October 7th 1999

A jury in Marion, Illinois, has returned a guilty verdict against State Farm Insurance. State Farm has been ordered to pay $456 million (U.S.) (reduced from the original verdict of $1.2 billion dollars!) to consumers for denying them the choice of repair parts after accidents and misrepresenting the quality of the aftermarket parts.

The class-action suit alleged that State Farm, which insures almost 20% of all U.S. vehicles, breached its contracts with five and a half million policy holders because the company's use of non-OEM parts fails to restore cars to their pre-loss condition as promised in the company's insurance policies. The suit also claims that State Farm defrauded policyholders by failing to disclose potential safety hazards caused by the use of non-OEM parts in repair.

Jurors heard from 40 witnesses from both sides in the six week trial.

If the verdict stands up after appeal, the $456 million award would be eligible for all car owners who had repair estimates written by State Farm between July 1987 and February 24th 1998. It is an average of about $95 per vehicle. The decision applies to policy holders in 48 states, excluding Tennessee and Arkansas, and to Illinois between 1994 and 1998.

State Farm plans to appeal the ruling stating that the verdict jeopardizes its use of aftermarket parts to repair damaged cars and could lead to higher auto insurance rates for everyone.

It is expected that the decision will send shockwaves through many insurance company claims offices in Canada.

Collision repair shops in the Southern Ontario marketplace are already reporting that their local State Farm appraisers are today advising using only OEM parts on future vehicle repairs, but to complete current repair or in-progress work with the already authorized aftermarket parts. Last year, State Farm wrote $530 million in auto policies in Ontario making it the number 5 auto insurer in the province.

Ray Datt, of the Automobile Industries Association of Canada, which represents some parts manufacturers and many aftermarket suppliers, is quoted as saying "..that the companies they represent in Canada meet or exceed original operating specs, so there's no issue to say that inferior parts are being sold here."