State Farm, the state’s largest automobile insurer, is accused of engaging in a pattern of unfair and fraudulent business practices involving car repairs in a state lawsuit filed Tuesday.
Attorney General Buddy Caldwell sued, alleging the company “created a culture of unsafe business practices in which consumer vehicle repairs are performed with cost-savings as the primary goal rather than safety and reliability.”
The suit, filed in 19th Judicial District Court, claims State Farm violated Louisiana’s Unfair Trade Practices Act and Monopolies Law by steering customers to its preferred repair shops and forcing shops to use cheaper, substandard or “junk yard” parts.
“Participating facilities perform repairs on damaged vehicles and are frequently required and/or pressured by the insurers to utilize used, recycled or non-OEM (original equipment manufacturer) parts,” the lawsuit states.
In a news conference, Caldwell said State Farm is not the only company at fault but it is being targeted because it does one-third of Louisiana’s automobile insurance business, far more than other insurers. In 2012, it wrote policies in the state totaling more than $1 billion in premiums.
“We want to catch this as early as we can because State Farm being a leader in the industry, we want State Farm to do the right thing and have other companies to follow,” Caldwell said. “Maybe customers will go to companies that treat them right.”
Caldwell wants the company to repay its customers.
In response to the lawsuit, State Farm issued a statement through its corporate spokesman Phil Supple.
“The description in this lawsuit is not in line with State Farm’s mission to serve the needs of its customers, and our long, proud history of achievements in advancing vehicle safety. We are reviewing the lawsuit and will have more to share soon,” Supple wrote via email. He provided a “background link to State Farm safety history: GoodNeighbors.com.”
Assistant Attorney General Stacie deBlieux said the lawsuit is aimed at stopping “the insurance industry from taking advantage of consumers for the sake of their bottom line.”
There is an “impermissible steering away from shops of their (policyholder’s) choice” to repair shops that have contractual relationships with State Farm, deBlieux said.
Caldwell aide Randy Ishee said automobiles are not repaired back to their pre-accident condition. After repairs, cars are usually worth less than their pre-accident condition. “When you put less than perfect parts, you decrease the value even more,” he said. In addition, Ishee said the use of “cheap, knock-off, junk parts” makes vehicles unsafe to be on the streets.
Caldwell said his office started looking into the situation in March and gathered evidence dating back five years. “Literally, we have hundreds of violations, not just State Farm, but by the industry itself,” he said.
Caldwell said repair estimates used by State Farm and others have been shown to be 24 to 29 percent low.
The case has been assigned to state District Court Judge Kay Bates.