The case centers on allegations that Progressive has illegally steered policyholders toward its direct repair program (DRP) participants while utilizing DRPs that are not properly licensed to do business in the state.

In addition, the plaintiffs are contending that Progressive does not adequately pay for proper repair procedures.

The 15-page suit could have implications for independent body shops in other jurisdictions as well, according to lawyer Bill Markovits, who is representing the three Ohio-based plaintiffs: Blue Ash Auto Body of Blue Ash; the Finney Automotive Co. in Cadiz; and Jim Collins Auto Body of Westwood. They referred all questions to Markovits.

"Some of the case involves nationwide phenomena," says Markovits, pointing to the charges of "deceptive steering" and shop owners "not being paid for auto body industry standard procedures."

The lawsuit says that the company "ensures an increased volume of work for DRPs by steering insureds, through unfair and deceptive means, away from the independents and to the DRPs. In return for this volume of work, (the) DRPs repair consumers' vehicles according to Progressive's dictates, which cut costs and corners to lower collision claims expense paid by Progressive."

The steering is accomplished by the insurer's employees telling policyholders that a non-DRP's prices could be inflated, the repair process delayed and the work may be of lesser quality, plus the customer could be obligated to pay extra out-of-pocket costs, according to the suit.

Permitting issue

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"They're operating illegally," says Markovits, "Progressive is working with unregistered shops – illegal shops."

In addition to concerns over whether the repairs are done safely and correctly, the unlicensed operations have an unfair advantage over legitimate businesses because their overhead is lower, he notes, asserting that Progressive "is turning a blind eye" to these shops in exchange for cheaper repairs.

"We don't comment on litigation issues," says Progressive spokeswoman Leah Knapp. She told the Cincinnati Enquirer's Mike Boyer, however, that "our customers always have a choice about where to have their vehicles repaired. They can choose their own body shop, a shop in our network or, where available, they can use our concierge level of claims service offered at our service centers. The bottom line is: it's the customer's car; it's the customer's choice."

Knapp also insisted to the newspaper that all the shops in Progressive's DRP network are required to follow state licensing and registration rules.

"They're not saying, 'You have to show your registration number,'" counters Markovits, comparing the situation to a health insurance provider sending patients to an unlicensed doctor. "They shouldn't be paying for these services by unregistered and illegal shops. Progressive shouldn't be taking part in it."

Markovits goes on to assail the insurer for allegedly underpaying the independent shops conducting repairs on behalf of its customers. "There's no reason for them to refuse to pay for these repair procedures," he says, noting how the industry's standards are "basic and universally accepted for a safe and quality repair."

"Although not accepting any liability for the safety or quality of repairs, Progressive arbitrarily imposes 'caps' on the amounts it will pay for certain repair activities and outright refuses to pay for some repair procedures, materials or activities," the suit says.

Payment caps

"For example, Progressive refuses to pay more than a set time for 'set up and measure' and 'pull time' for frame and unibody alignments," according to the filing. "Progressive arbitrarily caps the amount it will pay for paint and materials, without regard for the actual amount of paint and materials a shop must use for a proper repair and also caps the amount it pays for disposal of hazardous waste. Progressive outright refuses to pay for flex additive, for shop materials, feather/prime/block, finish/sand/buff, liquid masking, taping interiors, labor for covering the vehicle, color tinting, test driving the vehicle, and the time and labor necessary to clean a consumer's vehicle after the repairs and prior to delivery."

The lawsuit also charges that Progressive's adjusters are required to use a specialized estimating system designed to omit certain industry standard repair strategies. The software has been programmed to "artificially reduce the amount of time and materials needed to perform a particular repair function for the 'paint within panel' procedure, and excluded the necessary safety procedure to 'aim headlights' when the headlights or front areas of the vehicle are involved in the repair," the filing alleges.

Markovits is confident that the plaintiffs will prevail. "We have a strong case," he says. The matter is currently pending: "We're waiting for what the defendants are going to do."