Nationwide Lawsuit Against Insurance Industry for Forcing Body Shops to Use Junk Parts

I came across this interesting article on CNN.com regarding a massive class action lawsuit involving hundreds of auto bodys from nearly every State in the Country against the insurance industry and major insurance companies.  The complaint at the heart of the lawsuit concerns the use of old and/or junk parts in the repair of vehicles and steering by the insurance company to “preferred” body shops.  The body shops along with Attorney Generals representing several States have initiated this action to end both of these practices by the insurance company which they feel are unsafe and deceptive.

LKQ / USED PARTS IN THE REPAIR OF A VEHICLE

The term LKQ stands for Like Kind and Quality.  It means a replacement part that came off of a previously totaled or salvaged vehicle.  Massive salvage yards are in every corner of the country with thousands of vehicles that were deemed total losses following an auto accident.  These salvage yards remove every piece of a vehicle and post them for sale.  When a body shop or insurance company calls the salvage yard looking for a 2004 Camry headlight, they will very likely have one in stock.  Then that used headlight goes into your repaired 2004 Camry.  The insurance companies claim that they do not owe for a brand new Toyota headlight because the car being fixed is not new.  In other words, the insurance companies justify this practice by saying “we replaced a ten year old Camry headlight with another ten year old Camry headlight.”  There may be some fair rationale to that argument.  This lawsuit alleges, however, that used parts in a salvage yard are not always safe or in the best condition.  For that reason, forcing body shops to use such parts can potentially create a hazardous situation.  And lets be honest, if a tree falls on your house and you make a homeowners claim, would you expect your contractor to use 30 year old wood while re-constructing your house or brand new materials?  Junk parts are just that – junk.

STEERING TO PREFERRED BODY SHOPS

If you report a car accident to an insurance company one of the first things that you may hear is – “we’ll be happy to refer you to a body shop for your repairs which will be guaranteed for life.”  Sounds great!  One of the most difficult insurance companies in the State, Progressive, even advertises their repair centers on TV.  The idea is just drop off your car and we’ll give it back to you with a lifetime warranty.  You’ll have no idea who fixed your car or what parts they used, but they hope you won’t mind this trickery since they offer a lifetime warranty.  The insurance companies want you to use their preferred shops because they have a mutually beneficial agreement with them.  We guarantee that we will send you business each month and in return we expect that you will write affordable estimates and use the parts the insurance companies want them to use.  This means, for example, using junk parts or repairing a door in 1 hour instead of 3 hours.  The fear is that this creates unsafe or sloppy repairs.  This is a very important practice for the insurance companies and adjusters are watched for how many cars they are able to steer to these preferred shops.

I do not write this under the assumption that preferred shops are bad or dangerous in any way.  In fact, many terrific body shops are on preferred lists with insurance companies.  It is important, however, that the vehicle owner understand who is repairing the car and how is the vehicle going to be repaired.

Also, Rhode Island, does offer vehicle owners some protections.  Depending on the age and mileage of your car (under 3 years, 36,000) miles, insurance companies can not use certain alternative replacement parts.  They will have to use genuine Toyota or Ford parts.  That said, if your car has over 36k miles the insurance companies are free to use junk parts or aftermarket parts (generic parts made by companies other than the vehicle manufacturer).  I am curious how this lawsuit will play out and if it will effect the insurance industry practice in the future.

My office handles hundreds of car accidents each year and we always help our clients with the property damage claim as well as the personal injury claim.  If you have questions or concerns about the damage to your vehicle following an auto accident and the repairs that it will receive, please do not hesitate to contact our office.