California Court Sides with Insurers in Labor Rate Survey Case - BodyShop Business

California Court Sides with Insurers in Labor Rate Survey Case

A California shop owner recently lost his appellate court case against Progressive and Allstate, which he accused of engaging in unlawful and unfair business practices by paying “artificially low” labor rates based on surveys including DRP shops. In the decision filed Monday, the court upheld a lower court’s decision that the insurers were operating within the law and part of a “well-functioning market” for collision repairs that benefits consumers.

In the lawsuit, John Webster, who operates a shop in Gilroy, Calif., claimed that the insurers suppressed labor rates through the use of “unlawful and unfair” surveys that included rates charged by DRP shops that provided volume discounts to Allstate and Progressive. The court concluded that Webster’s “desire to charge more than the market will bear does not transform [the insurers’] lawful formation of service contracts into a forbidden conspiracy to destroy competition.”

The court pointed out that although some states forbid including DRP rates in labor rate surveys, California does not. The decision stated that the insurers’ alleged conduct “does not constitute a violation of the letter or spirit of any constitutional, statutory or regulatory provision.”

The court also noted that Webster is not a direct competitor with the insurers, so it would be impossible for them to unfairly compete with him. Further, the court stated that Progressive’s and Allstate’s business practices aren’t harmful to consumers but beneficial because consumers are charged a lower rate for repairs.

Finally, the court was skeptical that DRP shops would conspire with the insurers to lower labor rates. The appellate court quoted the original decision in the case, stating:

It is difficult to imagine that numerous independent auto body shops would conspire with [Progressive and Allstate] for the purpose of depressing auto body rates paid to those same auto body shops. [Webster’s] allegations reveal only a well-functioning market for auto body repair.

More information:

Editor’s Notes: All I Want for Xmas Is a DRP

• Appraiser Targets Insurers, DRP Shops in Book on Consumer Fraud

• Allstate Fined for Interfering with Repair Process in Rhode Island

• Independent Auto Body Shops Sue Progressive

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