"In some cases, we've found that these parts are nothing more than used junk yard parts. In others, we've found them to be foreign knock-off parts of questionable quality."
AG Buddy Caldwell
Unsafe business practices. Junk yard parts. Knock-off parts of questionable quality. Buddy Caldwell has some strong words for State Farm Insurance.
Louisiana's attorney general announced in a press conference Tuesday that he has filed a lawsuit alleging the Bloomington, Ill.-based nationwide insurer has engaged in a pattern of unfair and fraudulent business practices to control the auto repair industry. Caldwell says State Farm's tactics result in unsafe repairs on vehicles without the consent of the policy holder; he says the lawsuit aims to change that culture.
"State Farm has created a culture of unsafe business practices in which consumer vehicle repairs are performed with cost-savings as the primary goal rather than safety and reliability," Caldwell says in the statement.
The suit, filed in Louisiana's 19th Judicial District Court, alleges State Farm violated Louisiana's Unfair Trade Practices Act and Monopolies Law by using scare tactics to steer Louisiana consumers to State Farm's preferred repair shops and forcing shops to perform vehicle repairs cheaply and quickly, rather than in accordance with consumer safety and vehicle manufacturer performance standards.
The lawsuit claims that State Farm steers consumers to direct repair providers that have signed agreements with the insurance company. As part of the terms of the agreement, those repair shops must comply with the standards for repair laid out by State Farm. The insurance company, not the repair shop, dictates how long the repair should take, what types of repairs are made and the quality of replacement parts.
In many cases, the repairs are completed with sub-standard parts, he says.
"In some cases, we've found that these parts are nothing more than used junk yard parts. In others, we've found them to be foreign knock-off parts of questionable quality," says Caldwell. "Auto repair is not an industry where you can cut corners to save a little money," he said.
Caldwell says the suit aims to change the culture of unsafe business practices led by State Farm in the auto insurance and repair industry. State Farm currently holds the largest share of auto insurance policies in Louisiana. In 2012, State Farm wrote one-third of all auto insurance policies in the state totaling more than $1 billion in premiums.
"Each month Louisiana consumers give their hard earned money to State Farm under the assumption that the insurer will take care of them if an accident occurs. This simply isn't happening. Quite frankly, State Farm has been there for State Farm, not the Louisiana consumer," Caldwell says.
According to the Times-Picayune Caldwell said at a press conference Tuesday that he is suing for restitution and civil penalties for each violation:
"This could be a substantial amount of money to hold State Farm responsible for its conduct," he said.
State Farm is the only insurance company named as a defendant, Caldwell said, because the company has a third of the casualty business. But since his office began investigating the practices in March, they've uncovered "hundreds of violations, and they include not just State Farm but the industry itself."
State Farm Public Affairs Director Phil Supple issued the following statement to the T-P in response to the lawsuit:
"The description in this lawsuit is not in line with State Farm's mission to serve the needs of its customers, and our long, proud history of achievements in advancing vehicle safety. We are reviewing the lawsuit and will have more to share soon."
To obtain a full copy of the lawsuit, click here.