Louisiana’s Attorney General leads the fight against direct repair

The battle against direct repair ascended to a new level in August of 2014 when Louisiana Attorney General Buddy Caldwell filed a lawsuit against State Farm claiming that the insurance company was violating the Louisiana Unfair Trade Practices Act. Caldwell’s suit accuses State Farm of utilizing a number of practices that violate a 1963 consent decree from then U.S. Attorney General Robert Kennedy that sought to prevent insurance companies from colluding with appraisers and repair shops to sacrifice quality repairs for the cheapest parts available.

Direct repair has long been a problem that consumers can avoid when properly informed. If someone knows going into an accident that they can have their car taken to the repair shop of their choice, they can avoid the problems that follow direct repair. But, it doesn’t always work out according to plan and more often than not, policy holders take their vehicle where their insurance company steers them.

The consent decree itself was brought about by a class action lawsuit that was settled out of court shortly after being drafted and signed by 265 insurance companies. In it, the decree spelled out what it called a conspiracy that had been roughly twenty years in the making. The conspiracy was known as “The Plan” and involved insurers finding and paying off a handful of appraisers in every city to control the cost of assessed damage and limit their liability in handling claims. Further, “The Plan” called for shops to “repair rather than replace” damaged parts, and allowed for the sponsored appraisers “to arrange for a number of repair shops to agree to make automobile material damage repairs based upon his estimate without the repair shop first examining the damaged automobile.”

By signing the consent decree, insurers were not admitting guilt, but were required to cancel and abandon any independent appraisal plan. The consent decree also stated that moving forward, their practices would avoid "fixing, establishing, maintaining or otherwise controlling the prices to be paid for the appraisal of damage, or to be charged by shops for repair."

In the time since the consent decree, practices in the insurance industry consistently shifted back to the practices that brought the initial class action lawsuit. In fact, in July of 2000, bodyshopbusiness.com asked if the consent decree was “enforceable or forgettable?” While it was hailed as monumental at the time of its signing, the 1963 consent decree would go on to be referred to as “little known” and “obscure” in different body repair publications.

However, in the last few years, a number of states have seen a rise in the number of complaints over direct repair, steering, and the handling of auto accidents in general. This has brought the 1963 consent decree back to the forefront of the auto insurance industry. So much so that in August of 2014 Louisiana Attorney General Buddy Caldwell filed suit against State Farm.

While Louisiana's Attorney General leads the fight against direct repair in his state, Caldwell is not the only one filing suit against insurance companies. When contacted about the status of the suit, Caldwell's public information office said, “The State Farm case was consolidated on December 12 with the multidistrict litigation proceeding in the Middle District of Florida.” 

The consolidation of the lawsuits could prove to expedite a decision, but could also dilute the ramifications of that decision. Which is why Caldwell is trying to separate his suit and bring it back to Louisiana. According to his office, “Louisiana has filed a motion addressing the lack of federal jurisdiction over its claims. We believe the case will be remanded back to state court.”

Currently, the consolidated case in Florida is in the discovery phase and Caldwell’s request is being considered.