A $17 million verdict in a class-action lawsuit concerning the use of aftermarket auto parts has gone against an insurer who used non-OEM or salvaged OEM parts when repairing some of its Missouri customers' automobiles.
The class action, Smith, et al., v. American Family Mutual Insurance Company, was first filed in 2003 as a breach of contract suit and was nationwide in its scope. However, the Missouri Supreme Court limited the case to just Missouri policyholders.
In court documents, American Family was accused of basing its repair payouts on the cost of non-OEM parts and omitting some repairs, thereby breaching contract to repair the vehicle to pre-loss condition. According to a transcript of the opinion, American Family Mutual's repair guidelines stipulated that adjusters were to use non-OEM or salvaged OEM parts for automobiles that were older than three years. These guidelines were apparently later integrated into an electronic estimating system that automatically quoted non-OEM crash parts for certain model years. It was alleged that the estimating system also failed to include the cost of other associated costs of repair, including seat belt tests, wheel alignments, corrosion protection, and more. The plaintiffs contended that this meant inferior parts were used to repair their vehicles.
A three-week trial resulted in a jury verdict against the insurers, but the judge in the case chose to grant American Family's request for a judgment notwithstanding the verdict (JNOV) due to failure of proof. A JNOV is often requested but rarely granted. It allows the judge the opportunity to avoid extreme and unreasonable jury decisions.
Last month, however, an appeals court found the JNOV was in error and reinstated the damages originally found in the trial court's jury verdict. Damages for the breach of contract claim amounted to $13.1 million, while the damages for omitted repairs breach of contract claim were listed at $4.3 million.
However, American Family indicated that the matter was not necessarily over. “[We are] disappointed by the appellate court ruling, and we are considering our legal options, including our right to an appeal,” said Steve Witmer, spokesman for American Family. “We feel very strongly that our policyholders' best interests are best served by our business practices and policies to include aftermarket parts in certain auto repair estimates. American Family routinely explains to its customers the specification of these parts, and we stand behind the quality and fit of these parts. The specification of these parts has been legal in Missouri since the 1980s.”
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