Media Backgrounder

Avery v State Farm® -- formerly Snider v State Farm

Updated 03/07/06

(Michael Avery replaced Tammi Snider as the named plaintiff in this case; Snider's vehicle was not repaired with non-OEM parts.)

GENERAL DESCRIPTION: This class-action lawsuit accused State Farm of breaching its contracts with its policyholders when it specified the use of non-original equipment (non-OEM) parts in the repair of vehicles damaged in crashes. Over State Farm's objections, the suit covered the entire United States, except for Arkansas and Tennessee and some State Farm policyholders in Illinois and California, depending on the date of their respective crashes.

CASE CHRONOLOGY

THE PLAINTIFFS: There were six named plaintiffs (five others were withdrawn) in this action. They claimed to represent about 4.5 million present and former State Farm policyholders in 48 states who, between July 1987 and February 1998, had an auto insurance claim and non-OEM parts installed on or specified in estimates for their vehicle during the repair process.

The plaintiffs were represented by Don Barrett of Lexington, Miss., Thomas Thrash of Little Rock, Ark., Gordon Ball of Knoxville, Tenn., Steve Martino of Mobile, Ala., Elizabeth Cabrazer of San Francisco, Calif., Michael Hyman and Robert Clifford of Chicago, Ill., Patrick Penley of Plaquemine, La., Perry Craft of Brentwood, Tenn., and Patricia Littleton of Marion, Ill.

THE DEFENDANT: State Farm Mutual Automobile Insurance Company, the largest domestic property and casualty insurance company in the United States, is headquartered in Bloomington, Ill.

PROCEDURAL HISTORY: The case was filed on July 28, 1997 in Williamson County, Ill., as a 48-state class action based on an affidavit of Jeanne Teter, a State Farm policyholder from Marion, Ill. The suit was certified as a 48-state class action ex parte (no State Farm legal representative present) prior to State Farm being aware of the suit. When served with a summons, State Farm moved to have the certification set aside, believing it was not appropriate to deal with these issues in a class-action setting and knowing previous courts had thrown out similar claims made by other plaintiffs. The trial court confirmed the certification in December 1997. Jeanne Teter was later withdrawn as a plaintiff/class representative when it was determined she had never had a non-OEM part recommended for or installed on her car.

Based on the argument that class certification was not appropriate, State Farm twice asked the Illinois Supreme Court to (1) overrule the class certification or (2) move the case to Chicago. State Farm pointed out that other state and federal courts had denied class certification of similar cases--including some brought by some of the same plaintiff attorneys in this case. State Farm also argued that the Cook County Circuit Court was better equipped to address the issues in this case. The Illinois Supreme Court's first ruling was three in favor of review, three opposed, and one abstention on whether to hear the request.

State Farm then asked the United States Supreme Court to review the Williamson County court's certification decision. State Farm's appeal was supported by a diverse group of interests that included: the Consumer Federation of America, Public Citizen, the Center for Auto Safety, the National Association of Insurance Commissioners, the U.S. Chamber of Commerce, the State of New York, the Commonwealth of Pennsylvania, and Nevada's attorney general. In October 1998, the US Supreme Court declined to hear the case at that time without ruling on the merits of the case.

In April 2001, State Farm appealed its case to the Fifth District Appellate Court in Mt. Vernon, Ill., seeking a reversal of the trial court's judgments. In April, the Appellate Court upheld almost all of the trial court's verdicts. It reduced the verdict by $130 million, letting stand the remaining $1.05 billion judgment. State Farm subsequently filed an appeal with the Illinois Supreme Court. The Court agreed to hear State Farm's appeal, and heard oral arguments on May 14, 2003.

In August 2005, the Illinois Supreme Court reversed all awards made by the lower court, and found that the plaintiffs' case was without merit and that plaintiffs failed to demonstrate that any plaintiff suffered harm.

On January 4, 2006, plaintiffs filed a petition for a writ of certiorari before the United States Supreme Court. The petition asked the Court to grant review and overturn the Illinois Supreme Court's reversal of the nationwide class action judgment of more than $1 billion against State Farm.

On March 6, 2006, the U.S. Supreme Court issued a decision without comment, declining to consider plaintiff's petition for a writ of certiorari.

CAUSES OF ACTION:

The plaintiffs claimed:

THE PLAINTIFFS' CASE: The plaintiffs' lawyers presented evidence that all non-OEM parts are inferior to parts made by vehicles' original manufacturers and are therefore incapable of returning a car to its pre-loss condition as required by State Farm's insurance policy contract. They indicated they would prove that all non-OEM parts are inferior to OEM parts all the time, but at trial, only asked the jury to find that it was most likely true that most of the parts specified by State Farm were inferior. Although none of the plaintiffs claimed physical harm, their attorneys argued the use of non-OEM parts raises a safety issue because they're not crash-tested and because modern vehicles are designed to react certain ways in collisions. Plaintiffs relied on a number of documents from State Farm and the Certified Automotive Parts Association (CAPA) to argue that State Farm has known for years that non-OEM parts are inferior to OEM parts. Plaintiffs presented evidence that all non-OEM crash parts automatically diminish the value of a policyholder's vehicle and that this further proves that these parts are incapable of returning a car to its pre-loss condition.

STATE FARM'S CASE: State Farm learned years ago that many body shops, in an effort to reduce costs, were using non-OEM parts without State Farm's or State Farm policyholders' knowledge. Moreover, some of the shops charged State Farm and its policyholders OEM prices for such repairs. State Farm, along with other insurers, determined that having a viable non-OEM parts industry could benefit consumers by lowering the price of auto repairs. State Farm worked to ensure quality in the non-OEM industry by contributing to the formation of the Certified Automotive Parts Association (CAPA). CAPA is designed to scrutinize and certify, where its standards are met, non-OEM parts for use in the repair industry.

State Farm defended its practices by showing that the non-OEM parts it specified were quality parts, that there were relatively few policyholder complaints and that a State Farm guarantee insures policyholders' satisfaction. That guarantee states that if State Farm authorizes the repair shop, and customer isn't satisfied with the repairs, the company will see that the parts are repaired or replaced to the customer's satisfaction - at no cost to the customer. State Farm also showed that use of non-OEM parts by a professional repair shop does return a vehicle to its pre-loss condition and that its policyholders were fully informed of the proposed use of non-OEM parts when they were specified. State Farm argued that there are no safety issues associated with the use of non-OEM parts because they constitute the outer shell of a vehicle--not the part of a vehicle designed to protect passengers.

Included in State Farm's case was evidence of the company's long history of involvement in auto design, driver behavior and highway hazard issues; of its use of new non-OEM parts that undergo scrutiny for quality by the Certified Automotive Parts Association (CAPA); that no OEM parts undergo any type of external quality check. Presented into evidence was a copy of the State Farm auto insurance policy which specifically discloses that non-OEM parts may be used, copies of auto repair estimates that fully disclose the proposed use of non-OEM parts, a copy of a State Farm brochure that spells out their possible use and the State Farm guarantee that stands behind them. State Farm also showed how no state law bans the use of non-OEM parts and that some encourage, or even require, their use.

SIGNIFICANT RULING: On Aug. 10, 1999, Judge Speroni ruled that State Farm could not present to the jury evidence that its policyholders and ultimately all consumers benefit financially through the use of and very existence of non-OEM parts.

SIGNIFICANT DEVELOPMENT: On Oct. 7, 1999, State Farm suspended the use of aftermarket crash parts.