AASP/NJ Comments on MSCRA Suit Against State Farm/PartsTrader

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One of the industry’s most vocal opponents of State Farm’s controversial parts procurement system with PartsTrader, the Alliance of Automotive Service Providers of New Jersey (AASP/NJ) has announced its support of the Mississippi Collision Repair Association (MSCRA)’s recently filed suit against both entities in an attempt to prevent them from bringing the program to Mississippi.

“What part of ‘no’ doesn’t State Farm understand?” asks AASP/NJ Executive Director Charles Bryant. “The collision industry has clearly rejected the concept of PartsTrader, yet State Farm is taking the position that they are going to force PartsTrader on the collision industry – like it or not! This lawsuit should be a wake-up call for State Farm. State Farm’s attempt to create the appearance that they are trying to help the collision industry solve a problem has clearly failed.

“It has become blatantly clear that State Farm is really attempting to further line their pockets on the backs of the collision industry by transferring part of the profit derived from parts from the collision industry to the insurance industry,” he continues. “If PartsTrader was good for the collision industry, State Farm would have been able to convince the industry to accept the concept by now. Instead, the collision industry has spoken – not ‘no,’ but ‘HELL, no!’ If State Farm doesn’t wake up and back off now, I predict that this lawsuit is only a taste of what is to come.”

On August 28, MSCRA and dozens of collision repair facility operators, OEM dealers and other parts suppliers filed a lawsuit in the Hinds County, MS Chancery Court against State Farm Mutual Automobile Insurance Company and PartsTrader LLC requesting the following:

  • A declaratory judgment or other appropriate decree that the defendants are operating against the 1963 Consent Decree, and that their Select Service agreements are “void and unenforceable” as a result.
  • A preliminary injunction against the defendants, prohibiting them from proceeding “with the forced implementation of the PartsTrader program.”
  • A declaratory judgment or other appropriate decree that State Farm “can no longer interfere in the contract between the customer and the body shops by causing or implying delay in service payments, appraisal or limitation on the usage of rental automobiles.”

John Mosely, president of MSCRA and a plaintiff in the suit, fears that the continued application of PartsTrader will eventually lead to the greater use of aftermarket parts throughout the industry.

“We see [PartsTrader] as State Farm’s way to get back into the aftermarket parts business and not have their handprint on it…State Farm is telling us that we have to be a part of a program that is designed to get those parts put on our customers’ cars,” he says. “Any time the parts on a job are determined by the cheapest parts available, we call it ‘a race to the bottom of quality.’ It’s not fair to put us in that position with our consumers.”

“The body shops have a duty and a responsibility to the customer to provide a safe, proper repair,” adds the plaintiffs’ attorney, John Eaves, Jr. “State Farm, by the application of this program, is trying to force these body shops to breach their fiduciary duty to the customers.”

Eaves warns that State Farm’s activities with PartsTrader could have a negative effect on non-Select Service shops as well. “State Farm controls twice as much volume as any other insurance company in the state of Mississippi,” he says. “Whether you’re on the DRP program or not, they are influencing the market. A lot of times, they go to non-Select Service shops and say, ‘Well, this is all we’re paying our Select Service shops. We’re not going to pay you anything more.’”

On August 29, State Farm spokesperson Roszell Gadson issued the following statement regarding the case: “State Farm recently received notice of a lawsuit in Hinds County, MS related to our electronic parts ordering initiative and our Select Service program. We believe the suit is without merit. We intend to vigorously defend the suit.”