CNN's 360 news program dedicated over 10 minutes to a story about car repair shops in the US suing insurers for coercing them to use cheap parts and sometimes dangerous practices to fix vehicles involved in accidents on 11 February (see video below).
The report (read the online article) cited headlights held together by glue, dented rims and a new bonnet that's already coming apart are among the kinds of parts allegedly being pushed to go into cars as part of the repairs, according to some repair shops and attorneys general.
More than 500 garages from 36 states are joining in a lawsuit against the top insurance companies, and states like Louisiana, Mississippi and Oklahoma are also getting involved, says the CNN report. Buddy Caldwell, attorney general of Louisiana, has filed suit against State Farm insurance, saying its low-cost repair program could be dangerous for customers who get back on the road in vehicles that are not roadworthy.
He said he fears thousands of Americans could be driving round in vehicles repaired with what he calls junkyard parts after seeking repairs from body shops recommended by their auto insurance companies who took their premiums and picked up the bill.
U.S. Sen. Richard Blumenthal, who used to be Connecticut's attorney general, says not only is there a potential for small businesses to be hurt, but he, too, believes cars repaired through insurance company's preferred service centers pose a safety risk. He has asked the U.S. Department of Justice to investigate.
"The practice of steering involves jeopardy to the consumer because of the concern about parts," said Blumenthal, referring to the practice of steering customers towards certain preferred service centers.
"I believe strongly that federal watchdog agencies have a role in protecting consumers because serious safety concerns are raised by this practice of steering often involving the use of inferior or even salvaged or counterfeit parts," Blumenthal said.
John Mosley, an auto body shop owner in Clinton, Mississippi, explained how he saw insurance companies pushing consumers to 'preferred' shops where repairs are done faster, cheaper, and at times unsafely.
"The insurance industry has set up networks of shops, direct repair programs," he said. "And the way these shops' performance are measured is by the amount that it cost to repair cars at that particular shop. ... Just get the car in, make it look like it's fixed and get it out the door."
State Farm would not grant CNN interview, but said in a statement: "Our customers choose where their vehicles are going to be repaired. We provide information about our Select Service program while at the same time making it clear they can select which shop will do the work."
Bob Frayer, Global Managing Director Automotive for NSF International, whose organisation also certifies aftermarket parts and is now certifying parts for ACM in Australia said, “I am not surprised that CNN found both bad parts and bad repairs alike in the market. This is the very reason why NSF created the NSF Automotive Aftermarket Parts Certification program and is so actively engaged in the collision repair market. Consumers now have a choice as the number of NSF certified parts has grown and the need to use a non-certified aftermarket part has continued to decline.”
Automotive recyclers also raised concerns with how the report portrayed recycled parts.
The Automotive Recyclers Association (ARA) is very disappointed with what they believe is a lack of balanced reporting in the CNN segment. According to ARA, the reuse of original equipment (OE) automotive parts harvested from total loss vehicles is a $32 billion dollar industry in the United States.
ARA states that the labeling of quality, recycled automotive parts as "junkyard" parts is a misleading characterization that does a disservice to consumers.
Insurance Response
State Farm supplied CollisionWeek with the response it provided to CNN that said in part:
The allegations in the lawsuit filed by the attorney-general in Louisiana are not in line with State Farm’s mission to serve the needs of its customers, and our long, proud history of achievements in advancing vehicle safety.
A vibrant, profitable auto collision repair industry is in the interest of State Farm. At the same time, we are advocates on behalf of our customers for reasonable repair costs.
We believe repairer profitability and quality auto repairs that are reasonably priced can both be achieved. State Farm is a defendant along with dozens of other insurers in the litigation relating to issues that have been raised by some auto body repair facilities.
We want you to know that State Farm has excellent working relationships with thousands of body shops across the country, and that they are serving millions of our customers who consistently indicate their satisfaction with our handling of their claims.
In response to last night's broadcast State Farm released a statement saying, "We are disappointed that CNN did not choose to report what you have already reported, that all of the counts in the multi-district litigation in Florida that are specific to the state of Florida have been dismissed twice, although the court has permitted the Florida plaintiffs a third chance to replead. Moreover, a Magistrate Judge has recently recommended to the District Judge that the Mississippi complaint also be dismissed. We did make CNN aware of those rulings."
Repairer Response
Regarding the show's portrayal of the collision repair industry overall and its relationship with the insurance industry Aaron Schulenburg, executive director of the Society of Collision Repair Specialists, responded to CollisionWeek with a statement that supported the message the show delivered and that the market is broken and does not serve consumers.