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One Billion Reasons to Be Honest

Regarding The Fifth District Appellate Court’s recent decision to uphold the State Farm verdict.

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There’s overwhelming evidence of State Farm’s calculated deception of its policyholders in a deliberate disregard of its express written promises contained in the policies issued,” wrote Judge Gordon E. Maag in the opinion regarding The Fifth District Appellate Court’s recent decision to uphold the State Farm verdict – in which the insurer was found guilty of consumer fraud and breach of contract for specifying the use of aftermarket crash parts.

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Soon after the news got out, cries of “Ya-Hoo!” were heard throughout the collision repair industry. (Ya-Hoo, along with many other choice words about State Farm, some of which I can’t put in print. But you get the point.)

As repairers from across the country contacted me about the ruling, however, I noticed that most were excited because they thought that maybe, just maybe, insurers would now stop writing for A/M crash parts. After all, State Farm being ordered to fork out more than $1 billion should be enough of a deterrent, right?

But is that what this trial was really about – or are we missing the point here?

Insurers say this whole A/M crash parts issue is about money: Shops want to use OE parts because they have a higher list price – why settle for a 20 percent markup on an A/M fender that costs you $100 when you can have a 25 percent markup on an OEM fender that costs you $175? It has nothing to do with the quality of A/M crash parts, say insurers. In fact, even if insurers stopped writing for A/M crash parts, they contend that many shops would continue using A/M parts – but would charge for OE. Repair costs would skyrocket, the OEMs would have a monopoly and insurers would be forced to pass these extra costs on to policyholders in the form of higher premiums.

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Repairers also say the issue is about money: Insurers are cheap and greedy, and by writing for A/M crash parts, they can line their own pockets and take their families on exotic vacations. Meanwhile, while they’re lounging under a palm tree somewhere, sipping a margarita, repairers are left to deal with crappy parts that don’t fit properly. A/M crash parts require more work – and you don’t make as much money off them. And, let’s face it, when you’ve got someone telling you to use them, it makes you want to use them even less (especially when that someone is an insurance company).

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But what if that someone were the vehicle owner? After all, that’s what this trial was really about: consumers having a choice. State Farm had been specifying A/M crash parts without the knowledge and consent of its policyholders. They weren’t given a choice.

In fact, it’s even more basic than that. This trial – and the entire parts issue – is about honesty.

It’s about disclosing everything to consumers and educating them so they can make an informed decision regarding parts. “We just put an A/M hood on a Grand Am for a customer,” said a shop owner a few days after the State Farm appeal decision. “This young girl signed the forms we require and understood exactly what she was getting.”

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And that’s the point – she understood what she was getting. And when she opted for A/M crash parts, the shop owner had her sign an authorization/hold-harmless agreement stating he wouldn’t be liable if the parts failed. She got what she wanted – and she also knew what she was getting.

If there’s a moral to this story – a story that will cost State Farm more than $1 billion – it’s this: It’s not about whether you – or some insurance company – wants to use A/M crash parts. It’s about whether the vehicle owner wants you to use them.

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