AAI Hails Ohio Court’s Denial of Class-Action Status for Aftermarket Parts Case

February 3, 2003

The Alliance of American Insurers (AAI) said that a recent decision by the Court of Appeals of Ohio to deny class certification in a case challenging the use of non-original equipment manufacturer (non-OEM) parts is a reasonable ruling that brings an element of common sense to the aftermarket parts debate and the hearing of class actions.

In affirming a trial court’s ruling in Augustus v. Progressive Corp. (Ohio App. Jan. 23, 2003) the justices said they denied the request
for class-action status because individual questions of fact outweighed common questions of fact. The court also ruled that it would be “inconceivable” that an automobile is not returned to its “pre-loss condition” because a non-OEM part is used in making a repair.

“Granting of this class action would have further coerced insurers
from using aftermarket parts, just as Avery v. State Farm, did in
1999,” Kirk Hansen, Alliance director of claims, said. “Too often the courts let multi-state class actions usurp state regulation of insurance, permitting judges to become de facto regulators of insurance industry practices.”

Hansen also noted that the court’s reasoning strengthens the
insurance contract language permitting insurers to use non-OEM parts in repairs. “The court’s ruling clearly suggests that people are recognizing the fact that generic aftermarket parts are of like kind and quality to OEM parts,” he said. “This decision should help the small, but important aftermarket parts industry to flourish.”

The case reportedly also shows effective administration of the law relating to class actions.

“The court correctly realized that the trial of the case would involve different facts for each purported class member. With class members spread all over the country, the court wisely concluded that the case would be unmanageable as a class action,” Joyce
Kraeger, an Alliance attorney, added.

In the original case, plaintiff Eric Augustus brought a class action
against Progressive and several affiliates alleging they used a
company-wide policy that required the use of “imitation parts” in repairing and/or replacing damaged insured automobiles.

He also alleged that use of these parts understates the amount necessary to repair the damaged automobile to its pre-loss condition, resulting in a breach of contractual obligation. Augustus sought certification for: “All persons in the United States insured by a Progressive automobile insurance policy who, within the past 15 years, made a claim for vehicle repairs pursuant to their policy
and had imitation crash parts installed on their automobile or who
received monetary compensation determined by the cost of such imitation crash parts.”

The trial court hearing the case concluded that it could not be
certified as a class action because it failed to meet the requirements
of Ohio law. Augustus appealed; however, the appellate court affirmed the lower court’s decision, noting that the case failed the most basic requirement under Ohio law to qualify as a class action: that a high degree of commonality exist among class members.
The court found that Augustus failed to address the fact that
specific policy language authorized the use of non-OEM parts to restore vehicles to pre-loss condition. Further, the policies required
replacement parts to be “of like kind and quality” and limited liability to the amount needed to repair the damaged property to its pre-loss condition. Also, the policies provided that in returning a vehicle to its pre-loss condition, the insurer may use new, refurbished, used, OEM or non-OEM parts.

The court went on to state that it would be inconceivable that an
automobile is not returned to its pre-loss condition because a non-OEM part is used in making a repair.

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