Northeastern Edition New York Delaware New Jersey Pennsylvania
Maryland Connecticut Rhode Island Massachusetts
32
YEARS
www.autobodynews.com ww ww.autobodynews.com
PA Shop Owners File RICO Suit Against Seven Major Insurance Companies Citing Short Pays, Conspiracy The owners of Crawford’s Auto Center Inc. in Downington, PA, have filed what they expect to be a class-action lawsuit against seven major insurance carriers and their affiliates, accusing them of short pays and conspiring to establish and enforce “an artificial market value for collision repairs,” according to the complaint. The lawsuit was filed April 30 in the U.S. District Court for the Northern District of Illinois, Eastern Division, naming State Farm, Allstate, GEICO, Progressive, Farmers, Liberty Mutual and Nationwide and de-
fendant insurers alleging they illegally conspire to control the collision repair process and the cost of repairs. The suit, Crawford’s Auto Center v. State Farm et al, also names USAA, Travelers and American Family as conspirator insurers, though not as defendants. The plaintiff’s complaint seeks to have the suit granted class action status representing any repair facility that has done business with the defendant insurance companies since January 1, 2006.
Dorian Parsley, 44, a civilian police dispatcher, is accused of giving confidential police information—such as locations of auto accidents, to the owner of K & B Auto Body, a Philadelphia shop, William Cheeseman and two other tow-truck operators, Stepfon Flowers and Chad Harris, who at times worked for K&B. Parsley allegedly did it in exchange for bribes, collecting thousands of dollars in cash, from February 2011 to December 2013, authorities say, according to reports in the Philadelphia Daily News. The U.S. Attorney’s Office announced the unsealing of an indictment against Parsley, of Philadelphia;
Cheeseman, 42, of Delran, NJ; Flowers, 24, and Harris, 22, both of the city. All four are charged with conspiracy and bribery. Parsley and Flowers are also charged with honest-services fraud. Three of the four defendants in the alleged bribery scam pleaded not guilty at their arraignments in federal court May 15. The fourth, Flowers, had previously plead not guilty. All have been released on $25,000 bond. According to the indictment, the four entered into a scheme in which Parsley texted confidential police information—such as locations of auto accidents—to the tow-truck operators
See PA Shop’s RICO, Page 9
PA Body Shop Embroiled in Alleged Towing Scheme with Philadelphia Police Department Dispatcher
See Philly Towing Case, Page 9
VOL. 4 ISSUE 3 JUNE 2014
GEICO Fined by Massachusetts For Inconsistent Accident Reporting, $275K Levied, $275K Suspended Massachusetts Commissioner of Insurance Joseph G. Murphy announced an agreement with Government Employees Insurance Company and GEICO General Insurance Company resolving inconsistencies in its reporting of accident information to state agencies and policyholders. Under the terms of the agreement, GEICO has agreed to modify portions of its current business procedures, implement new procedures and pay a $275,000 fine. An additional $275,000 fine has been suspended pending a future re-examination by the Division of Insurance. “Today’s announcement is the result of our ongoing monitoring of the insurance marketplace to ensure that consumers are receiving the benefits to which they are entitled and compa-
nies are competing on a level playing field,” said Commissioner Murphy. “The company’s actions created disruptive issues within the auto insurance marketplace in Massachusetts.” The Division negotiated this agreement with GEICO following a market conduct examination of GEICO’s practices since the company began offering private passenger automobile insurance to Massachusetts drivers in May 2009. The examination specifically identified GEICO’s inconsistency in reporting claim information and providing operators proper notice of at-fault accident determinations and their rights to appeal those determinations to the Division’s Board of Appeal as areas requiring a change in business practices. The company will notify in-
Collision repairers from six states are pursuing legal action against insurers for alleged antitrust violations, collusion by making deals with preferred body shops to reduce labor costs, and interfering with body shops’ business by dictating how they do repairs. There are also allegations that shops are being forced to use substandard repair parts. The body shops are seeking damages from the suits that could amount to damages in the billions. See Autobody News May edition for more details. In the federal lawsuit, 14 Indiana shops and others have accused State Farm Insurance and competitors of extracting “unreasonable and onerous” concessions on vehicle repair costs. When a shop doesn’t comply with price ceilings, the insurers dissuade policyholders from choosing that shop for repairs by telling them it has quality issues or gets lots of complaints, the shops allege in the suit filed April 2. The 34-page suit alleges insurers have violated the federal Sherman Act,
both in price-fixing and through boycotting tactics. Insurance company dictates are “placing the driving public at harm,” says the lawsuit. (Other defendants include Allstate, American Family, Auto-Owners, Erie Insurance, Indiana Farmers Mutual, Liberty Mutual, Nationwide, Shelter General and Zurich American.) Pat Johnson, a Martinsville, IN, shop owner of Brothers Body & Paint next to IN 39, was cut from State Farm’s Select Service Program last November, unable to live with the its requirement that he buy vehicle parts through the online PartsTrader site instead of using his own longtime suppliers. Now Johnson says he is feeling the pain of losing business from State Farm. Revenue at Brothers Body & Paint has fallen by $100,000 so far this year from his former $2 million annual gross on repairing about 60 vehicles a month. Johnson has said he may need to cut his 12-person staff, but he’s
See GEICO Fined, Page 17
Update on Shops’ Accusations of Insurers’ Collusion
See Shops’ Accusations, Page 14
Change Service Requested
P.O. BOX 1516, CARLSBAD, CA 92018
Presorted Standard US Postage PAID San Bernardino, CA Permit #2244