NAMIC Reacts to Ohio Director’s Praise of Court Ruling

Ohio Insurance Director Ann Womer Benjamin praised a recent decision of the 8th District Court of Appeals in Cuyahoga County, which provides protection to Ohio insurance consumers and defends Mayfield Village-based Progressive Insurance Company from a national class action that could have led to higher automobile insurance rates for Ohioans.

In September, the Department filed an amicus brief with the Court in support of Progressive.

“This decision will protect Ohio consumers from potentially huge increases in automobile insurance,” Womer Benjamin said. “Ohio consumers enjoy one of the healthiest automobile insurance markets in the country, and this decision will protect our market from significant cost increases at a time when few consumers could afford them.”

“NAMIC agrees with the 8th Circuit decision and applauds Commissioner Womer Benjamin and her staff for helping protect the state’s healthy and competitive auto insurance market,” Joe Thesing, NAMIC’s state advocate, commented. “We also agree with and support the OII study. Legislatures in other states such as North Dakota may wrestle with the issue of after market parts, this year.”

A national class action against Progressive reportedly could have seriously impacted Ohio consumers in the form of higher premiums – because of Progressive’s large market share (they are the third-largest auto insurer in the country), reversing the lower court’s decision against a class action could have destabilized the broader auto insurance market.

The case, Augustus v. Progressive, involved Eric Augustus, a Kentucky resident dissatisfied with the November 1998 repairs to his 1993 Chevrolet pick up truck. Augustus filed a lawsuit and sought class action status in 1999, accusing Progressive of not fulfilling its contractual duty to return his vehicle to “pre-loss condition” because the insurer reportedly allowed the use of two non-OEM (original equipment manufacturer) parts.

Ohio law allows the use of non-OEM parts, known as generic or aftermarket parts, and requires insurers and repair facilities to notify a consumer when an estimate for repairs is based in whole or in part on the use of non-OEM parts.

A study conducted by the Ohio Insurance Institute found that the cost of building a 2001 Chevrolet Cavalier with OEM parts was $63,240.14, while the manufacturer’s suggested retail price was only $15,395.00. Industry observers believe that without non-OEM parts, manufacturers’ total control of the parts market could lead to even higher costs for auto repairs. That, in turn, would result in increased insurance premiums.

In denying the class action certification, the appellate court affirmed the decision of the lower court that the case did not meet the standard for class action status because reportedly common questions of law do not predominate over the class members’ claims, the litigation is not manageable, the identity of proper class members is based on many factual variables, and the class mechanism is not the superior method of adjudication.