Mississippi Attorney General Jim Hood has begun an investigation of insurers that may be involved in “steering” policyholders to certain body shops.
The practice, which is illegal, coerces body shops to conduct repairs with inferior aftermarket or remanufactured parts to reduce costs in favor of the insurer.
Hood sent identical letters to 12 insurance companies on July 9, with a deadline to respond a week later. He said in the letter that if he did not receive a response by the deadline “I will assume your company is not interested in reaching an agreement and will proceed accordingly.”
All responded by the deadline. They are: Alfa Insurance, Allstate, Direct General, CT Corporation System of Mississippi, Mississippi Farm Bureau, Nationwide, Progressive, Safeco, Shelter, Travelers and USAA.
The letter was sent to the Butler Snow law firm, which is representing State Farm. Justin Tomczak, State Farm spokesman, said in an email on Tuesday that “in early July, Attorney General Hood requested a meeting with State Farm and we immediately notified him that we would meet with him as his schedule allowed. Attorney General Hood’s office recently offered two dates for such a meeting and we are in the midst of finalizing arrangements.”
Hood’s office declined to tell the Mississippi Business Journal which companies agreed to meet with him, saying that such information is exempt from the Mississippi Open Records Act.
An email from Hood’s office said: “These are civil investigative records that are protected. We don’t think the insurance companies will be as open if their responses are made public during our investigation. The records will not be public until our inquiry is complete.”
Hood singled out State Farm in a March 13 letter to then-U.S. Attorney General Eric Holder, asking the Department of Justice to investigate the matter.
Hood made reference to State Farm’s Parts Trader program, “an online system that State Farm requires its Select Service shops to use for obtaining parts program. “Body shops have reported to my office that they are pressured into accepting bid from Parts Trader for after-market or re-manufactured parts that are unsafe and far below the quality of the original equipment manufacturer.”
State Farm said in an earlier statement that “our customers choose where their vehicles are going to be repaired. We provide information about our Select Service program while at the same time making it clear they can select which shops will do the work.”
Hood told Holder that “there are also allegations that the insurance companies are artificially fixing auto body labor rates to reduce the cost of repair.”
Hood noted that a consent decree reached in 1963 between the Department of Justice and the Association of Casualty and Surety Cos. prohibited such practices, which, if proven, are in violation of the Sherman Antitrust Act.
The department did not commit to an investigation when it wrote Hood in a July 13 letter, saying only that it “will continue to consider complaints it may receive and determine whether the facts warrant further investigation.”
Lawsuits arising against insurers in numerous states are being tried in the U.S. District Court for Middle Florida because of their similarities.
A Mississippi case, Capitol Body Shop et al v. State Farm et al, includes John Mosley, owner of Clinton Body Shop.
Mosley had campaigned to become insurance commissioner on, among other things, stricter language in state law and guidelines for body shops. He lost to incumbent Mike Chaney.