NJ Superior Court Denies NJM Insurance’s Motion to Dismiss Class-Action Steering Lawsuit

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The Superior Court in Union County, NJ, denied a Motion to Dismiss filed by New Jersey Manufacturers Insurance (NJM) in relation to a class-action lawsuit filed in June 2019 alleging steering-related violations against non-DRP collision repair facilities.

The lawsuit is being led by Sam Mikhail on behalf of Quality Auto Painting Center d/b/a Prestige Auto Body (now dissolved) and BMR Automotive Service, Inc. d/b/a Robbie’s Automotive & Collision Specialists.

The decision means the lawsuit will proceed with NJM facing accusations on a number of offenses, including injurious falsehood and tortious interference with prospective business advantage, as well as violations of the NJ Antitrust Act, NJ’s Consumer Fraud Act, and the state’s Civil RICO Act.

Plaintiffs are seeking class-action status that would include all shops not on NJM’s DRP who fixed, or attempted to fix, a vehicle insured by NJM in the past six years and who witnessed the insurer’s refusal to negotiate in good faith, attempts to steer an insured, or misrepresentations of the shop’s price or quality.

Working on behalf of themselves and the class-action members, the plaintiffs are in pursuit of actual/punitive/treble damages as well as interest, lawsuit costs, attorney fees, and “such other and further relief the Court deems just and proper.” They are also requesting injunctive relief to prevent the insurer from committing these alleged “unlawful acts” in the future.

In addition to denying allegations, NJM has offered the defense that the case doesn’t merit class-action status. In a statement following the court’s decision, the insurer said, “NJM does not ordinarily comment on pending litigation; however, the plaintiffs’ accusations are baseless, and will be vigorously defended.”

Offering no opinion on either party’s argument on Nov. 22, Union County Superior Court Judge Alan Lesnewich simply rejected NJM’s Motion of Dismiss, writing that the decision was made after “the Court having considered the papers submitted, opposition having been filed, Oral Argument having taken place on Nov. 22, 2019 for the reasons set forth on the record on Nov. 22, 2019, and for good cause shown.”

In a news release issued by AASP/NJ after the decision, the plaintiffs’ attorney, Joshua Bauchner of Ansell Grimm & Aaron, PC, said, “At this point, we have rather significant positive action against NJM, including for violations of RICO and antitrust. We believe this is the first action against an insurer of this nature in New Jersey. We have some pretty substantial evidence regarding steering and the disparagement of the plaintiffs.”

Mikhail and BMR v. NJM alleges that, due to NJM’s failure to negotiate in good faith, Prestige Auto Body was forced to substantially reduce its labor and paint charges to meet NJM’s “take it or leave it” pricing model. Prestige also claims that NJM refused compensation for extra installation time on aftermarket parts and only paid for OEM parts after the collision repair facility’s failed attempt to install the aftermarket part.

The lawsuit states, “It often takes months to secure a refund for the aftermarket part which could not be installed and to secure agreement for payment from [NJM], without accounting for the delay suffered by the consumer.”

NJM also failed to pay the true cost on paint and materials, although “the paint cost varies based on the type and color of paint used.” The lawsuit suggested that delays were also caused by the use of “a proprietary program which apparently only one employee of Defendant is permitted to manipulate, therefore a request to utilize the Computer Logic program can delay payment for months.”

Alleging that NJM’s calculations aren’t reflective of the actual job, plaintiffs provided an example: Defendant itself submitted differing estimates for the purported “true cost” of labor and materials, including one on March 20,2017 for $459.55 which purported that Prestige should use exactly 22.59 ounces of base coat, 26.95 ounces of clear coat, 11.095 ounces of pre-paint solvent, 6.28 ounces of adhesion promoter, 14.23 ounces of sealer, 1.45 pieces of coarse sand paper, 4.25 pieces of finesse sand paper, a 0.32 piece of foam polishing pad, 0.22 ounces of hardener, a 0.16 piece of a wool buff pad, and exactly 18.7 feet of (1.5) to 2 inch wide tape.

NJM was accused of “inordinately delay[ing] payment for the vehicle because Prestige pointed out the unfair charges, intentionally harming Prestige by requiring multiple supplements just to recoup amounts approaching fair value. Specifically, the repairs were completed in or around April, 2016, yet Defendant waited approximately one year to remit its insufficient payment to Prestige.”

Quoting NJ’s Shop Choice Rule, Mikhail and BMR alleged that the insurer “knowingly and intentionally” neglected to notify insureds that they could have their vehicles repaired at their shop of choice and also refused “to recommend upon request a qualified repair facility at a location reasonably convenient to the insured’s motor vehicle which will repair the damaged motor vehicle at the insurer’s estimated cost of repairs.”

Robbie Berman, owner of BMR, participated in NJM’s DRP for over 20 years but left the program last year, reportedly due to receiving inadequate reimbursement for his services, and the lawsuit includes multiple examples of NJM allegedly steering work away from BMR by “intentionally misrepresent[ing] to insureds that Robbie’s and other targeted body shops are not on [the insurer’s] ‘preferred list of shops’ – even though they are not permitted to have such a list and insureds did not request a recommendation from [NJM].”

According to Berman, “For the past five years, [NJM was] promising me some kind of increase [in labor rate]. The last time they presented me with a contract, not only did they not give an increase, but they took things away. They told me that washing cars was a part of me doing business, and they cut back on sublets. Cars keep getting more technical, and employees keep getting more expensive. The cost of the cars keeps going up, but somehow the labor rate to repair them keeps going down.”

In AASP/NJ’s statement, Executive Director Charles Bryan expressed hope that a favorable conclusion to Mikhail and BMR v. NJM could positively impact the state’s collision repair industry’s issues. “This suit was brought on by the insurer because of greed and their unwillingness to pay a fair and reasonable amount to repair vehicles damaged as the result of a collision,” he stated.

“The insurer is dictating what it will pay rather than making all reasonable efforts to negotiate an agreed price to repair an automobile as required by the regulations governing fair claim settlement practices, while the New Jersey Department of Banking and Insurance looks the other way. When a collision shop fails to surrender and take whatever the insurer wants to pay, the insurer engages in unlawful ‘steering’ activity by claiming that the shop is being unreasonable and overcharging; they then pressure insureds to have their vehicles repaired at specific ‘preferred’ repair shops that can afford to fix the vehicles at lower rates because of the high volume of work being steered to them. This type of suit has to happen because of the unwillingness of greedy insurers to work these issues out and pay fair and reasonable rates for the procedures now required to safely and properly repair vehicles on the roads today.”

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