Court Upholds Insurers’ Auto Body Repair Networks Against Racketeering Claim

By | December 30, 2019

The 11th Circuit Court of Appeals in Atlanta agreed with the district court that the repair shops failed to state a valid claim that the insurers had conspired to commit a fraud by demanding that they accept lower rates for their work in order to participate in their repair networks.

The 11th Circuit noted that the 9th Circuit had rejected a similar pleading brought by small business owners against Yelp for allegedly manipulating user reviews to “extort” advertising revenue.

“The Ninth Circuit’s reasoning fits the facts here well, and we conclude that, at most, these defendants drove a hard bargain,” the 11th Circuit panel said in an opinion written by Judge William Pryor.

The case is titled Crawford’s Auto Center v. State Farm Mutual Insurance Co. Insurers Allstate, Geico, Progressive, Farmers, Liberty Mutual, and Nationwide were also named as defendants.

The repair shops first filed the lawsuit alleging an insurer conspiracy in a Chicago federal district court in 2014. The case was assigned as multi-district litigation to U.S. District Judge Gregory A. Presnell in Orlando, Fla.

The body shops alleged that the insurers used third-party information providers — ADP Claims Services Group, CCC One and Mitchell — to establish “prevailing rates” for auto body repair work. The carriers referred policyholders to repair shops that agreed to accept the prevailing rates.

The lawsuit alleges the insurers conspired to suppress the rates charged by their industry be creating deflated prevailing rates, a violation of the Racketeering Influenced and Corrupt Organizations Act. What’s more, the carriers violated antitrust laws by working together to lower their costs.

In its analysis, the 11th Circuit noted that a group of auto body shops has filed a similar lawsuit that was also rejected. In Quality Auto Paining Center of Roselle v. State Farm, the appellate court dismissed a suit that alleged that insurance carriers were violating anti-trust laws by colluding to improperly pressure body shops to accept lower repair prices.

The court said in order to pursue a claim under the RICO act, the repair shops would have to show that they there were the victim of a fraud or extortion. The fraud alleged in the complaint, however, consisted of nothing more than “vague allusions” to misrepresentations made by the insurers. There was also no allegation of extortion, which means to use force, violence or fear to obtain property.

“Plaintiffs could have refused to perform the requested repairs at the rates set by defendants, but they did not,” the panel said. “They went ahead and performed those repairs. This is not extortion.”

The panel also rejected plaintiffs’ arguments that the district judge erred by not entering several exhibits into evidence and by refusing them an opportunity to amend their complaint a third time.

Topics Carriers Auto

About Jim Sams

Sams is editor of, the online resource and daily newsletter for property/casualty insurance claims professionals. ClaimsJournal is a member of the Wells Media Group. Sams can be reached at More from Jim Sams

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