Court Rejects Class Action on GEICO Insurance Fraud - BodyShop Business
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Court Rejects Class Action on GEICO Insurance Fraud

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The 7th Circuit Court in Chicago dismissed a man’s prospective class action that accused GEICO of omitting necessary repairs from its collision-damage estimates because he donated his car to charity after the crash instead of choosing to fix it, Courthouse News reported. The ruling supported the decision of an Illinois federal court that ruled in GEICO’s favor previously.

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Steven Greenberger, a professor at DePaul University College of Law, was involved in a crash in 2002 that damaged the bumper, steering box, suspension and lower body of his 1994 Acura. GEICO evaluated the damages and wrote Greenberger a check for $3,284.69. A body shop later estimated that the car would cost $4,938.65 to repair – about $1,150 more than the insurer estimated.

Greenberger deposited GEICO’s check and donated the car to charity without making any repairs. He then accused GEICO of "systematically [omitting] necessary repairs from its collision-damage estimates in violation of the promise to restore the policyholder’s vehicle to its preloss condition," Courthouse News reported.

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An Illinois federal court entered a summary judgment for GEICO, and the 7th Circuit upheld the ruling Jan. 10. In beginning its analysis, the appeals court concluded that the district court did not err in sidestepping the class-certification issue to rule on Circuit Judge Diane Sykes’ claims. The three-judge panel then upheld the lower court’s findings on the merits, finding that the claims were foreclosed by an Illinois Supreme Court decision, Avery v. State Farm Mutual Automobile Insurance Company.

"Avery established the common-sense position that a policyholder’s suit against his insurer for breach of its promise to restore his collision-damaged car to its preloss condition cannot succeed without an examination of his car," Sykes wrote.

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In trying to distinguish his suit, Greenberger argued that he wasn’t challenging the quality of the repair work, as in Avery, but the alleged practice of the insurer omitting repairs necessary to restore the vehicle to its preloss condition.

The court rejected the interpretation, finding that Avery "is not narrowly limited to cases alleging that an insurer’s estimate uses substandard repair parts."

Greenberger’s claims of widespread breach of contract fall under the Consumer Fraud Act since he failed to show evidence of "affirmative acts of misrepresentation multiplied over a prospective plaintiff class," Sykes explained.

The ruling also upheld the district court’s decisions to dismiss Sykes’ breach of contract and common-law fraud claims.

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