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What the Recent Wave of Lawsuits Means for Collision Repair

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Recent Lawsuits Point to a Possible Turning Point
The recent pileup of lawsuits between shop owners and insurance companies could prompt change in the collision repair industry. For that to happen, however, it requires more diligence and accountability from body shops.

“This is the tip of the iceberg.”

That’s what shop owner Leif Hansen kept reiterating while discussing the scope of the lawsuit he’s filed on behalf of  Leif’s Auto Collision Centers against GEICO.

But the question is whether this “iceberg”—aka the slew of recent lawsuits varying from John Eagle’s failure to follow OEM procedures, to Nick’s Garage accusing Nationwide and Progressive of breaching contracts, to Hansen’s own hub-and-spoke conspiracy theory—will be a catalyst for industry change.

Particularly: A change in insurer-repairer relationships.

No court case is the same, but with various insurance companies being involved in a large majority of them, shop owners are raising concerns of liability and unfair payment. And, as Erica Eversman (a collision repair attorney for Vehicle Information Services) noted in a previous article with FenderBender, the John Eagle case wasn’t just another lawsuit—it was a watershed moment; it was the stepping stone that could lead to massive, industry-wide action.

But for massive, industry-wide action to take place, it requires more diligence and accountability from collision repair shops, says Doug Irish, president and CEO of Accuracy Driven 4 and co-chair of insurer-repairer relations for the Collision Industry Conference (CIC). FenderBender spoke with both Hansen and Irish to evaluate the legal landscape and gauge whether change is, indeed, coming.

 

Want to hear more?

To hear more of Irish's thoughts on the industry-wide impact of these lawsuits, listen to CollisionCastFenderBender's official podcast.

 

Leif’s vs. GEICO

This isn’t the first time Hansen has seen GEICO (who did not respond to an interview request from FenderBender) in court. In a case over rates back in 2016, Hansen won and hoped that it would change things—unfortunately, it didn’t.

In November 2017, Hansen filed on behalf of his two-location shop operation (once 11 locations) against GEICO, alleging the insurance company contracted with a group of body shops in various Portland regions to set a ceiling for repair rates.

Hansen says that discounted rate is being forced on other shops that believe they are conforming to the “market rate.”

In his part of the market, Hansen says the going rate for mechanical work is about $110-120 an hour for domestic vehicles. He alleges that GEICO shops do the same mechanical work for $58 an hour.

“As the lawsuit explains, this is a classic hub-and-spoke conspiracy where a big industry giant bullies its way to higher profits,” says Steven Olson, attorney for Leif’s. “Many Oregonians will be surprised to learn they are driving unsafe cars as a direct result of GEICO’s backroom dealings with repair shops.”

But this push-and-pull with GEICO has been going on for a bit. In addition to Hansen’s pervious suit against GEICO, earlier this year the insurer filed against Leif’s for using “intimidation, delays and other abusive tactics to keep adjusters from inspecting vehicles.”

When asked how the lawsuit is affecting business, Hansen says that he has to send a daily email to the president of GEICO claims, listing the dozen-and-a-half cars that have been sitting in his shop waiting for them to be approved, with some cars being there for almost a month.

After recently discovering his shops have been insured with GEICO for personal auto insurance for quite some time now, Hansen also personally filed a class action on behalf of all the GEICO-insured across the nation for breach of contract, claiming that GEICO sold him a policy that does not pay out 100 percent when a claim is made.

 

More to the Puzzle

Irish believes it’s more complex than just one insurance company telling a shop what it can and can’t do.

“[These lawsuits] … are trying to work through some laws that I don’t necessarily agree apply to the issues that they have at hand,” Irish says.

There’s always going to be the same issue between insurers and repairers on whether or not they’re being paid properly, he says.  

“The challenge that I have is that whenever I see these lawsuits, it always claims that the insurance carrier is either prohibiting or preventing or demanding the shop fix a car improperly. I’ve always taken the position that the insurance companies don’t have anything to do with a repair,” Irish says. “They’re there to indemnify the owner of the vehicle to have the vehicle repaired, so the only control they have is how much they will pay for the repair and that’s what the shops need to negotiate: a fair price for fixing the car. “

The insurance company never touches the car, Irish says, so shops can’t claim after the fact that the insurance company didn’t let them repair it properly.

Not speaking to the Leif’s case in particular, Irish says that when it comes to cases similar to that of the John Eagle case, it’s fairly common for shop technicians, managers or owners to say they didn’t repair something because they weren’t being paid. His response to the shops he works with is quite simple:

“You need to fix the car properly regardless of whether or not you got paid for it up front.”

For actual change to happen, Irish says, it would depend on how many cases reach a jury verdict. If these cases keep getting settled beforehand, he says, it’s going to be very hard for any shop to claim that an insurance company is culpable in an improper repair.

 

Covering Your Bases

Ninety percent of the time, when a shop owner claims a insurance company prohibited a repair, Irish says the shop owner cannot provide documentation of it.

To avoid a he-said-she-said situation, whenever you discuss claims with the owner of the vehicle or the adjuster, Irish suggests you ask them to send you a follow-up email about the discussion.

Otherwise, send the other party a summary in writing of what you’ve discussed so you have documents to back up your case.

“Photos and documentation are more important than any telephone conversation you’re ever going to have,” he says.

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