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After an accident, you can assume that your vehicle will be repaired using replacement parts from the manufacturer. But in many cases, you are wrong. the insurance claim process is more complicated.

Working under insurance company agreements, auto shops sometimes use recycled or aftermarket parts to make repair – and therefore insurance claim – cheaper. It’s a practice that’s been around for decades, but is now the subject of a lawsuit pitting hundreds of repair shops in 36 states against dozens of auto insurance companies, including giants State Farm, Geico and Progressive.

In the litigation, recently consolidated in federal court in Florida, store owners claim some of the recycled and aftermarket parts are substandard and put consumers at risk.

They also accuse insurers like Allstate of illegally “running” business elsewhere if the store does not purchase parts from the supplier of the insurer’s choice and / or repair the vehicle as the insurer sees fit – even if it’s not the best way to get the job done.

“Is there a time for used parts? Yes there are, especially if a consumer wants to save money on a personal repair, ”says Tony Passwater, executive director of the Indiana Auto Body Association, one of the plaintiffs in the lawsuit. “But that’s not what’s happening. The insurer tells him every time “you have to use this, or that’s all we’ll pay”. “

This kind of interference, says Passwater, is wrong and goes beyond legal limits.

Insurers say nothing is inappropriate

The insurers named as defendants have denied any irregularities. They say they’re only trying to keep repair costs – and drivers’ insurance premiums down.

Michael Barry, vice president of media relations for the Insurance Information Institute, an industry-funded group, says it’s not profitable for insurers to encourage quick or low-quality repairs .

“I don’t know why an insurer would want to put a dangerous car back on the road,” he says. “They always insure the car and all the passengers they have.”

Auto insurers are accused of violating antitrust laws, of having agreements with preferred body shops to keep prices low, and of dictating how repairs are done. Workshop owners also say that in some cases they are forced to use substandard replacement parts.

Billions of dollars in damages are at stake. Stores also want insurance companies to change the way they operate, said a representative for John Eaves Jr., the senior lawyer representing body shops. .

the 92-page complaint claims auto insurance companies “have succeeded in creating a ‘market’ system that rewards body shops that cut corners to increase their profits and punish body shops that don’t want to compromise on quality or safety of the repair of the American consumer. “

Put consumers at risk?

Insurance industry practices have also caught the attention of regulators, including Mississippi Attorney General Jim Hood, who joined U.S. Senator Richard Blumenthal, D-Conn., In asking the Justice Department to initiate an investigation into the allegations.

In particular, Blumenthal wants to know whether insurers are breaking a consent decree signed in 1963 intended to prevent auto insurers and repair shops from “corroborating and deceiving customers.”

“Contrary to what insurers may have consumers believe, insurers’ preferred repair shops don’t necessarily equate to quality repairs,” Blumenthal wrote in a letter to Attorney General Eric Holder in March. “It seems to be common knowledge among auto repair shops that the best way to land a coveted spot on an insurer’s preferred list is not necessarily to provide consistent, quality service, but to agree to bill. lower than market labor rates and using cheaper, salvaged, used or even counterfeit parts of questionable quality and safety. “

Louisiana Attorney General Buddy Caldwell, who sued State Farm over similar allegations in his state last year, said motorists could drive repaired vehicles that are not in working order. And that, he said, could be a matter of life and death.

“In some cases, we’ve found that these parts are nothing more than used landfill parts. In others, we have found them to be foreign spare parts of questionable quality, ”Caldwell says. “Auto repair is not an industry where you can cut corners to save a little money.”

For example, in the lawsuit, lawyers for repair shops allege that some aftermarket windshields are thinner than the originals and are not designed to fit a particular vehicle. In the event of an accident, there is a greater chance that these windshields will “break rather than provide rollover protection or simply come off.”

In another example, tests by Ford showed that non-branded aftermarket parts, including radiator brackets and bumper beams, might not withstand the force of an accident as well as the parts. original, according to Consumer Reports. Replacement panels that don’t fit well could also slow the rate at which an airbag inflates, Passwater says.

“Most of your credible stores will go ahead and do what’s necessary and won’t even get paid by the insurance companies,” he says. “It puts a strain on stores. They do and are not paid for it.

Insurers defend policies

State Farm and other insurers named in the lawsuit denied the management accusations and defended their “direct repair” programs for body shops as a way to keep repair costs and premiums under control. The programs, used by most insurers, have different names but tend to work the same way. Insurers sign agreements with auto garages, promising to recommend them to policyholders. In return, workshops must follow certain cost and repair guidelines.

Insurers love aftermarket parts for a big reason: They typically cost 26% to 50% less than original manufacturer parts, according to the Insurance Information Institute. The Property Casualty Insurers Association of America, a trade group, says their use saves consumers about $ 1.5 billion in insurance costs each year, preventing vehicle damage premiums from rising by. about 3.6%.

“We are looking to make sure that competition is preserved and that insurers have the flexibility to use (spare) parts,” says Bob Passmore, assistant vice president of personal lines insurance policy at PCIAA.

When it comes to safety, aftermarket parts are strictly exterior parts, like the bumpers and side panels, that have “nothing to do with how the vehicle operates,” Barry explains. “You won’t get a generic part if you’re talking about a transmission.”

Most states have laws relating to the use of aftermarket parts. In Indiana, for example, policyholders have the right to select the type of parts they wish to use on their vehicle for five years after the year of manufacture. Other states require a parts disclosure statement from body shops, although Passwater says it is often “on the last page in the fine print.”

The issue of spare parts is one that has been contested several times before – with the courts sometimes ruling on the side of insurers and sometimes on the side of repair shops and / or consumers. The 1963 consent decree came about as a result of a scuffle between body shops and insurers over many of the same issues in the current lawsuit.

The bottom line

In the latest amended Florida complaint, repair shop lawyers agree that not all direct repair programs are bad and point out that most employ “honest, hardworking and professional bodybuilders.”

It’s the way these programs are used by insurers, they say, that needs to change.

A concrete example? Express Paint and Body, a repair shop based in Lakeland, Florida. Express had been part of Geico’s direct repair program for years, according to the lawsuit, but left in March 2013. Geico “immediately” started bashing Express to current and potential customers, alleging the shop was overloaded and taking too much. time to make repairs, among other things, supports the costume.

The impact was swift – and brutal. Revenue from repairs for Geico customers fell from $ 205,077 in March 2013 to just $ 29,712 the following month, according to the lawsuit. In 2014, the shop only made $ 85,468 from Geico repairs.

“The gist of the litigation is that the only person who should be making decisions in consultation with the consumer or the vehicle owner is the collision repair professional,” Passwater says. Insurance companies, he says, should stay out of this.

Ultimately, it’s important for consumers to know that they can take their vehicle to any store they want, not just their insurance company’s network. And you have the right to ask questions about the coins used – and to ask for something different, although you may end up paying out of pocket.

Image via iStock.

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