California Court Gives Green Light To Plaintiffs In Auto Insurance Case

Judge James Ware of the U.S. District Court for the Northern District of California has denied the summary judgment motions of several car insurers in a class action alleging they created a sham organization to eliminate competition in the market for repair parts. 

The plaintiffs in Perez et al. v. State Farm Mutual Automobile Insurance Co. et al. (No. 5:06-cv-01962) are California automobile insurance policyholders who allege that defendant car insurers set up the Certified Automotive Parts Association to provide inferior replacement parts in violation of California’s Cartwright Act and Unfair Competition Law.  Plaintiffs also allege that the insurers unlawfully conspired to stifle competition in the auto repair market by agreeing to offer exclusively policies that provide inferior repair parts and to exclude other insurance companies. 

The original complaint was filed in 2006, and a third amended complaint was filed in November 2010.  Defendants argued that the amended complaint should be dismissed because the plaintiffs did not meet the Twombly standard to establish a conspiracy.  Judge Ware disagreed and held that the facts, if taken as true, were sufficient to show that the insurers conspired to eliminate competition for auto parts.

The defendants include State Farm Mutual Automobile Insurance Company, Geico General Insurance Company, Liberty Mutual Fire Insurance Company, and Allstate Insurance.