Louisiana readers may have heard that State Farm has been accused of engaging in unfair trade practices and violating antitrust laws by leading its consumers to utilize repair shops preferred by State Farm. These repair shops are more or less required to abide by insurance estimates regarding the cost of repairs. Naturally, insurance companies want to keep these costs as low as possible. The problem is that when insurance companies low-ball repair estimates, this forces repair shops to perform substandard repairs.
In many cases, low insurance estimates for repair forces repair shops to utilize after-market parts, which can end up voiding driver warranties and can lead to depreciation of the value of an insured’s vehicle. Another potential consequence of this approach is that repair shops can lose their reputation for doing quality work. The accusation against State Farm is that it engaged in just this kind of behavior toward its customers.
Being that State Farm writes over one third of automobile insurance policies in the state of Louisiana and brings in over $1 billion in annual earnings from premiums, the accusations are quite serious. For its part, State Farm has said that it seeks to keep repair costs reasonable for its customers, and that policyholders have the ability to choose which shops to use rather than being forced to use preferred shops. It will certainly be interesting to see how the litigation plays out.
For businesses, managing liabilities is an important and ongoing task, and one that requires significant resources. Failing to put a solid compliance program in place can lead to increased liabilities, though, so businesses that care about their future do what it takes to make sure they are meeting their legal obligations. And, when accusations of illegal business practices do arise, it is important to work with experienced counsel to protect the business’ interests.