Monday, 19 March 2018 10:17

$713,000 Lawsuit Against Progressive Filed by PA Shop Owner

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Across the country, “insurers aren’t fully reimbursing consumers so they can have proper and safe repairs done,” according to Ron Perretta, owner of Professionals Auto Body in Pennsylvania.

“It’s impossible for the shops to fix these cars properly [while] being paid what they are being paid,” said Perretta. “Their hourly rates are being suppressed and the repair operations that are needed to fix these cars properly have been suppressed.”


He said insurers continue to “bully” shops into lowering their rates and not performing operations required to bring the vehicles back to their pre-loss condition.


After experiencing this first-hand for many years at his two Pennsylvania locations in Altoona and Duncansville, Perretta filed a lawsuit against Progressive in 2017.


According to court documents, “Progressive had a contractual duty to the insureds and third-party claimants to compensate Professionals for the reasonable and necessary costs to return the covered vehicles to their pre-loss condition. But rather than agree to reimburse Professionals for the cost of making reasonable and necessary repairs, Progressive directed Professionals to ‘utilize inferior parts and/or to perform inferior service.’”


When Autobody News asked Perretta if Professionals was asked to use inferior parts, the body shop owner replied, “Yes, as they always do… as they do all shops. We refuse to use inferior parts. The years of tracking the return of those parts have led us to not use them anymore.”


Perretta said he has also found that these parts are not crash-tested or safe.


Therefore, when working on customers’ cars, Professionals “perform[ed] all reasonable and necessary repairs to place the vehicles in their pre-loss condition[s],” according to court documents. When the body shop asked to be reimbursed from Progressive, Perretta said the insurance company paid a fraction of the cost of the repairs.


The $712,972.90 Professionals is seeking in damages represents “unpaid balances, ‘delay time costs,’ and administrative costs.”


Insureds and third-party claimants signed what is called an “Assignment of Proceeds” that authorized the body shop “…to recover any unpaid balances for Professionals’ services and repairs,” court documents stated.


“The body shop has a contract with the consumer and the consumer has a contract with the insurance company,” explained Perretta. “The Assignment of Proceeds allows the body shop to ‘step into the consumers’ shoes to secure a fair and reasonable reimbursement.”


As a result, Professionals is allowed to seek damages from Progressive under the insurance company’s contractual obligations to the insureds and third-party claimants.


“Progressive had a duty to compensate the consumer for a reasonable repair,” he added.


The case was originally filed on August 23, 2017 in the Court of Common Pleas of Blair County, PA. Twenty-five insurance companies were named as defendants. A month later, the Court of Common Pleas removed Progressive from the larger case and the insurance company moved the case to the United States District Court for the Western District of PA.


On December 4, 2017, the body shop filed an amended complaint and brought four counts against Progressive: breach of contract; bad faith; intentional interference with business relations; and quantum meruit.


Progressive attempted to dismiss the amended complaint. According to court documents in February (2018), the court denied Progressive’s motion to dismiss Professionals’ claims of breach of contract, bad faith and unjust enrichment claims. However, the court granted the insurance company’s motion to dismiss the bad faith claim in regard to third-party claimants and the causes of action that accrued before August 23, 2015 due to the statute of limitations. The court also granted Progressive’s motion to dismiss Professionals’ tortious interference with business relations claim.


“This all really just comes down to one thing---the insurance company has a contract with their customer to bring their vehicle back to its pre-loss condition and they are breaching that contract,” said Perretta. “Because of that, that’s where this judge [Judge Kim R. Gibson] looked at this and said ‘Yes, these counts are true. They are accurate.’ We’ve proven that.”


He said the other pertinent issue is that insurers want to pay one rate in the market.


“It has been proven over and over again that a rate is not one number. The rate is a range of numbers,” said Perretta. “In a market, the range could go from $50 an hour to $120 an hour.”


He said that shops that aren’t trained and don’t have the proper equipment or facilities to repair cars are paid the same rate by the insurance company as the shops that have the proper facilities, training and equipment.


“That makes no sense,” said Perretta. “Any judge who looks at this whole situation is going to apply the law based on the contract and… as this judge mentioned in his opinion.”


Breach of Contract

According to the court documents, Progressive argued that Professionals did not state a plausible breach of contract claim because it didn’t plead the existence of a contract, the terms of the contract and damages. The insurance company also stated that the body shop did not have standing “…to pursue a breach of contract claim on behalf of third-party claimants who, by definition, are not parties to any agreement with Progressive.”


Professionals alleged that the insurance company had contracts with the insureds and liable third-parties, which required Progressive to pay for “reasonable and necessary expenses.” In addition, the body shop said its customers assigned their claims against the insurance company.


