Oregon MSO Files Lawsuit Against GEICO
Nov. 15, 2017— Leif’s Auto Collision Centers, a two-shop network (formerly 11 shops) in Oregon, has filed an antitrust lawsuit against GEICO for "cutting corners and making unsafe repairs."
The court filings allege GEICO engaged in a conspiracy beginning no later than 2014 with a small group of auto body shops in Portland to provide incomplete repairs in return for a promise of consistent referrals.
"The purpose of these agreements is to maximize GEICO’s profits by causing its automobile policyholders to accept unsafe and incomplete repairs," according to the lawsuit filed in United States District Court.
“As the lawsuit explains, this is a classic hub-and-spoke conspiracy where a big industry giant bullies its way to higher profits,” said Steven Olson, attorney for Leif’s. “Many Oregonians will be surprised to learn that they are driving unsafe cars as a direct result of GEICO’s backroom dealings with repair shops.”
Leif's has a history with lawsuits involving insurance companies. In fact, just earlier this year, GEICO issued a suit against Leif's for using "intimidation, delays and other abusive tactics to keep adjusters from inspecting vehicles."
Leif's contentious history with insurance companies can even be traced back to 2012, when the MSO launched an consumer education effort called "Ask Leif" that connected consumers with insurance company liaisons and the Oregon Insurance Commissioner to help settle disputed claims in a fair and equitable manner.
“Insurance companies go to any length necessary to keep their multi-billion [dollar] business rolling along, including forcing auto body shops to cut corners and undermine their customers by offering them less than they’re owed," Leif's said at the time. "While this is going on, insurance commissioners across the country are failing consumers as they stand idly by while top tier companies continue to pocket record profits. At Leif’s, we’ve seen a growing trend of customers seeking information—and answers—to questions involving shoddy repairs, cutting corners, totaling of cars and more.”
Leif's recent complaint against GEICO alleges a complicated scheme by which GEICO entered into price-fixing agreements with auto repair shops through its Auto Repair Xpress (ARX) program.
"Based on promises of consistent referrals and lockstep cooperation by all member shops in the ARX program, GEICO enticed shops to sign written agreements stating they would charge less than fixed maximum prices for parts and labor," Leif's claimed. "Once shops entered the program, GEICO would then pressure them to reduce costs by making incomplete or unsafe repairs.
As an example, the lawsuit states that GEICO summarily refuses to pay claimants for pre- and post-collision electronic vehicle scans that are recommended by manufacturers including Nissan, Honda, Toyota and General Motors. The scans test for diagnostic trouble codes that identify potential damage to ensure that the airbag, steering and accident avoidance systems are reset and working properly.
“GEICO is just the tip of the iceberg,” said Leif Hansen, owner of Leif’s Auto Collision Centers. “It’s an open secret that the insurance industry is putting thousands of unsafe vehicles back on the roads every year. Vehicles we see coming to us for post-repair inspections that were fixed under GEICO’s claims scheme typically have major problems. My hope is that this lawsuit will save lives by keeping those unsafe vehicles off the streets.”