AIA, Chamber and ATRA laud high court's dismissal of billion dollar verdict against State Farm

By The Madison County Record | Aug 18, 2005

The American Insurance Association, U.S. Chamber of Commerce and the American Tort Reformation Association were quick to respond to the announcement today by the Illinois Supreme Court to overturn Avery v. State Farm.

The court ruled that the class was improperly certified by a lower court in Williamson County.

"Avery" involved insurer use of generic auto collision repair parts, which are also known as "aftermarket" or "non-OEM" (original equipment manufacturer) parts.

The billon dollar verdict was the second largest ever recorded in the state and the largest against an insurance company, according to the American Insurance Association (AIA).

David Snyder, vice president of the AIA, called the decision a "huge win" for consumers.

"Today the court addressed all of the harm that was done to consumers in the state of Illinois and in states nationwide, including the many issues arising out of the establishment of the national class action, and Illinois imposing its public policy on the legislatures and insurance regulators of other states," Snyder stated in a press release.

The U.S. Chamber of Commerce also praised the court's ruling.

"This is a victory for businesses and it sends a strong signal that class action abuse won't be tolerated," said Robin Conrad, senior vice president of the National Chamber Litigation Center, which filed an amicus brief supporting class decertification.

"The aggregation of 4.7 million claims in one lawsuit defied common sense and violated State Farm's due process rights," Conrad added. "Had this case gone forward as a class action, it would have been a travesty of justice."

In the 1998 class action suit, a Williamson County judge made the following award of damages: $456 million for breach of contract, $600 million for punitive damages under the consumer fraud law and $130 million for disgorgement damages – representing direct savings realized by State Farm from use of non-OEM parts.

The intermediate appellate court reversed the award of disgorgement damages and upheld the rest. The class claims were based on the allegation that the insurers specified non-OEM parts in preparing estimates for repairs – even though other states (e.g., Hawaii and Massachusetts) in which the insurers issued auto policies permitted or even required the use of non-OEM parts.

The American Tort Reform Association (ATRA) called the decision a "blow against regulation through litigation."

"The Court deserves praise for refusing to allow trial lawyers and a single judge in one case to dictate how forty-eight states and the District of Columbia treat the use of replacement parts in car repairs—the very essence of regulation through litigation," Tiger Joyce, ATRA President, said.

"The Court was respectful of Illinois legislators and regulators, lawmakers in other states, and especially the public at large," he added. "The Court took a commonsense approach to the Illinois consumer protection statute and showed its respect for the rule of law."

The Madison County Record is owned by the Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce.

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