The suit alleges breach of contract, fraud, and unfair competition, and specifically that Mitchell misrepresents the source of its data used to determine repair estimates, and that the data really comes from insurance companies, who have a vested interest in low-balling actual repair costs. Included in the complaint is the allegation that Mitchell is “intentionally understating the cost to repair damaged automobiles at the request of State Farm and other insurance companies,” and that “State Farm and other insurance companies were influencing Mitchell to adjust its time and labor estimates in an effort to reduce the costs of repair. In exchange for acquiescing to the insurance companies’ request to intentionally understate costs to repair damaged vehicles, Mitchell’s software was endorsed by State Farm and other major insurance companies.”
The suit contends a conspiracy exists between Mitchell and several large insurers to systematically lower the estimated costs to repair damaged vehicles, giving cover to insurers looking to pay lower rates for repairs. The complaint states that “Mitchell has succumbed to threats made by various large insurance companies to fraudulently lower auto body shop repair costs through manipulating data base times and costs to reduce overall charges paid to many other auto body shops, in order to arbitrarily reduce the cost of reimbursable repairs due from large insurance companies.”
The suit seeks substantial damages (formally in excess of $25,000 but final amount to be determined in court), including lost earnings and profits from business lost due to cancelled DRP agreements, in addition to attorney’s fees and punitive damages. In fact, the Waldrens claim that “Mitchell conspires and participates in ill-gotten profits earned by large insurance companies… as a result of this misconduct, [the Plaintiffs] have suffered substantial losses in excess of millions of dollars per year per insurance company.”
Paramount complained that “a number of auto body shops have [been] compensated for the underestimated time and labor cost estimates by utilizing used and/or sub par parts, as well as less experienced, unqualified, and cheaper labor. This conduct has compromised the safety of the public consumer, and upon information and belief caused accidental deaths of unsuspecting motorists. Paramount has refused to compromise the quality of their repair work to fit the Mitchell estimates, thereby suffering a substantial reduction of profit.”
The Waldrens have operated Paramount Autobody for three decades and have used Mitchell estimating data since the 1980s. Paramount claims that in 2006, when it first complained to State Farm about the understated estimates, the shop was unilaterally terminated from the insurer's preferred program. The shop learned from a Mitchell employee in 2008 that that the software was intentionally designed to underestimate time and labor costs. When Paramount complained directly to Mitchell about this, Mitchell, in June 2009, refused to renew its contract with the shop. When Paramount no longer utilized Mitchell’s system it jeopardized its DRP relationships with other insurers who prefer doing business with shops that utilize the Mitchell software. Paramount named Progressive and American Family as some of the insurance companies that “prefer paying for the lower cost at the shops that compromise quality for price” and who prefer using shops that “go along with the sub-par pricing and repair encouraged by Mitchell.”
To further aggravate damages to Paramount and other shops, the complaint says Mitchell sold the EMS data belonging to many other body shops, which contains their intellectual and proprietary information, without their permission, to insurance companies who then used the collective shop data to gain an unfair competitive advantage over all the auto body shops by driving the market place to the lowest price factor, and resulted in an industry wide reduction in the cost of repairs.
Some examples that Paramount cites are times established for damaged vehicles are in fact times for assembling new vehicles, wherein actual time to repair a damaged vehicle is clearly more than to assemble new.
Stated blending times are underestimated in that the time to blend is less than the time to paint without any blend. Fenders are paid higher time factors than doors. Less time is given to a used fender than a new fender. Time to paint undersides are less than topsides, etc.
The Waldrens and Paramount are represented by San Diego attorney Kevin J. Mirch. Mirch is not without controversy and is a former Nevada attorney and Supreme Court candidate who has a reputation for supporting underdogs against large and powerful interests, a predilection that may have been a politically-motivated factor in his ultimate disbarment in Nevada. He is, however, fully qualified to pursue this and other cases in California.
Mirch is making his time available to give talks and seminars to other attorneys and body shops who are considering similar cases, and a fund is established to support this endeavor.
Contact his office at 444 West C Street, Suite 320, San Diego, CA 92101, phone: 619-501-6220 or fax 619-501-6980. Anyone having material information is invited to contact Mirch at KevinMirch@mirchlaw.com.
Mitchell has been invited to comment on the case.