Policies on auto parts suit ruled to be too diverse to qualifyfor class-action status

In a huge victory for the property-casualty insurance industry,the Illinois Supreme Court last week threw out the $1.05 billionauto parts class-action judgment against State Farm.

The American Insurance Association called the decision "a winfor all consumers because it will foster price competition inautomotive repair costs."

David Snyder, AIA vice president and assistant general counsel,said the ruling means that, under Illinois law, use ofcompetitively priced replacement parts in auto repair of like kindand quality compared to those supplied by the original manufactureris recognized by the insurance code and not categoricallyprohibited.

Mr. Snyder said such "aftermarket" parts have helped injectcompetitive pricing into physical damage coverages--both collisionand comprehensive--that account for over one-half of the premiumspaid by consumers. "The vast majority of those coverages are spentto repair or replace motor vehicles," Mr. Snyder said.

In reversing the judgment in State Farm v. Avery, the court saidthat the claims of the class were too diverse to meet thedefinition of a class-action lawsuit. Differences in insurancepolicies meant customers did not share the same conditionsnecessary to sue as a group, the court found.

Furthermore, the court said it was a mistake for an Illinoistrial court to grant national class-action status when there wasonly one named plaintiff from Illinois and he failed to prove hehad suffered actual damages.

In its court filings, State Farm contended that the caseaffected as many as 4.7 million of its insureds across thecountry.

The suit was filed as part of consumer dissatisfaction with autoinsurer efforts to use replacement parts modeled after themanufacturers' original equipment but not made to manufacturerspecifications. The lawsuit contends such parts are inferior andfail to deliver the same level of quality, fit and, in come cases,safety.

The trial court jury ordered State Farm to pay nearly $1.2billion for failing to provide top-quality parts when paying forauto repairs. At the time, it was the largest judgment in Illinoishistory. The judgment was later reduced to $1.05 billion.

The U.S. Chamber of Commerce noted the suit was originally filedin Williams County, which ranked as one of the worst jurisdictionsin the country for class-action abuse, dubbed by someanti-plaintiff lawyer groups as a "judicial hellhole."