NAII Praises Courts’ Rulings Against Class Action Suits in Three Aftermarket Auto Parts Cases

February 6, 2003

A trend encompassing the use of aftermarket automobile parts develops as three state courts reject class-action lawsuits against insurance companies for authorizing the use of non-original equipment manufacturer crash parts in repairs.

Three recent, separate class-action lawsuits in Ohio, Washington and Florida were overturned or dismissed, in which the plaintiffs sought damages and relief for alleged breach of contracts based on insurance companies’ use of automobile replacement crash parts from sources other than the original equipment manufacturer (OEM). The courts deemed that the plaintiffs had not met requirements for class-action status under the state laws, and that the class-action lawsuits were not superior to other available methods for fair and efficient settlement of the matters.

“All three cases signal important victories for insurance companies and consumers in a continuing legal battle regarding the use of aftermarket crash parts,” Robert Hurns, counsel of the National Association of Independent Insurers (NAII), remarked. “Aftermarket parts are just as safe and significantly less expensive than parts made by a car’s original manufacturer. Using aftermarket parts is an effective way to minimize costs and keep insurance rates low.”

NAII said it hopes that the Illinois Supreme Court will take notice of the three recent court rulings when considering the landmark Avery v. State Farm case this year, the 1999 class-action case that thrust the use of aftermarket parts in the national spotlight. In this case, an Illinois jury awarded $1.2 billion in damages to plaintiffs suing State Farm Group over its use of aftermarket parts. An appellate court lowered the award to $1 billion, but let the decision stand. The Illinois Supreme Court agreed to hear State Farm’s appeal this year.

“Avery v. State Farm ruled that the use of aftermarket parts was a breach of contract, and that aftemarket parts are inherently inferior to OEM parts—an assumption that is incorrect,” Hurns said.

The Dade County, Florida Circuit Court ruled against the plaintiffs in Herrera v. United Automobile Insurance Company. The class-action case asserted that all after-market parts are inferior to OEM parts in fit, appearance, utility, quality, safety and function, and are never of “like, kind, and quality” when compared to OEM parts. As a result, the plaintiffs charged that United Auto violates the terms of any applicable insurance policy by allowing for the use of aftermarket parts. The court ruled that class-action certification is only appropriate if non-OEM parts can never be of “like, kind, and quality” to OEM parts, and that the plaintiffs provided no indication that they could prove this premise on a global basis. The court also said it “is of the belief that such proposition cannot be proven given that this country’s free market economy relies heavily on the ability to manufacture and sell non-original or imitation items, such as generic drugs.”

In Augustus v. Progressive Corp., the Ohio Court of Appeals upheld the denial of nationwide class certification in the non-OEM parts case, ruling that it finds no commonality in the issues. The court stated that each claim must be reviewed on its own merits to determine whether OEM or non-OEM parts were actually used in the repair, and whether the repairs were sufficient in returning the vehicle to its “pre-loss condition.” The appellate court also did not accept the plaintiff’s allegation that non-OEM parts are inherently not of “like, kind and quality.” In addition, specific policy language authorized the use of non-OEM parts to restore vehicles to pre-loss condition.

“The Ohio case as a class-action suit would be unmanageable as the suit involved different facts for each participant,” Hurns continued. “The case failed the basic requirement under Ohio law to quality as class-action status since a high-degree of commonality does not exist among the class members.”

Plaintiffs suing USAA Casualty Insurance Co. for using aftermarket automobile parts in repairing or replacing damaged insured automobiles in Schwendeman v. USAA were also denied class-action status. The Washington state Court of Appeals upheld a lower trial court’s denial of class certification to the plaintiffs in the case, ruling against the plaintiffs’ argument that USAA’s use of non-OEM parts was a breach of contract and a violation of Washington’s trade-practices law.

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