A federal judge has kicked West Virginia's lawsuit against Liberty Mutual for use of unauthorized salvage parts back to the state courts. The insurance company's attorneys had attempted to have the case moved to federal jurisdiction, claiming the case involved issues covered by the Magnuson-Moss Warranty Act. Like this article? Sign up to receive our weekly news blasts here.
In December 2011, West Virginia Attorney General Darrell McGraw filed a lawsuit against Liberty Mutual and a St. Albans-based body shop, Greg Chandler's Frame and Body, with violating the state's Crash Parts Act by installing salvage parts on vehicles less than three years old without consent.
The AG's office became involved when a former employee of Joe Holland Automotive presented them with information that Liberty Mutual specifically asked shops in its direct repair program to use salvage parts without obtaining written consent. The Holland shop was removed from the Liberty Mutual direct repair program (DRP) after apparently refusing to comply with the insurer’s requirements.
The lawsuit, filed in Kanawha County Circuit Court, asks the court to enjoin Liberty Mutual from future engagement in the illegal activity, and asks for restitution for consumers whose cars were illegal repaired along with civil penalties.
Under the provisions of the West Virginia Consumer Credit and Protection Act, it is illegal for insurance companies to require the use of salvage, used or reconditioned OEM crash parts on repairs of motor vehicles less than three years old without acquiring the vehicle owner’s written consent.
According to the original petition, Chandler's Frame and Body "failed to include in its estimates a written statement on a separate piece of paper in ten-point capital type notifying the motor vehicle owner that salvaged crash parts are being used to repair the owner's vehicle."
“My office will always work to insure that West Virginians receive safe, high-quality, competent, and lawful repairs to their vehicles,” McGraw said in a statement released at the time. “Implementing policies that thwart state law in an effort to increase profits is unacceptable.”
According to Erica Eversman, an attorney with Vehicle Information Services in Akron, Ohio, West Virginia is somewhat unique in requiring written consent for the use of aftermarket or salvage parts.
"They may have been providing notice in terms of the type of ordinary notice that has worked its way into collision estimates," Eversman said. "But the problem is, that doesn't mean anything to consumers. In this case there was no express consent provided, and that's included in the AG's documentation."
Lawyers for Liberty Mutual attempted to move the lawsuit to federal court, citing potential issues that may have been covered by the 1975 warranty act. This resulted in the preliminary injunction hearing being canceled. According to an article in the Charleston Gazette, the AG's office claimed this was a stalling tactic. "That's why they did it," Assistant Attorney General Jill Miles told the Gazette. "It's a way of delaying the injunction hearing."
The Magnuson-Moss Act (MMWA) was passed in order to protect consumers from deceptive warranty practices. It requires that warrantors provide terms and conditions of a warranty in easily understood language.
In denying Liberty Mutual's attorneys motion, Federal Judge Joseph Goodwin (of the Southern District Court of West Virginia) wrote: "The provision of the MMWA cited by the defendants prohibits warrantors of consumer products from conditioning their warranties in certain circumstances. In contrast, the Crash Parts Act maintains standards for motor vehicle body shops and insurance companies for the repair of new automobiles. The federal and state statutes govern different actors and different conduct. It is nonsensical to allege that a claim that an insurance company and a motor vehicle body shop have repaired automobiles in a way that violates the Crash Parts Act is actually a claim under the MMWA, which applies to warrantors of consumer products."
This setback for the Liberty Mutual attorneys could have an impact in other states depending on the eventual outcome of the original suit, Eversman says, because it will help state regulators understand issues surrounding crash parts notifications.
"Even in states where only notice is required, this could have a big effect because it highlights a huge issue," Eversman said. "Giving somebody notice in industry terminology, which is essentially a foreign language to the consumer, is not notice. That's not meaningful. People can't understand it, they don't read, they don't know what it is. It's not in plain language that says, 'Hey, we're going to stick an imitation crash part on your car, or we're going to stick a salvage yard part on your car.'"
