Insurance Companies Sued For Forcing Garages To Make Shoddy Repairs With Cheap Parts

February 18, 2015

Americans are wary of insurance companies. In fact, a recent Gallup poll about trustworthy professions put insurance agents near the bottom of the "trusted" list, besting U.S. Senators, Representatives, and, sadly, car salespeople.

A new series of lawsuits against insurers isn't going to do the industry any favors. According to CNN, over 500 repair shops in 36 states are now jointly suing major insurance companies. The shops claim that they've been coerced to use poorly made parts and shoddy repair techniques when fixing vehicles damaged in auto accidents. 

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Specifically, plaintiffs claim that they're being pressured to use refurbished or aftermarket parts to repair vehicles rather than those from automakers. They also allege that they're being asked to cut corners during the repair process.

Those that don't comply with insurance company demands say that they're being removed from lists of preferred shops that are provided to vehicle owners in need of repairs. While owners can choose to take their cars to companies that aren't on those lists, being removed from the lists likely causes a drop in business to those shops.

What's worse -- at least for insurers -- is that attorneys general across the country are filing similar lawsuits of their own. State officials say that policies like those alleged by repair shops not only hurt mom-and-pop businesses, but they also pose a safety hazard to vehicle passengers and others on the road when and if shoddy repairs fail to live up to standards.

Insurance companies have generally refused to talk about the various lawsuits. However, CNN did speak to the National Association of Mutual Insurance Companies, a trade association and lobbying group for insurance companies. A spokesperson for NAMIC denied all charges, saying that it wouldn't make sense for insurers to insist on shoddy repairs, because they'd just have to pay for customers to return to shops and have repairs done again. He also denied that customers were being forcibly steered to some shops instead of others.

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All these cases are ongoing, and to date, none has made its way to trial. Not knowing the specifics of the complaints, it's hard to say how the cases will proceed, especially the individual suits from attorneys general in states like Louisiana and Mississippi. 

However, we do know that the health insurance industry has undergone some massive changes over the past couple of years -- changes meant to be more friendly to consumers. It wouldn't be terribly surprising to see the auto insurance industry follow suit. Stay tuned.  

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