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

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

The American Insurance Association called the decision "a win for all consumers because it will foster price competition in automotive repair costs."

David Snyder, AIA vice president and assistant general counsel, said the ruling means that, under Illinois law, use of competitively priced replacement parts in auto repair of like kind and quality compared to those supplied by the original manufacturer is recognized by the insurance code and not categorically prohibited.

Mr. Snyder said such "aftermarket" parts have helped inject competitive pricing into physical damage coverages--both collision and comprehensive--that account for over one-half of the premiums paid by consumers. "The vast majority of those coverages are spent to repair or replace motor vehicles," Mr. Snyder said.

In reversing the judgment in State Farm v. Avery, the court said that the claims of the class were too diverse to meet the definition of a class-action lawsuit. Differences in insurance policies meant customers did not share the same conditions necessary to sue as a group, the court found.

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

In its court filings, State Farm contended that the case affected as many as 4.7 million of its insureds across the country.

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

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

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

Special Reports /

Court Tosses $1 Billion State Farm Verdict

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