Auto Repair Shops Claim Insurance Price-Fixing Breaks the Industry

In 2015, dozens of auto repair shops banded together to file a series of lawsuits across the country alleging that insurance companies, including State Farm, Allstate, and Geico, fixed prices for collision repairs in violation of federal antitrust laws.

These lawsuits claimed the insurers engaged in two types of misconduct.  First, the repair shops – none of which participated in the insurance companies’ direct repair or preferred provider programs – claimed that State Farm determined the market rate for repairs through an unreliable process and that the other insurers blindly applied those same rates.  The repair shops further alleged that the insurers pressured them into using inferior parts to suppress market rates (a practice we recently wrote about).  Finally, the lawsuits claimed that the insurance companies forced compliance with the artificial market rates by making false and negative statements to vehicle owners about repair shops that would not accept market rates.

The cases were consolidated and the trial court dismissed the suits for a lack of factual allegations.  However, the Eleventh Circuit recently reversed that dismissal and held that the antitrust claims can go forward because the repair shops alleged sufficient information from which an agreement to fix prices could be inferred.  The insurance companies have asked for further review of that decision and critics claim that this will open the floodgates for unsupported antitrust claims.

The Eleventh Circuit Decision gives new life to this litigation and for repair shops’ hope for change. Although it’s difficult to predict the ultimate impact this case will have on the industry, it illustrates the scrutiny now being given to market rates and preferred provider programs.