An Indiana trade association of auto repair shops, together
with a group of its members, have filed an antitrust action against over twenty
five auto insurers in Indiana, alleging that the insurers’ direct repair
programs violate the antitrust laws by artificially depressing repair rates for
the services plaintiffs offer and by “steering” insureds away from plaintiffs’
businesses. The action, Indiana AutoBody
Association v. State Farm Mutual Automobile Insurance, was commenced on
April 2 in the United States District Court for the Southern District of
Indiana. Notably, the case follows a similar action filed by a collection of
Florida repair shops against many of the same insurers only two months ago,
including State Farm, entitled A & E
Auto Body v. 21st Century Centennial Insurance.
As in the Florida case, the Indiana plaintiffs allege that
State Farm’s vendor agreement requires shops that desire to participate in its
direct repair program to accept the “market rate” for such services, and that
State Farm calculates the “market rate” in a manner that keeps them
artificially low and not representative of the “true” market rate. Plaintiffs
also allege that the other insurer defendants have all advised plaintiffs that
they will pay no more than State Farm pays for their services. As in the Florida
case, plaintiffs allege that the defendants’ conduct constitutes a conspiracy
to restrain their repair rates, in violation of Section 1 of the Sherman Act,
and that the alleged “steering” conduct constitutes an unlawful “group boycott”
of plaintiffs’ services. The defendant insurers have not yet responded to
plaintiffs’ complaint.
Meanwhile, in the Florida action, on March 26 the insurers
filed a motion seeking to have plaintiffs’ antitrust claims dismissed for
failure to state a claim. They maintain that the Florida shops have not
adequately alleged any anticompetitive agreement, and have at most alleged “consciously
parallel” conduct by the defendants, insufficient to plead conspiracy under the
Supreme Court’s Twombly decision.
Specifically, the insurers assert that “plaintiffs’ core allegation is simply
the self-defeating generalization that after State Farm, the purported market
leader, ‘unilaterally’ adopted a price structure for labor rates, the other
defendants asked plaintiffs to give them the same prices given to State Farm.
Following a price leader, however, does not suffice to prove the existence of
agreement.” As to plaintiffs’ boycott claim, the insurers maintain that “not
only have [plaintiffs] failed properly to allege concerted action, but do not
allege that any defendant cut off business from any plaintiff or refused to
reimburse insureds who patronized a plaintiff, much less that all defendants
refused to deal with any particular body shop.”
Plaintiffs filed a response to the defendants’ motion on
April 17, contending that defendants’ motions fail because they do not
acknowledge other allegations in the plaintiffs’ complaint, and that in any
event dismissal of their claims at this juncture, prior to discovery, would be
premature. The Court has not yet ruled on the insurers’ motion.
Turning back to Indiana, given the similarity between the
two cases, the defendants in Indiana are likely to file a motion similar to the
motion filed in Florida, seeking to have that case dismissed as well. As we
move into the summer, both matters are now “cases to watch” for the auto
insurance industry. Stay tuned.
