State Farm Asks Illinois Supreme Court to Immediately Consider Auto Parts Case
State Farm has filed a motion with the Illinois Supreme Court asking for an expedited appeal of the verdict in Avery vs. State Farm Mutual Automobile Insurance Company, which concerns State Farm's specification of quality generic crash parts in auto repair estimates. (see "Insurers Say Illinois Aftermarkets Ruling Could Cost Consumers ")
The company said it is seeking an expedited appeal for three reasons: because the judgment will have a drastic effect on insurance consumers, it infringes upon state insurance regulation, and it will invite excessive and unwarranted litigation in Illinois. State Farm and other concerned organizations are asking the Supreme Court to act now -- rather than at the end of the ordinary appeal process -- to remedy the already-apparent negative consequences of the verdict.
``As a mutual insurance company with an undivided interest in serving our policyholders, State Farm wants a reversal of this court decision as soon as possible,'' said State Farm Chairman and CEO Edward Rust Jr. ``We're continuing to follow the normal appeals process, but we're pointing out to the Supreme Court that the decision is already hurting consumers.''
State Farm is joined in its appeal by a broad group of consumer, government and business groups who support the motion, including Citizens for a Sound Economy, the National Association of Insurance Commissioners, the National Conference of Insurance Legislators, the U.S. Chamber of Commerce and the Illinois Chamber of Commerce.
The company has voluntarily suspended the use of quality generic parts, but continues to believe that their use benefits both policyholders who have claims and consumers as a whole.
State Farm explained that it is already seeing the effects of not quoting generic crash parts on auto repair estimates: parts costs were $4.8 million more than expected in the first full month since the company's suspension of their use. Costs are likely to rise even higher, as auto manufacturers raise prices to take advantage of their monopoly power in the automobile parts market, State Farm officials said. These higher repair costs inevitably lead to higher insurance premiums for all consumers, the company said.
Second, State Farm indicated that the expedited appeal is necessary because the Avery verdict overrides the rights of individual states to regulate insurance, allowing a single state's judge and jury in Marion, Ill., to dictate policy for the entire insurance-buying public nationwide. The court's action disregards the facts that insurance regulators across the United States have examined the use of generic auto parts and that the laws in every state allow insurance companies to specify them for repairs.
Finally, State Farm said it is asking the court for an expedited appeal because the extraordinary billion-dollar verdict in this case will act like a magnet, attracting lawyers from all over the country to file ``nationwide'' class actions in what they perceive to be a plaintiff-friendly forum in southern Illinois. State Farm said the Illinois Supreme Court needs to provide critical guidance to the lower courts on when massive, multistate class actions are appropriate for a state court.
The Williamson County court in Marion, Ill., last October ordered State Farm to pay nearly $1.2 billion in damages -- the largest judgment ever rendered in Illinois -- to certain policyholders who had vehicles repaired between July 1987 and February 1998. A jury found State Farm breached its contract with policyholders when it sometimes specified generic parts in auto repairs. A judge later ruled that the company violated the state's consumer fraud act.
State Farm on Dec. 17 filed an appeal to the 5th District Appellate Court in Mount Vernon, Ill. (see "State Farm Appeals After-Market Parts Case") The motion before the Supreme Court effectively asks the court to bypass the usual appeals process and consider the appeal directly.