The Illinois Supreme Court will hear an appeal by State Farm Mutual Automobile Insurance Co. of a $1.2 billion verdict for consumer fraud and breach of contract. The jury found the insurer failed to disclose to consumers that it was using aftermarket crash parts that were of inferior quality to new repair parts.
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) used in repairs were not as high quality as OEM parts.
Eligible class members are those 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. The jury awarded 4.7 million members of the class about $220 each.
State Farm spokesperson Dave Hurst says the company is pleased the court agreed to hear the case. "Hopefully the Supreme Court will address several serious flaws that the trial court judge made," he says.
After the verdict, State Farm and several other insurers stopped using aftermarket parts, but it is difficult to determine how widespread the practice is. The industry trade association, the National Association of Independent Insurers (NAII), believes studies have shown that aftermarket parts are equal in quality to OEM parts, at a much lower price. Dan Kummer, director of auto insurance at NAII, says evidence exists that shows that prices of OEM parts have already risen since the State Farm verdict.
"If the verdict stands, we can expect rates to go up. If not, then we can expect them to hold the rate increases at bay," Kummer says.
Oral arguments on the appeal will be heard in the spring of 2003 and a decision is expected to be handed down in the summer of 2003.
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