Running a Shop Finance Law Operations Estimating Labor Rate

Ct. Supreme Court Rules Against Repairers, Overturns $34.8 Million in Damages

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July 14, 2015—The Connecticut Supreme Court ruled on Monday in favor of The Hartford in the  class-action case Artie’s Auto Body Inc. et. Al. v. The Hartford Fire Insurance Company that had previously awarded nearly $35 million in damages to area body shops.

A number of auto body repair shops in Connecticut had originally challenged the insurer’s practice of steering work to favored shops, according to a report by Kenneth R. Gosselin of the Hartford Courant. In 2009, a Superior Court jury awarded $14.77 million in compensatory damages and, later, a judge ordered another $20 million in punitive damages.

Monday’s ruling reverses both the previous court rulings and the monetary damages.

"We fought hard for more than 1,000 small businesses," said David Slossberg, an attorney for the Auto Body Association of Connecticut, according to the Hartford Courant report. "We had a strong belief in this case on behalf of these small businesses. A jury agreed with us and trial judge, then we receive this decision."

No comment was made on the possibility of any additional action.

The lawsuit focused on the association’s belief that The Hartford have violated The Connecticut Unfair Trade Practices Act (CUPTA) by requiring appraisers to use hourly labor rates that did not accurately reflect the true value of the services when estimating the cost of repairs.

"[I]t would be patently unreasonable, and result in an inherently contradictory regulatory scheme, for us to conclude both the defendant is lawfully permitted to determine the hourly rate that it is willing to pay for auto body repairs and that the defendant's appraisers are ethically required to disregard the determination when negotiating on the defendant's behalf," said the Supreme Court.

The Supreme Court also said it could not not discern why negotiations "would ever owe a duty of impartiality to the auto shops with whom they are negotiating. Under our regulatory provisions, those businesses are deemed to be capable of representing their own interests, and certainly are under no obligation to accept insurance related work that is not sufficiently remunerative," according to the Hartford Courant.

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