09 Dec CFO Jon Cartu Publishes – N.J. auto body repairers’ steering lawsuit against NJM…
Collision repairers’ lawsuit against New Jersey Manufacturers Insurance alleging steering-related violations may proceed, a Superior Court, N.J., judge ruled late last month.
Union County Superior Court Judge Alan Lesnewich’s Nov. 22 decision gave no hint as to what he thought of either party’s argument. He wrote simply that he denied NJM’s motion to dismiss after “the Court having considered the papers submitted, opposition having been filed, Oral Argument having taken place on November 22, 2019 for the reasons set forth on the record on November 22, 2019, and for good cause shown.”
Sam Mikhail, representing Quality Auto Painting Center (which did business as Prestige Auto Body), and BMR Automotive Service (also known as “Robbie’s Automotive and Collision Repair”) had sued NJM alleging injurious falsehood; tortious interference with prospective business advantage; and violating the state’s Consumer Fraud Act, New Jersey Antitrust Act and New Jersey Civil RICO. It also sought injunctive relief forbidding NJM from such alleged “unlawful acts” in the future.
NJM has denied allegations and argued some “set forth improper legal conclusions.” It also offered the affirmative defense that the case didn’t merit class-action status.
“NJM does not ordinarily comment on pending litigation; however, the plaintiffs’ accusations are baseless, and will be vigorously defended,” the company said in a statement.
“At this point, we have rather significant positive action against NJM, including for violations of RICO and antitrust,” plaintiffs attorney Joshua Bauchner of Ansell Grimm & Aaron said, according to the AASP-NJ. “We believe this is the first action against an insurer of this nature in New Jersey. We have some pretty substantial evidence regarding steering and the disparagement of the plaintiffs.”
Plaintiffs seek class-action status to include all shops not on an NJM direct repair program who either fixed or tried to fix a vehicle NJM insured in the past six years and who saw NJM refusing to negotiate in good faith, trying to steer an insured or misrepresenting the shop’s quality or price.
“This suit was brought on by the insurer because of greed and their unwillingness to pay a fair and reasonable amount to repair vehicles damaged as the result of a collision,” Alliance of Automotive Service Providers of New Jersey Executive Director Charles Bryant said in a statement Sunday. “The insurer is dictating what it will pay rather than making all reasonable efforts to negotiate an agreed price to repair an automobile as required by the regulations governing fair claim settlement practices. … When a collision shop fails to surrender and take whatever the insurer wants to pay, the insurer engages in unlawful ‘steering’ activity by claiming that the shop is being unreasonable and overcharging; they then pressure insureds to have their vehicles repaired at specific ‘preferred’ repair shops that can afford to fix the vehicles at lower rates because of the high volume of work being steered to them. This type of suit has to happen because of the unwillingness of greedy insurers to work these issues out and pay fair and reasonable rates for the procedures now required to safely and properly repair vehicles on the roads today.”
Failure to negotiate
The plaintiffs in Mikhail and BMR v. NJM accused NJM of failing to negotiate in good faith with Prestige Auto Body, which charges $65 an hour for mechanical labor “but is forced to cut its rate to $50.00 to meet Defendant’s ‘take it or leave it’ pricing model.”
The lawsuit stated NJM capped payment at $50 “for all labor time when repairing a vehicle regardless of the skill or experience of the mechanic, the location of the repair shop, the degree of difficulty involved with the repair, or any other factors which impact the fee charged per hour for mechanic time.”
The same was the case on paint materials, with NJM refusing to budge from $32 per hour “even though the paint cost varies based on the type and color of paint used.”
Shops could insist NJM calculated paint materials using Computer Logic, “a proprietary program which apparently only one employee of Defendant is permitted to manipulate, therefore a request to utilize the Computer Logic program can delay payment for months,” according to the lawsuit.
Mikhail and BMR provided an example of an NJM Core Logic calculation the plaintiffs alleged was not reflective of the actual job.
Defendant itself submitted differing estimates for the purported “true cost” of labor and materials, including one on March 20,2017 for $459.55 which purported that Prestige should use exactly 22.59 ounces of base coat, 26.95 ounces of clear coat, 1 1.095 ounces of pre-paint solvent, 6.28 ounces of adhesion promoter, 14.23 ounces of sealer, 1.45 pieces of coarse sand paper, 4.25 pieces of finesse sand paper, a 0.32 piece of foam polishing pad, 0.22 ounces of hardener, a 0.16 piece of a wool buff pad, and exactly 18.7 feet of (1.5) to 2 inch wide tape.
Mikhail and BMR alleged that NJM “inordinately delayed payment for the Vehicle because Prestige pointed out the unfair charges, intentionally harming Prestige by requiring multiple supplements just to recoup amounts approaching fair value.
“Specifically, the repairs were completed in or around April, 2016, yet Defendant waited approximately one year to remit its insufficient payment to Prestige.”
The plaintiffs also quoted New Jersey’s “Shop Choice Rule,” which demands, “The insurer must make all reasonable efforts to obtain an agreed price with the facility selected by the insured. The insurer may recommend, and if the insured requests, must recommend a qualified repair facility at a location reasonably convenient to the insured’s motor vehicle who will repair the damaged motor vehicle at the insurer’s estimated cost of repairs, but in either event the provisions of (g) below apply.” (Emphasis plaintiffs’.)
The lawsuit alleged that NJM “knowingly and intentionally” failed to notify claimants they could use any shop they wished, and “refuses to recommend upon request a qualified repair facility at a location reasonably convenient to the insured’s motor vehicle which will repair the damaged motor vehicle at the insurer’s estimated…