The court affirmed that Professionals pleaded a breach of contract claim and stated, “Professionals sufficiently alleged each element of breach of contract under Pennsylvania law.” The court also concluded that Professionals has standing to purse breach of contract claims on behalf of third-party claimants.


Bad Faith Claim

Progressive asked the Court to dismiss Professionals’ bad faith claim for three reasons, according to court documents. First, it said that the body shop lacked standing to bring a bad-faith claim on behalf of third-party claimants. Second, Progressive stated that Professionals failed to plead a bad faith claim on behalf of insureds because it did not show that the insurance company violated the Motor Vehicle Physical Damage Appraiser Act; the insurance company paid part of the claims due; and the body shop did not establish that Progressive acted unreasonably. Third, Progressive stated that the body shop’s bad faith claims that were based on repairs prior to August 23, 2015 are barred by the statute of limitations.


Professionals, in response, conceded in court documents that “Pennsylvania law does not recognize bad faith claims asserted by ‘third-party of intended beneficiaries of insurance contracts.’” It also argued that Pennsylvania law doesn’t require a complete denial of a claim to state a claim for bad faith. In response to the statute of limitations argument, Professionals “concedes that the Pennsylvania Supreme Court determined that a two-year statute of limitations applies to statutory bad faith claims.”


The Court dismissed the body shop’s bad faith regarding third-party claimants and stated in court documents that “Under Pennsylvania law, the third-party claimant cannot have a cause of action for bad faith.”


It also ruled that Professionals pleaded a bad faith claim in regard to the insureds.


“Professionals alleges that Progressive failed to reimburse it for the full amount of the reasonable and necessary repairs without a valid justification,” according to court documents. “Furthermore, Progressive knew of or recklessly disregarded this lack of a reasonable basis because it failed to fully reimburse Professionals despite Professionals informing Progressive on several occasions that it had failed to pay the full cost of all reasonable necessary repairs on each of the vehicles that Professionals serviced…


“The fact that Progressive has a long history of failing to fully reimburse Professionals supports Professionals’ argument that Progressive acted in bad faith.”


Accordingly, the court denied the insurance company’s motion to dismiss the bad faith claim in regard to the insureds.


Regarding the statute of limitations, the Court granted Progressive’s motion to discuss the bad faith claim for those that occurred before August 23, 2015.


Intentional Interference With Business Relations

Progressive also tried to dismiss the intentional interference claim by Professionals and said the body shop “…fails to allege that any of its contracts with its customers were breached or not fully performed because of Progressive’s alleged breach, emphasizing that Professionals admitted that it ‘completed the terms of its contract with each vehicle owner.’”


Professionals responded that it suffered actual losses due to the conduct from Progressive.


The Court ruled that Professionals did not plead a plausible tortious interference claim, which requires “purposeful action on the part of the defendant, specifically intended to harm the existing relation,” according to court documents. As a result, it granted the insurance company’s motion to dismiss the intentional interference claim.


In the Court’s opinion, “The facts alleged in the Amended Complaint do not give rise to a reasonable inference that Progressive specifically intended to interfere with Professionals’ contracts with its customers; rather, they give rise to a reasonable inference that Progressive sought to underpay Professionals for the repairs that Professionals performed on covered vehicles.”


Unjust Enrichment Claim

Progressive attempted to dismiss this claim for three reasons. First, it said the body shop did not confer any benefit on the insurance company. Second, the body shop didn’t accept any benefit allegedly conferred and third, Progressive said that express contracts govern the repairs that are at issue.


Professionals alleged that it conferred a benefit on the insurance in which Progressive accepted, which was to repair the vehicles covered under the insurance policies without being fully paid for the work. In court documents, the body shop also said it “properly pleaded unjust enrichment in the alternative to its breach of contract claims.”


The judge ruled that Professionals stated a plausible unjust enrichment claim and denied Progressive’s motion to dismiss this claim.


“Professionals conferred a benefit on Progressive by discharging Progressive’s obligations to pay for repairs under its policies. Progressive accepted and retained the benefit because it failed to fully compensate Professionals. Furthermore, it would be unjust for Progressive to retain this benefit,” court documents stated.


Progressive also argued that “…the doctrine of res judicata bars Professionals’ claims for intentional interference with business relations and unjust enrichment because Professionals asserted identical claims against Progressive in previous litigation in the Middle District of Florida.” 


In response, Professionals asserted that the individuals it is representing in this case are not included in the MDL. The court agreed and ruled that Progressive did not establish res judicata.


The legal information included in this article is based on information from court documents. Autobody News reached out to Progressive for comments, but none were provided.


Autobody News will continue to report on this case.