On August 19, Louisiana Attorney General Buddy Caldwell announced that his office had filed a lawsuit against State Farm, accusing the insurer of violating Louisiana's Unfair Trade Practices Act (LSA-R.S. 51:1401 et seq.) and its Monopolies Law (LSA-R.S. 51:121 et seq.). The suit, which was filed in Louisiana state court, alleges that State Farm, the state's largest auto insurer, steers Louisiana consumers to its direct repair shops, and then pressures those shops to perform vehicle repairs with inferior parts and/or too quickly, without regard to consumer safety and vehicle manufacturer performance standards. The complaint states that State Farm's alleged conduct constitutes an "attempt to monopolize" the repair market in Louisiana, in violation of the Louisiana state antitrust laws, and that State Farm's alleged "steering" of insureds to the direct repair shops constitutes deceptive conduct under the Louisiana Unfair Trade Practices Act. Attorney General Caldwell also contends that State Farm's alleged conduct violates a 1963 Consent Decree between the DOJ and many insurers, including State Farm, that settled an investigation into insurer influence in the auto repair industry. The Consent Decree is often cited by repair shops challenging insurer direct repair programs, because its terms include a prohibition on directing that an insured utilize a particular repair shop or seeking to "control automobile material damage repair costs."
In announcing the action, Attorney General Caldwell stated that alleged conduct is "a national problem," and that while State Farm is the only defendant in the suit, "State Farm is not the only one" engaged in the allegedly unlawful practices. However, the Attorney General has not filed similar suits against any other insurer, at least as of now, nor have similar claims been brought by other state Attorneys General. (Private actions by repair shops have repeatedly been brought challenging insurer direct repair programs and alleged "steering" practices, but typically have been rejected by the courts. See, e.g., Harner v. Allstate, (S.D.N.Y. 2012)). Needless to say, the Louisiana action is one that every auto insurer operating in Louisiana will want to follow closely.
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