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Steering, breached contract & defamation suit against Allstate dismissed

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Insurance | Legal
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A lawsuit against Allstate by a Maryland body shop over allegations of steering, tortious interference, and defamation has been dismissed.

Total Recon Auto Center, an independent Tesla-certified collision repair center, sued the carrier for $225,000 and punitive damages in March for ongoing profit loss and harm to its reputation.

U.S. District Judge Deborah L. Boardman ruled on Dec. 11 that Total Recon failed to prove the existence of a contract with “sufficient specificity,” such as customer names, agreed-upon services, and details about denied payment of claims. She also ruled that Total Recon failed to prove Allstate committed an independently wrong or unlawful act and made defamatory remarks.

The lawsuit accuses Allstate of tortious interference with contractual relations, i.e., interfering with repair contracts, through its alleged denial of claims on vehicles that aren’t physically inspected. This is “contrary to Total Recon’s known and previously accepted digital adjusting practice,” which is “Allstate’s knowing and wrongful interference with the valid contracts between Total Recon and Allstate’s insureds was accompanied by actual malice,” the complaint states.

“Allstate’s main attack on this claim is that Total Recon has not pled that any third party breached a contract with Total Recon — leaving the complaint insufficient on the fourth element [hindrance to the performance of the contract],” Boardman wrote in the order, in reference to Maryland law.

“Allstate is correct that Total Recon does not plead that a third party breached a contract with the auto center. Instead, Total Recon pleads that Allstate’s conduct prevented Total Recon from fulfilling its responsibilities to customers insured by Allstate, leading Total Recon itself to terminate those contracts.”

However, Maryland law doesn’t require breach of contract to prove tortious interference with contract, according to the order.

Based on case law, “a plaintiff may state a claim for tortious interference with contractual relations by alleging that the defendant so interfered with the plaintiff’s performance that they caused the plaintiff to cancel the contract,” Boardman wrote.

“Total Recon has pled the fourth element of a claim for tortious interference with contractual relations by alleging that Allstate’s conduct prevented Total Recon from performing under existing repair contracts with Total Recon customers insured by Allstate, leading Total Recon to terminate them,” Boardman wrote.

“At this stage, that is enough. However, Total Recon has failed to state a claim for tortious interference with contractual relations for a different reason: The company has not pled the first element — the existence of any contract between Total Recon and a customer — with sufficient specificity.”

Total Recon switched to fully digital inspections in April 2020 and states Allstate didn’t start denying them for lack of physical inspections until on or about May 2022, according to the complaint.

The complaint notes that Allstate championed virtual inspections in place of in-person inspections starting before the COVID-19 pandemic, which was when several other insurers began decreasing or entirely stopping physical inspections.

“In fact, even before the COVID-19 Pandemic, Allstate had been a self-proclaimed leader in ‘the [insurance] industry in digital transformation of the claims experience,'” the suit states.

“According to Allstate… ‘In early 2019, [it] completed the transition to a digital claim file system, so claim agents and adjusters have electronic access to everything they need. In the new system, users can share files and images, and separate, reorder and annotate digital documents, just as they would with a paper file. This eliminated mail to the claim offices and improved… speed and accuracy. The new file tool is more consistent and simple…”

Allstate’s website states that with its Virtual Assist, a live and on-demand video chat tool, “auto body shops can instantly show vehicle damage in real time to an auto technical Allstate representative so an initial estimate or supplement review and decision can happen instantly so the repairs can start faster.”

Virtual- and photo-based inspections and estimating have often caused more problems than good for body shops, even prolonging already long cycle times by increasing the number of supplements filed because of unseen damage in initial photos, thereby also adding to customer confusion.

“As far as the Court can tell, the idea is that Allstate’s policy of requiring physical inspections for claims for service at Total Recon is an unreasonable standard for investigating claims,” Boardman’s order states. “But Total Recon says nothing to indicate that Allstate fails to adopt and implement reasonable standards ‘with the frequency to indicate [that the violations are] a general business practice.’ Ins. § 27304.

“At most, Total Recon alleges that Allstate has done so once, by adopting the putatively unreasonable policy of requiring physical inspections before paying out claims for repairs at Total Recon. Even if Total Recon has alleged a single failure to adopt and implement reasonable standards for the prompt investigation of claims — a question this Court need not and does not decide — Total Recon has failed to allege enough violations to indicate a general business practice.”

Tortious interference with prospective advantage and defamation were allegedly committed by Allstate by steering potential customers away from Total Recon to other shops.

Anti-steering laws are in place in some states to prevent carriers from funneling business away from or to specific shops. Steering is commonly known in the collision repair industry, and defined in the lawsuit, as “tactics employed by insurance companies to steer their insureds to or away from particular repair shops, without informing their insureds of their statutory right to choose.”

Regarding defamation accusations, the carrier allegedly made disparaging remarks to its clients such as, “It is our nightmare when a car ends up at Total Recon.” The suit states Allstate said Total Recon’s work is of poor quality and described the shop as being dishonest as well as “price-gouging.”

Total Recon states in the suit that Allstate told claimants it would waive deductibles if they took their vehicle to a different shop.

However, Boardman ruled that — like the tortious interference with prospective advantage allegation — Total Recon didn’t provide enough detail to prove defamation.

Total Recon also filed suit against State Farm for nearly identical reasons in August. The owner claimed Allstate violated the Maryland Insurance Act because of the OEM-approved labor rate it charges its customers.

“[T]he words on there are written carefully to try to bypass the law,” Total Recon founder and CEO Bobby Taheri previously told Repairer Driven News. “They say, ‘Well, you do have an option to take your car where you want. However, if you do, there’s going to be out-of-pocket expenses or storage fees; they do unnecessary repairs, and the ones that they do that are necessary they don’t charge for so there’s going to be significant out-of-pocket expense, just be ready for that.’

“And instantly, they scare them. Most of them don’t follow the script. They’re just fearmongering so obviously we lose a lot of customers.”

State Farm filed a motion to dismiss in September.

The carrier alleges Total Recon’s complaint:

    • Fails to meet operative pleading requirements;
    • Isn’t permitted to base its complaint on unidentified customers or prospective;
    • Fails to allege incurred damages;
    • Fails to state a claim in general and specific to some of the customers named in the suit;
    • Fails to adequately allege State Farm had a contract with any of the individuals named; and
    • Fails to adequately allege damages.

State Farm also says defamatory allegations aren’t tied to specific customers or potential customers and should therefore be dismissed.

A response from Total Recon hasn’t been filed nor has an order from the court.


Featured image: Allstate building in a Houston, Texas strip mall. (Credit: Brett_Hondow/iStock)

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