State Farm To Face Litigation In Louisiana
When State Farm, the insurance and financial services company, was sued by the state of Louisiana, the move opened a floodgate of allegations. State Farm was sued for engaging in auto repair services that were both “unsafe and deceptive”. The major complaint against the firm was that it had used it influence and power in an unfair manner. State Farm holds a huge share of all auto insurance policies in the state of Louisiana. In 2012, alone, this company received over $1 billion in premiums and wrote about 66.6% of all automobile insurance policies in the state.
State Farm is accused of steering customers and policy holders to its preferred repair shops. This can be interpreted as abuse of office and unfair use of influence. To make matters worse, some of these “preferred shops” did not use original spare parts recommended by the manufacturer. Some of the parts used in these shops were described as “after-market”, “junkyard” and “knock-off” parts.
It has been established that State Farm has contractual relationships with the preferred shops. It was also discovered that the shops agreed to carry out repairs cheaply and quickly. In addition, an owner of a body shop admitted that State Farm was putting pressure on him to use after-market parts on cars he repairs for policy holders. This means that safety and standards were sacrificed for profit and convenience. According to the Louisiana suit, State Farm broke state laws by influencing the consumer in an unfair manner. It is also clear State Farm has contravened the laws that regulate monopolies and unfair trade practices.
State Farm responded to these allegations by stating that they are advocates of reasonable repair costs. They also added that customers have a right to choose repair shops and do not have to patronize shops recommended by State Farm.