Organizations Seek to Overturn Fla. Court Ruling in Auto Repair Parts Case

The Alliance of American Insurers (Alliance) said three other national insurance industry trade associations joined it in filing an amicus brief in a Florida lawsuit involving the use of aftermarket automobile repair parts—also known as non-original equipment manufacturer (OEM) parts.

Last month, the U.S. District Court for the Northern District of Florida certified a countrywide class of auto insurance policyholders who claim that Allstate, GEICO, Nationwide and State Farm conspired to violate antitrust laws by requiring the use of non-OEM replacement parts to repair their damaged vehicles, and by charging too much premium for their auto insurance policies.

Along with the Alliance, the American Insurance Association (AIA), the National Association of Independent Insurers (NAII) and the National Association of Mutual Insurers (NAMIC) are asking a federal appeals court of the Eleventh Circuit to reject the class status.

The brief contends that by granting class status, the court has ignored the provisions of the McCarran-Ferguson Act, which allow states to regulate insurance, and also is ignoring the fact that under the filed-rate doctrine, insurers cannot be attacked in court once a state insurance regulator has approved a rate.

“We feel very strongly that the court erred in its decision to grant class status to this group of policyholders,” said Alliance general counsel Ann Spragens. “Class certification in an anti-trust case puts a gun to the insurer’s head. If we can’t persuade the court to take the certification on appeal, insurers will feel enormous pressure to settle. Even though the law in the Eleventh Circuit is strongly in their favor, insurers are being threatened with the potential for triple damages that could reach into billions of dollars.”

“This case illustrates an immediate threat to high-quality state regulation, creating in effect a national insurance regulator in a single court and jury,” said David F. Snyder, AIA assistant general counsel. “Companies cannot be expected to operate in a system where compliance with one state’s laws becomes the basis for severe punishment in another state. If we are to have one insurance regulator, that office should be created by federal legislation, not class-action lawsuits, and should be responsive to issues of consumer protection, solvency and competitiveness alike.”

“We don’t think this is an issue ripe for certification of class action, especially since insurers are not mandating the use of aftermarket parts,” said Jim Taylor, counsel for the NAII. “Certified aftermarket parts have proven to be a great tool in controlling claim costs, and if insurers are prohibited from using them, everyone will pay more for insurance because of the exorbitantly high cost of original equipment manufacturer parts.”

“Setting and determining rates is clearly the business of insurance, and rate regulation is the exclusive jurisdiction of the states and their regulators who have the unique expertise to determine appropriate rates of insurance for their citizens,” said Gregg Dykstra, vice president and General Counsel of NAMIC. “It is, as a practical reality, impossible for the plaintiffs to establish through common proof that all of the millions of class members from different states with different regulatory approaches paid excessive rates.”