GEICO orchestrated a complex and widespread scheme with auto body shops to keep its costs low by cutting corners and making unsafe repairs, according to an antitrust lawsuit filed on Nov. 15, 2017 in federal court. The lawsuit was brought by Leif’s Auto Collision Centers, one of the largest independent collision repair companies in the U.S.
The court filings allege GEICO engaged in a conspiracy beginning no later than 2014 with a small group of body shops in Portland to provide incomplete repairs in return for a promise of consistent referrals. The purpose of these agreements is to maximize GEICO’s profits by causing its automobile policyholders to accept unsafe and incomplete repairs, according to the lawsuit filed in United States District Court.
“As the lawsuit explains, this is a classic hub-and-spoke conspiracy where a big industry giant bullies its way to higher profits,” said Steven Olson, attorney for Leif’s. “Many Oregonians will be surprised to learn that they are driving unsafe cars as a direct result of GEICO’s backroom dealings with repair shops.”
The complaint lays out a complicated scheme by which GEICO allegedly entered into price-fixing agreements with body shops through its Auto Repair Xpress (ARX) program. Based on promises of consistent referrals and lockstep cooperation by all member shops in the ARX program, GEICO allegedly enticed shops to sign written agreements stating they would charge less than fixed maximum prices for parts and labor. Once shops entered the program, GEICO allegedly would then pressure them to reduce costs by making incomplete or unsafe repairs.
As an example, the lawsuit states that GEICO summarily refuses to pay claimants for pre- and post-repair scans that are recommended by manufacturers including Nissan, Honda, Toyota and General Motors.
“GEICO is just the tip of the iceberg,” said Leif Hansen, owner of Leif’s Auto Collision Centers. “It’s an open secret that the insurance industry is putting thousands of unsafe vehicles back on the roads every year. Vehicles we see coming to us for post-repair inspections that were fixed under GEICO’s claims scheme typically have major problems. My hope is that this lawsuit will save lives by keeping those unsafe vehicles off the streets.”
In 1994, Hansen uncovered a scheme where body shops were giving kickbacks to insurance companies in exchange for referrals. This inspired him to go to the Oregon Legislature to protect consumers from illegal steering practices. He was instrumental in passing Senate Bill 523, which requires insurance companies in Oregon to inform consumers that they have the legal right to choose where their vehicle is repaired. Under the law, insurance companies must inform consumers of their rights prior to making a recommendation for a repair provider. The law also prevents insurance companies from limiting reimbursement when consumers choose a repair provider without a referral from the insurance company.