Connecticut High Court Overturns $35M Auto-Repair Award

The Connecticut Supreme Court on July 13 unanimously overturned nearly $35 million in damages against the Hartford Fire Insurance Company.

The Supreme Court said the lower court had incorrectly concluded that the Hartford Fire violated the state’s unfair trade practices law when it paid auto repair shops agreed-upon labor rates that the plaintiffs claim are lower than the actual value of the shops’ services.

The plaintiffs – Artie’s Auto Body, A&R Body Specialty, Skrip’s Auto Body and the Auto Body Association of Connecticut – brought the class action in 2003 against the Hartford Fire on behalf of more than 1,000 independent auto repair shops in Connecticut.

Following a trial in 2009, the Superior Court jury found in favor of the plaintiffs and awarded $14,765,556 in compensatory damages. Later, the trial court awarded plaintiffs $20,000,000 in punitive damages and rendered judgment for plaintiffs in the total amount of $34,765,556. The Supreme Court’s July 13 decision overturns the lower court ruling as well as the monetary damages.

The plaintiffs had filed the class action asserting that the Hartford Fire, when appraising auto body damage sustained by its insureds, engaged in unfair trade practices by requiring its appraisers to use artificially low labor rates agreed on by the insurer and the plaintiff auto body shops.

Court documents showed that the appraisers, when negotiating on behalf of the Hartford Fire, used the labor rate in the insurer’s direct repair program (DRP). Under this program, repair shops contractually agreed to perform repairs at a labor rate set by the Hartford Fire in return for “a steady stream of customer referrals.”

In 2009, during the time of the trial, the DRP rate was around $46 per hour, compared to the $65-to-$78 hourly labor rates that were posted in the plaintiff auto body shops. However, the DRP rate was equal to the rates that other insurers in Connecticut paid for auto repair services.

The Supreme Court noted that regarding the auto repair services purchased in Connecticut, almost all of those services are purchased by insurers. And since most of plaintiff shops’ businesses are insurance-related, it is rare for these shops to be paid their posted rates. The Supreme Court stated that repair shop owners are capable of representing their own interests and “are under no obligation to accept insurance-related work that is not sufficiently remunerative.”

The case is Artie’s Auto Body Inc. et al. vs. Hartford Fire Insurance Company, No. 19219, the Supreme Court of Connecticut.