm allegedly demanded price and priority concessions from body shops to let them stay on a direct-repair list.
"Failure to comply results in either removal from the program(s) combined with improper 'steering' of customers away from plaintiffs' business or simply punishment to decrees the number of customers utilizing plaintiffs' services," the lawsuit states.
Insurance companies purport that their survey-based price standards "keep a lid on costs and premiums, according to an article from USA Today reporter Adam Belz.
Rodenhouse says the surveys are flawed.
"The geographical boundaries of the market area to be 'surveyed' to establish the 'market rate' are wholly within the control and direction of State Farm," the complaint states.
Complaining of a lack of neutral oversight, the body shops say State Farm also does not disclose the methods it uses in the surveys to reach its conclusion.
The customers and revenue gained from insurance-related repairs is substantial in the collision-repair industry.
"Insurance-paying customers account for between seventy and ninety-five percent of each shop's revenue," the complaint says.
What State Farm pays has no connection, however, to what the actual costs are, the body shops say, adding that the discrepancy causes them to lose money and to use substandard parts.
"The continued refusal to and/or failure to compensate plaintiffs for ordinary and customary repairs and materials costs places plaintiffs in the untenable position of either performing incomplete and/or substandard repairs and thus breaching their obligation to the automobile owners to return vehicles to pre-accident condition, or performing labor and expending materials without proper compensation and thereby jeopardizing continuing viability of the business enterprise," the complaint states.
There are more than three dozen insurance companies named as defendants to the action, which seeks punitive damages for price-fixing, conversion and other claims.
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