Dozens of auto insurers are facing a federal lawsuit brought in U.S. District Court for the Middle District of Florida in Orlando by hundreds of auto shops in 36 states alleging the insurance industry forces unfair, illegal and unsafe auto repairs for consumers in order to reduce expenses.
Insurance industry representatives insist they are doing nothing wrong, and say they are simply trying to save on repair costs, which in turn keeps customers’ premiums at a reasonable level.
But according to the 92-page complaint, insurers insist that auto repair shops use replacement parts that are off-brand, after-market, used, recycled or, in some cases, even counterfeit, on any repairs made. Of course, this does keep costs down. The concern, however, is that those parts won’t provide the same degree of protection as manufacturer replacements. Beyond that, customers usually have no idea the parts used may be substandard.
It also means auto repair shops that refuse to use potentially dangerous auto parts or offer labor costs at under-market value are shut out from the coveted status as a “preferred” shop by many large insurers – which can mean a huge cut in revenue to many shops, especially smaller ones, plaintiffs allege. Essentially, the insurance companies have established a market that rewards auto repair centers willing to cut corners in order to boost profits – at the expense of consumer safety.
For example, some shops have been instructed to replace windshields with after-market glass that is far thinner than the original material and, in some cases, even in designed to go in that exact vehicle. That means in the event of a crash, there’s a greater chance the windshield is either going to pop out or the glass could shatter and the occupants would more likely be ejected.
This is not the first time these concerns have been raised.
Last year, the Louisiana Attorney General sued insurance giant State Farm, alleging that systematically insisting on used replacement parts meant many drivers were operating vehicles that weren’t safe for the road. That not only put those drivers and passengers at risk of serious injury or death, it also jeopardized the well-being of anyone else on the road with them. That lawsuit alleged that in some cases, the parts used were “nothing more than used junkyard parts.” Others were foreign knock-offs.
Earlier this year, the Mississippi Attorney General joined a Connecticut lawmaker who requested the U.S. Department of Justice investigate these allegations. That request noted customers likely have no idea that the repairs on their vehicles are anything less than high-quality – something they have a right to expect.
The auto shop plaintiffs say rather than risk customer safety, many will instead do the work at a quality level and take the hit on costs.
Aftermarket parts can cost between 25 to 50 percent less than original manufacturer parts, and this does save insurers about $1.5 billion a year. But if those savings result in additional costs when the parts fail to protect occupants in a wreck or, worse, perhaps even cause an auto accident, then the benefit is significantly diminished.
Many states have laws that prevent certain parts from being aftermarket or require customers be informed of that fact. Whether those laws are being followed is part of the subject of this litigation.
Call Freeman Injury Law — 1-800-561-7777 for a free appointment to discuss your rights.
Auto Insurance Giants Accused of Pushing Cheap Repairs, April 17, 2015, By Sarah Cooke, NerdWallet.com
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