INDIANAPOLIS (Aug. 18, 2005)––The National Association of Mutual Insurance Companies (NAMIC), the nation’s largest property/casualty trade association, hailed today’s Illinois Supreme Court decision in Avery et al. v. State Farm and called upon lawmakers to establish safeguards for preventing further instances of class action abuse.
“In overturning the trial court’s ruling that State Farm’s use of non-OEM parts violated Illinois’ consumer fraud act, the state supreme court effectively vindicated insurers’ use of non-OEM parts as a cost-effective alternative to OEM parts, the use of which benefits consumers by lowering repair costs and, thus, premiums,” said NAMIC Public Policy Director Robert Detlefsen. “But what is equally significant, from a legal and public policy standpoint, is the supreme court’s core ruling that the case should never have been tried as a class action in the first place.”
The court pointed to glaring differences among the members of the plaintiff class with regard to such fundamental matters as the language in their policy agreements and whether they had actually had non-OEM parts installed in their vehicles. “Accordingly,” the Supreme Court averred, “it was an abuse of discretion for the circuit court to certify plaintiffs' breach of contract claim as a class action.”
“It’s wonderful that the Illinois Supreme Court has declared that the Avery case should not have gone to trial nearly six years after the trial court’s decision,” Detlefsen said. “But it’s appalling to think that in the meantime, State Farm was forced to spend millions of dollars defending itself from what was essentially an illegitimate lawsuit. Because State Farm is a mutual company, those dollars came directly from the pockets of its policyholders. Even worse was the nationwide moratorium on the use of non-OEM parts that the illegitimate decision effectively imposed, contravening the laws of 47 states that had independently approved insurer’s use of non-OEM parts.”
“All of this could have been avoided,” Detlefsen continued, “if Illinois had a law allowing either party to immediately appeal an adverse class action certification ruling to the state supreme court, with a requirement that the supreme court issue a definitive ruling on the appeal before the case could go to trial. Texas passed such a law three years ago, and the Avery debacle should serve notice to other states that they ought to follow Texas’s lead.”
The Court’s decision can be read online.