U.S. Supreme Court refuses to hear Allstate appeal
Insurance companies can't own repair shops in Texas
The U.S. Supreme Court has refused to hear an appeal from Allstate Insurance Co. that asked the court to reconsider a lower court's decision that prohibits insurance companies from owning collision repair shops in Texas.
The appeal came after the U.S. Court of Appeals, 5th Circuit, New Orleans, affirmed the District Court ruling in the case of Allstate vs. the state of Texas and the Automotive Service Association (ASA), on Aug. 1, 2007. That ruling prevented Allstate from expanding its Sterling Autobody Centers business any further in the state of Texas. It did allow Allstate to communicate and market the benefits of its existing insurer-owned repair facilities to customers.
Allstate's appeal asked the nation's highest court to reverse the U.S. Court of Appeals decision that prohibits it from expanding its Sterling business. It said that House Bill (H.B.) 1131 was drafted by the state to protect a predominantly local industry from out-of-state competition.
The U.S. Supreme Court's decision means that Allstate can continue to own and operate its Sterling stores in Texas, but it may not add to its network by opening or acquiring new stores. Also, insurance companies that don't own auto body repair centers in Texas cannot open or acquire new facilities.
"We are very pleased," says Bob Redding, ASA's Washington D.C. representative who handles all federal and state legislation. "We hope other states take a close look at the Texas legislation and move forward by modeling their legislation after it."
California and Michigan are among several states that introduced bills or were considering legislation prohibiting insurance companies from owning repair facilities but pulled back until the case in Texas was resolved.
"We have no further legal options with respect to H.B. 1131," says Mike Siemienas, an Allstate spokesman. "While we are disappointed that the Supreme Court declined to hear Allstate's challenge to Texas H.B. 1131, we are continuing to provide exceptional service at the more than 60 Sterling shops nationwide, including the 15 we currently operate in Texas."
It has been nearly seven years since Allstate acquired Sterling and five years since H.B. 1131 was passed by the Texas legislature (see timeline in sidebar)."Clearly, there are other issues that have risen to the top of the priority list while states were waiting on this case to be exhausted and resolved," Redding says. "It would be in the long-term best interests of the collision repair industry if we had other states move on insurer-owned shop legislation. It's not the most talked about issue in the industry now, but in the mid- to long-term it could become important once again, and it's in the states' best interest to act now."
Since this case was tried in Texas, 49 other states remain fertile ground for insurance companies looking to purchase or acquire collision repair facilities. States that want to prevent that could draft legislation based on the Texas statute, which held up to the U.S. Supreme Court challenge.
