Indiana Auto Repair Shops Bring Antitrust Action Against Auto Insurers

by Dickinson Wright

An Indiana trade association of auto repair shops, together with a group of its members, have filed an antitrust action against over twenty five auto insurers in Indiana, alleging that the insurers’ direct repair programs violate the antitrust laws by artificially depressing repair rates for the services plaintiffs offer and by “steering” insureds away from plaintiffs’ businesses. The action, Indiana AutoBody Association v. State Farm Mutual Automobile Insurance, was commenced on April 2 in the United States District Court for the Southern District of Indiana. Notably, the case follows a similar action filed by a collection of Florida repair shops against many of the same insurers only two months ago, including State Farm, entitled A & E Auto Body v. 21st Century Centennial Insurance.
As in the Florida case, the Indiana plaintiffs allege that State Farm’s vendor agreement requires shops that desire to participate in its direct repair program to accept the “market rate” for such services, and that State Farm calculates the “market rate” in a manner that keeps them artificially low and not representative of the “true” market rate. Plaintiffs also allege that the other insurer defendants have all advised plaintiffs that they will pay no more than State Farm pays for their services. As in the Florida case, plaintiffs allege that the defendants’ conduct constitutes a conspiracy to restrain their repair rates, in violation of Section 1 of the Sherman Act, and that the alleged “steering” conduct constitutes an unlawful “group boycott” of plaintiffs’ services. The defendant insurers have not yet responded to plaintiffs’ complaint.
Meanwhile, in the Florida action, on March 26 the insurers filed a motion seeking to have plaintiffs’ antitrust claims dismissed for failure to state a claim. They maintain that the Florida shops have not adequately alleged any anticompetitive agreement, and have at most alleged “consciously parallel” conduct by the defendants, insufficient to plead conspiracy under the Supreme Court’s Twombly decision. Specifically, the insurers assert that “plaintiffs’ core allegation is simply the self-defeating generalization that after State Farm, the purported market leader, ‘unilaterally’ adopted a price structure for labor rates, the other defendants asked plaintiffs to give them the same prices given to State Farm. Following a price leader, however, does not suffice to prove the existence of agreement.” As to plaintiffs’ boycott claim, the insurers maintain that “not only have [plaintiffs] failed properly to allege concerted action, but do not allege that any defendant cut off business from any plaintiff or refused to reimburse insureds who patronized a plaintiff, much less that all defendants refused to deal with any particular body shop.”
Plaintiffs filed a response to the defendants’ motion on April 17, contending that defendants’ motions fail because they do not acknowledge other allegations in the plaintiffs’ complaint, and that in any event dismissal of their claims at this juncture, prior to discovery, would be premature. The Court has not yet ruled on the insurers’ motion.
Turning back to Indiana, given the similarity between the two cases, the defendants in Indiana are likely to file a motion similar to the motion filed in Florida, seeking to have that case dismissed as well. As we move into the summer, both matters are now “cases to watch” for the auto insurance industry. Stay tuned.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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