Aftermarket Parts Lawsuits Hit Canada

AXA Canada and ING Canada named in class action IBC to look at insurance company practices

Monday, January 3, 2000

Insurance companies in Canada are starting to feel the impact of the U.S. aftermarket parts class action trial that ended October 8th in Illinois with a $1.18 billion award against State Farm .

Some recent Canadian events:

• A class action style lawsuit has been filed in Quebec against Groupe Desjardins, ING Canada (the second largest auto insurer in Canada) and AXA Canada (seventh largest) relating to their use of non-OE parts.
• The Insurance Bureau of Canada (IBC) has asked its Ontario claims committee to look at their current practices with respect to aftermarket parts and develop a sound position on the issue.
• The Automotive Industries Association of Canada (AlA), representing automotive manufacturers and suppliers in Canada, is urging full disclosure to consumers of the aftermarket status of any collision repair part, and worries that all aftermarket manufacturers will be tarred with the same brush. Ray Datt, AlA president said "We worry about insurers dictating to body shops on price rather than proper fit. In some cases an aftermarket part is fine; in other cases it isn't."
• Both State Farm and Liberty Mutual Insurance have announced a prohibition on using some or all non-OE crash parts on vehicles repaired in Ontario. Liberty Mutual Insurance is one of nine insurers named in aftermarket parts class action suits in the United States.
• Transport Canada is being requested by a trade association in Alberta to prohibit importation of possibly unsafe aftermarket parts and stop them from entering Canada.
• A group in Ontario is demanding that Transport Canada provide for recalls of unsafe structural aftermarket parts in the same fashion that OEM parts are recalled. Aftermarket mechanical parts manufactured by such brand name companies as Monroe and Moog Canada have previously been subject to Transport Canada recall.

ALBERTA DROPS STAFF ADJUSTER LICENSING

December 2000, Canadian Insurance

In a major coup for the Alberta insurance industry, regulators agreed in mid-November to remove any requirement for staff adjuster licensing from the new Insurance Act.

Insurers had strongly opposed the requirement, arguing that it was unnecessary and potentially costly. Peace Hills General Insurance Company president Diane Strashok, who helped spearhead the lobby, says insurers have it in writing from MLA Marlene Graham and Superintendent of Insurance Bernie Rodriques, that an amendment will be made to the Act. Insurance companies will now be formally responsible for the product of their employees, including staff adjusters. "Now, if there is a complaint of incompetent, fraudulent or illegal activity, the Superintendent will have the power to make sure that person no longer handles claims," says Strashok. "The insurance company can move that person to a different area-and we agree with that process." Strashok notes that the Alberta Insurance Council, which handles consumer inquiries, has to date received no complaints about the conduct of staff adjusters.

Alberta's Insurance Act, Bill 25, has received royal acent but has not been proclaimed into law. Several industry observers expect that to happen in the current legislative session.

Comments from the Hamilton District Autobody Repair Association (HARA)

Dec.15.1999

Following the pattern of aftermarket crash parts litigation that rocked State Farm Insurance with a $1.2 million (US) penalty, two separate lawsuits were filed November 11 against The Hartford and Travelers for using and not disclosing the use of aftermarket parts in policyholders' car repairs. This brings to 9 the number of insurers with law suits pending. Most are asking for class action status.

Other suits filed against insurers are: State Farm, CNA, Allstate, SAFECO, Liberty Mutual, USA, and GEICO. In Ontario, Liberty Mutual and State Farm have announced restrictions on their use of aftermarket parts to repair collision damaged vehicles.

Aftermarket crash parts, also known as non-Original Manufacturer Equipment (OEM) parts - sheet metal parts, such as hoods and fenders - fail to restore cars to their "pre-loss condition" as promised in the companies' insurance policies, according to the plaintiffs. James Johnson, attorney at New York-based Goodkind, Labaton, Rudoff, and Sucharow, the firm representing the plaintiffs, also claims that aftermarket parts pose a safety threat to drivers.

In Ontario, The Hartford sells some $5 million (Cn) in vehicle policies with Travelers accounting for only $1.3 million (Cn). State Farm writes $529 million (Cn) in car policies annually in Ontario, with Allstate and Liberty Mutual taking in $201 million (Cn) and $194 million (Cn) respectively.

The cases are the first aftermarket parts lawsuits brought against The Hartford and Travelers, according to Johnson. They were filed in the Stamford division of the Superior Court of Connecticit and are seeking nationwide class action status. "This case seems to have been prompted by both the recent verdict against State Farm and the proclivity of the plaintiffs' bar for copycat suits," says Cynthia Michener, a spokesperson for The Hartford, the USA Number 15 auto insurer. Travelers, the Number 10 auto insurer in the USA, pays for OEM parts to repair cars that are not more than two years old, according to Kris Hammond, a spokesperson for the company