The Connecticut Supreme Court recently overturned a $34.7 million judgment against The Hartford Fire Insurance Company (“Hartford”) in a class action suit filed by over 1000 auto body repair shops alleging unfair trade practices by Hartford for paying the shops well below their hourly rates.
In 2009, a jury awarded $14.7 million in compensatory damages to the plaintiffs due to Hartford’s alleged violations of the Connecticut Unfair Trade Practices Act (“CUTPA”). The jury found that Hartford had engaged in deceptive practices by requiring its adjusters to use artificially low hourly labor rates when estimating the cost of repairs. The trial court later imposed an additional $20 million in punitive damages upon Hartford.
On appeal, plaintiffs argued that while Hartford’s labor rate practices are not prohibited by the Connecticut Unfair Insurance Practices Act, a state regulation mandating fair and unbiased appraisals by physical damage appraisers created a private right of action under CUTPA. The Supreme Court disagreed, holding that the regulation did not apply to the conduct at issue. The court found that “[i]insurance companies in this state have the right to negotiate the hourly labor rate that they are willing to pay for auto body repairs and to refuse to give their business to an auto body repair shop with which they are unable to agree on such a rate.” The Court further noted that the body shop owners were “capable of representing their own interests” and were “under no obligation to accept insurance related work that is not sufficiently remunerative.”
The Supreme Court’s opinion in Artie’s Auto Body, Inc., et al. v. The Hartford Fire Ins. Co. can be found here.
