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State Farm aftermarket parts verdict upheld by appeals court

The Illinois Court of Appeals has upheld an October 1999 class action verdict which found State Farm Mutual Automobile Insurance Co. guilty of consumer fraud and breach of contract for failing to disclose to consumers that it was using aftermarket crash parts that were of inferior quality to new repair parts.

The 4.7 million members of the class will receive approximately $223.40 each.

In October 1999, a Marion, Ill., judge and jury found that State Farm failed to disclose that aftermarket crash parts (such as hoods and fenders) — also known as non-Original Equipment Manufacturer (OEM) parts — used in repairs were not as high in quality as OEM parts.

While the appeals court upheld the verdict, it reduced State Farm's penalty by $130 million, from $1.18 billion to $1.05 billion. The court lowered the penalty because it felt that the original award was "overlapping" on the counts of consumer fraud and breach of contract. The 4.7 million members of the class will receive approximately $223.40 each.

"The appeals court opinion was a victory for consumers who are unable to obtain meaningful relief from large corporations on their own and a vindication of the class action device," says Elizabeth Cabraser, an attorney for the class.

Eligible class members are those people who were insured by State Farm, filed a claim on their policy, and had non-OEM crash parts installed on their vehicles or received money for the crash parts between Sept. 26, 1996, and Feb. 23, 1998.

Steve Vogel, a spokesperson for State Farm, says the insurer will appeal what he calls a "disappointing" verdict to the Illinois Supreme Court. Vogel says that if the supreme court upholds the verdict, auto insurance costs will go up because other insurers may follow State Farm's lead in no longer using aftermarket parts on vehicle repairs. State Farm suspended use of aftermarket parts in October 1999, shortly after the original verdict was reached.

"If this decision stands, automakers will be that much closer to a parts monopoly," Vogel says.

Class members will not receive any award until State Farm's appeals to the Illinois Supreme Court are exhausted. Morris Ratner, an attorney for the plaintiffs, says that class action attorneys will file for their compensation with the court after the appeals are exhausted. Ratner says that attorneys fees are generally 25 to 33 percent of the award.

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