The following appeared in Collision Week online, Fri, 20 Feb 2015

U.S. Senator Reiterates Call to Investigate Auto Insurance “Scheme”
A frequent critic of both insurance companies and vehicle manufacturers, U.S. Senator Blumenthal of
Connecticut asks Attorney General to investigate possible illegal practices by auto insurers. Asks for DOJ
update on 1963 Consent Decree’s applicability to today’s marketplace.

U.S. Senator Richard Blumenthal announced yesterday that he sent a letter
to Attorney General Eric Holder urging the Department of Justice (DOJ) to
investigate auto insurance company claim practices that were highlighted in
a report last week by CNN. In 2009, when Blumenthal was the Attorney
General of Connecticut, he asked the Department of Justice conduct a
similar investigation.
The report by CNN, on which Blumenthal was interviewed, detailed
allegations contained in the antitrust lawsuits filed by collision repair facilities
alleging illegal activities by auto insurers. On the day of the CNN report,
CollisionWeek reported on the amended complaint filed in A&E Auto Body,
Inc., et al. v. 21st Century Centennial Insurance Company, et al, one of
more than 20 antitrust suits pending in Florida.
In the letter, Blumenthal questions the parts used by collision repairers on
insurance claims and raises the concern that consumers are being deceived
by auto insurers and their safety may be at risk as a result.
“As junk yard, remanufactured, and used parts of substandard quality
become increasingly widely available, auto insurers are adopting alarming
new ways to save money at the expense of consumer safety. Contrary to
what consumers may be led to believe by their insurers, repair shops
preferred by insurers do not necessarily equate with quality repairs,”
Blumenthal wrote. “It seems to be common knowledge among auto repair
shops that the best way to land a coveted spot on an insurer’s preferred list
is not necessarily by delivering consistent, quality service, but by agreeing to
charge below-market labor rates and use cheaper, salvaged, used, or even
counterfeit parts of questionable quality and safety.”
While criticizing the parts that repair facilities use in this most recent letter,
Blumenthal has supported non-OEM parts suppliers and independent repair
facility operators against vehicle manufacturers in the past on issues
surrounding parts requirements and their impact on vehicle manufacturer

warranties. In October, Blumenthal wrote a letter to the Federal Trade
Commission (FTC) raising concerns that vehicle manufacturers deceive
consumers about tying warranty terms to the use of OEM parts or services
by dealerships.
Driver safety is a frequent topic of interest to Senator Blumenthal. On
February 11, the day CNN aired its report on collision repair, Senator
Blumenthal announced legislation to improve the security of vehicle
electronic systems from hacking and to provide privacy protections to
consumers. If passed, the legislation would direct the National Highway
Traffic Safety Administration (NHTSA) and the FTC to establish federal
standards to secure cars and protect drivers’ privacy.
1963 Consent Decree
In the letter to Attorney General Holder, Blumenthal also requested that the
DOJ determine whether insurers are still bound by the terms of the oft-cited
1963 Consent Decree the DOJ entered into with several property casualty
insurer associations and their members that sought to address insurer
conduct with appraisers, independent and dealer collision repair facilities.
“I urge the DOJ to investigate and make a determination as to whether such
practices violate the 1963 consent order or any other current federal laws.
As you investigate this matter, I urge you to use your authority to investigate
the contents of contracts between insurance companies and facilities listed
in their direct repair programs or preferred lists,” Blumenthal wrote. “I would
also like to request an update regarding DOJ’s understanding of the current
signatories of the 1963 consent decree and whether they continue to be
bound by the consent decree in light of business transactions in the years
since the decree was signed.”
The DOJ has declined previous requests, going back decades, by the
collision repair industry to enforce the consent decree.
In 1979, the DOJ determined that entering into perpetual decrees, such as
the 1963 consent decree, was not in the public interest. Since then, decrees
have included “sunset” provisions that will automatically terminate them after
a period of time not to exceed 10 years. Most decrees entered into before
1980, like the 1963 Consent Decree between the DOJ and the insurance
associations, do not contain this sunset provision.

