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An Indiana welcome sign is shown July 5, 2006.  (csfotoimage/iStock)

Following Fla. dismissal, appeal only hope for Ind. auto body shops, IABA in lawsuit against insurers

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Insurance | Legal | Repair Operations

A Middle District of Florida judge on Friday killed a lawsuit brought by Indiana collision repairers and the IABA against auto insurers, the third state in a series of related litigation to suffer a potentially fatal setback.

The only hope for the plaintiffs — 25 collision repairers and the Indiana Auto Body Association — following Judge Gregory Presnell’s dismissal with prejudice would be an appeal to the Eleventh Circuit Court of Appeals. Other states’ auto body plaintiffs — who share the same legal representation as the Indiana filers — have attempted that route.

After already tossing federal Sherman Act antitrust claims for good in February, Presnell on Friday discarded state-level tortious interference — steering — and quantum meruit claims the shops had brought against 26 insurers and insurer subsidiaries.

The shops couldn’t sue under tortious interference if the alleged steering didn’t work, according to Magistrate Judge Thomas Smith’s recommendations, and Presnell agreed. (There’s no “attempted tortious interference” in Indiana, apparently.)

None of the four specific examples provided in the litigation involved a customer being lost to another shop through an insurer’s action, according to Smith and Presnell. Though the shops had indicated these were but a few examples of insurer steering, both judges seized upon them.

“In their objection, the Plaintiffs do not dispute Judge Smith’s determination that none of the four instances were alleged to have succeeded,” Presnell wrote Friday. “Because damage resulting from the interference is one of the requirements of a tortious interference claim under Indiana law, the Plaintiffs have failed to state such a claim in regard to those four instances of attempted steering.”

Not even an alleged example from the lawsuit in which “against (a customer’s) wishes, State Farm towed his vehicle to a preferred shop and refused to allow it to be taken to (Brothers Body & Paint),” was enough to satisfy the judges’ reading of Indiana law.

The shops also lacked a business relationship with the customers themselves in the formal sense, according to Presnell. Such relationships are defined differently in different states, and the precedents cited by the shops don’t make enough of a case to call the vehicle owners shop customers under Indiana law, according to Presnell.

“The Plaintiffs also argue that the decision by a customer to do business with a particular vendor is enough to establish such a relationship,” Presnell wrote. “However, the case Plaintiffs cite … does not stand for this proposition. In Anderson, the Court held that the absence of such a determination by the customer meant there was no valid business relationship, but it did not hold that the presence of such a determination, standing alone, would create such a relationship. Thus, the fact that each of the four insureds at issue here had decided to utilize the services of one of the Plaintiffs is not enough, on its own, to satisfy the requirement that the Defendant have attempted to interfere with a ‘valid business relationship.'”

Presnell’s findings of what constitutes a true “business relationship” could be a tough precedent for other Indiana shops to overcome in future cases. However, the most discouraging part of the ruling might be his backing Smith’s conclusion that none of the alleged steering in the four examples or anywhere else in the lawsuit violated Indiana Code rules on deceptive insurance acts and practices.

Here’s the four specific descriptions of the tortious interference in the second amendemd complaint:

(A customer) identified Plaintiff Conn’s Collision as his choice of repair shop to insurer Safeco. Safeco told (the customer) he was required to go to one of Safeco’s preferred repair shops to have an estimate performed before going to Conn’s, that Conn’s was not one of Safeco’s preferred shops, that if (the customer) went to a Safeco-preferred shop, the repair would be performed faster. (The customer) felt significantly pressured by Safeco to go another shop rather than the shop of his choice, Plaintiff (Conn’s).

(A customer) identified Plaintiff Martin’s Body Shop as his choice of repair shop to insurer Liberty Mutual. Liberty Mutual told (the customer) that Martin’s was not on their preferred list of shops, that going to Martin’s would mean the repairs would take longer, that if he took his vehicle to Martin’s, Liberty Mutual would not warranty the repairs performed but going to a Liberty Mutual preferred shop would result in a warranty of the repairs performed. As a result, (the customer) felt significantly pressured by Liberty Mutual to go to another shop rather than the shop of his choice, Plaintiff Martin’s.

(A customer) identified Plaintiff Martin’s Body Shop as his choice of repair shop to Defendant Allstate. Allstate told (the customer) that if he used the shop of his choice, he would have to pay more for the repair, that Allstate would not warrant the repairs performed at Martin’s but going to a preferred shop would result in a warranty of the work performed, that Martin’s was difficult and “we can’t work with that shop,” and if (the customer) went to a preferred shop, Allstate could pay that shop directly and (the customer) could get his vehicle back faster. As a result, (the customer) felt significantly pressured by Allstate to go to another shop rather than the shop of his choice, Plaintiff Martin’s.

(A customer) tried on three separate occasions to have his vehicle towed to Plaintiff Brothers Body & Paint. Without his permission and against his wishes, State Farm towed his vehicle to a preferred shop and refused to allow it to be taken to Brothers.

Indiana Code 27-4-1-4 (and the related -4.5) can be found here.

Quantum meruit

The shops also were unable to successfully sustain their case for quantum meruit, which involves getting a benefit without being paid for it.

“They complain that they have ‘performed valuable services and expended material resources with the reasonable expectation of payment/compensation’ but that the Defendants have refused to provide “full payment” for those services and materials,” Presnell wrote. “Under Indiana law, the elements of a claim for quantum meruit are: (1) a benefit conferred upon another at the express or implied request of this other party; (2) allowing the other party to retain the benefit without restitution would be unjust; and (3) the plaintiff expected payment.”

Since the shops argued in the case that insurers refused to pay above a certain amount for certain work, they couldn’t perform more work than that amount and then expect reimbursement, Presnell wrote.

Presnell (and Smith) make a fair point there. But unfortunately, Presnell goes to conclude that the shops hadn’t delivered any benefit to insurers. Which seems insane, considering insurers are tpyically bound by contracts to restore a vehicle to pre-loss condition and Smith has said a benefit in Indiana law can be satisfying a duty (though he also felt the shops hadn’t conferred a benefit).

But Presnell goes literal on this one:

“The Plaintiffs point out that the conferring of a benefit can include satisfaction of a debt or duty,” he wrote. “They argue that the Defendants ‘are obligated to pay the cost of repairing vehicles for their insureds and claimants’ and that the Plaintiffs’ repair services ‘allow the Defendants to execute this duty.’ But allowing the Defendants to satisfy their duties to their insureds is a far cry from the Plaintiffs themselves actually satisfying those duties, as required to support a quantum meruit claim.”

Featured image: An Indiana welcome sign is shown July 5, 2006.  (csfotoimage/iStock)