In a huge victory for the property-casualty insurance industry, the Illinois Supreme Court today threw out a $1.05 billion judgment against State Farm in a class-action lawsuit that accused the insurer of using unsafe replacement parts to repair customers' vehicles.
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 replacement parts of like kind and quality as 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 over auto insurers' use of replacement parts modeled after the manufacturers' original equipment, but not made to the manufacturers' specifications. The lawsuit contended 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."
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