Last year, the DOJ announced expedited procedures to allow parties to
these perpetual consent decrees to have them modified or terminated.
According to the DOJ, pre-1980 perpetual decrees cannot be terminated or
modified except by court order.
In announcing the expedited process, the DOJ stated “Going forward, the
department will advise courts that pre-1980 ‘legacy’ decrees, except in
limited circumstances, are presumptively no longer in the public interest.
Those limited circumstances may include when there is a long-standing
reliance by industry participants on the decree.”
Collision repair facility plaintiffs in the antitrust lawsuits also included
allegations that insurers were violating terms of the 1963 Consent Decree.
As CollisionWeek reported in January, U.S. District Judge Gregory A.
Presnell, in a footnote to the order dismissing charges in the earlier
complaint in the A&E Auto Body, Inc. suit found that the 1963 Consent
Decree was not relevant to the case since the parties included in the
consent decree were not part of this case. The footnote states, “In the
Amended Complaint, the Plaintiffs repeatedly refer to a consent decree
entered in a 1963 suit between the United States on one side and three
insurance trade associations on the other. (Doc. 167-5). Although some of
the practices at issue in the consent decree are alleged to have occurred in
the instant case, none of the parties in this case were parties to the 1963
case, and the Court does not find the 1963 consent decree to have any
relevance to the instant case.”
The full text of Senator Blumenthal’s letter to Attorney General Holder is
reproduced below:

See Senator Blumenthal’s letter below.

The Honorable Eric Holder
Attorney General of the United States
Robert F. Kennedy Building
950 Pennsylvania Avenue NW
Washington, DC 20530

Dear Attorney General Holder:

As a longtime advocate of consumer choice, I write to bring to your attention
to troubling new evidence that our nation’s top auto insurers continue to
engage in anticompetitive and possibly illegal tactics to pressure consumers
into repairing their vehicles at insurer-preferred repair shops. As uncovered
in a special investigation featured on Anderson Cooper 360 Wednesday
evening, insurance steering not only undermines a basic consumer right, but
can also compromise the safety of vehicles on our nation’s roads—
endangering motorists and their passengers.
I urge the Department of Justice (DOJ) to immediately investigate such
practices by the auto insurance industry and act swiftly to protect the safety
of consumers and preserve competition in the auto repair industry.
As junk yard, remanufactured, and used parts of substandard quality
become increasingly widely available, auto insurers are adopting alarming
new ways to save money at the expense of consumer safety. Contrary to
what consumers may be led to believe by their insurers, repair shops
preferred by insurers do not necessarily equate with quality repairs. It seems
to be common knowledge among auto repair shops that the best way to land
a coveted spot on an insurer’s preferred list is not necessarily by delivering
consistent, quality service, but by agreeing to charge below-market labor
rates and use cheaper, salvaged, used, or even counterfeit parts of
questionable quality and safety. Unfortunately, many consumers are also
being misled into thinking that they are required to have their car repaired at

one of these shops. This has the harmful effect of limiting consumer choice,
creating a serious safety risk, and suppressing competition in the auto repair
industry.
According to a 1963 consent decree with the DOJ, a number of insurers
were ordered to stop: “sponsoring any appraiser; directing, advising or
otherwise suggesting any person or firm do business with any independent
or dealer-franchised automotive repair shop; exercising control over the
activities of any appraiser; and fixing or otherwise controlling the prices
charged by automotive repair shops for the repair of damage to the vehicle
or for labor in connection therewith, by use of a flat rate.” Over 50 years
have since passed, and consumers and auto repairers possibly remain
victims of the very same misconduct insurers were directed to stop doing
decades ago.
I urge the DOJ to investigate and make a determination as to whether such
practices violate the 1963 consent order or any other current federal laws.
As you investigate this matter, I urge you to use your authority to investigate
the contents of contracts between insurance companies and facilities listed
in their direct repair programs or preferred lists. I would also like to request
an update regarding DOJ’s understanding of the current signatories of the
1963 consent decree and whether they continue to be bound by the consent
decree in light of business transactions in the years since the decree was
signed.
Thank you in advance for your prompt attention to this important matter
harming consumers and the auto repair industry, and compromising vehicle
safety.
Sincerely,

RICHARD BLUMENTHAL
United States Senator