Two class-action lawsuits with major implications for body shops have been filed in California against six major insurers, challenging the basis upon which insurers require policyholders to pay out-of-pocket for choosing body shops that charge more than what the insurer claims is the prevailing labor rate. The suit, Barbara Hinman v. California State Insurance Association Inter-Insurance Bureau, was filed in Los Angeles Superior Court by John Quisenberry and Robert J. Drexler of the Quisenberry Law Firm, Los Angeles. The suit claims that Hinman exercised her right to choose a body shop and the shop charged $88.00 per hour labor. Her insurer refused to pay more than what it claimed was the prevailing rate of $68.00. Hinman paid the difference out of pocket. The suit claims that this treatment is typical of other "class insureds" - consumers who will be eligible to participate in the suit, should it be certified as a class-action by the court.
In a prepared statement, the law firm summarized their reason for filing the suit:
"We have filed suits on behalf of the policyholders who have been told by their insurance companies that they have to pay out of their own pocket for part of the costs to repair their car. The insurance companies say they don't have to pay the hourly labor rates charged by the body shops. The body shops say their rates are reasonable, and the insurance companies have no reasonable basis for negotiating a lower rate. The consumers, the policyholders, are caught in the middle.
The insurance commissioner has issued regulations which allow an insurer to pay a lower rate if that rate is justified by means of a valid survey filed by the insurer with the Department of Insurance. In the suits we have filed, the insurance companies have not filed such surveys. In these class action lawsuits, the policyholders are asking the court to order the insurance companies to reimburse the policy holders for the amounts they've had to pay out of their own pockets to have their vehicles repaired.
The insurance companies whose practices are being challenged are: USAA, AAA, Allstate, Progressive, Geico and Farmers."
This suit was filed on Nov. 27, 2006.