The ongoing Greg Coccaro v. Progressive case (formally North State Autobahn, Inc. v Progressive Ins. Group) has taken a wide turn in a NY Supreme Court decision very similar to a recent California Supreme Court ruling (see coverage in Autobody News HERE.) Essentially both the NY (North State) and CA (Hughes) decisions allow the respective State insurance codes, which prevent private parties from suing insurers for steering related damages, to be trumped by overlapping general business law, under which an insurer can, theoretically at present, be sued for steering-related damages.
North State's original case against Progressive had included several causes of action against the insurer, including steering, tortious interference, and injurious falsehood. The first claim, a violation of the state's anti-steering law, had been previously dismissed because New York (and also California) does not provide for a private right of action for such violations. Those violations are actionable only by a state or government agency such as the Attorney General or Department of Insurance.
The June 24, 2011 decision by NY Supreme Court Justice Gerald E. Loehr, in Westchester County, found that North State's claim against Progressive, which is predicated on derogatory statements about North State to its customers in order to steer them toward Progressive's DRP facilities, are not merely "disguised" claims of steering as Progressive argued. Progressive had filed a motion to dismiss the remaining claims against it including alleged violations of the General Business law. They argued that North State's argument was merely a disguised steering claim.
Basically the judge found that, although misrepresentations uttered in connection with a private, business-to-business dispute does not turn the matter into a general business law violation, practices by insurance companies involving routine, widespread marketing and communication with insureds, impacting the public at large, may support a cause of action under NY's general business law, section 349.
Two different NY Court cases had come to contrary conclusions on this matter, even though the cases involved the same plaintiff (M.V. B. Collision) and apparently identical facts, as to whether a claim under general business law section 349 had been made. In the two cases, the defendant insurance companies, Progressive and Allstate, were alleged to have made disparaging misrepresentations to its insureds concerning M.V.B Collision, in connection with steering of their insureds away from M.V.B. Collision to other shops. The courts found for Progressive in one case, and against Allstate in the other.
In arguing against North State, Progressive based its "disguised" argument on the precedent NY Supreme court case of M.V.B. Collision, Inc. v Progressive Northeastern Ins. Co. (Nassau Co. 2010) to argue that North State's claim is a "private, non-consumer business dispute" and therefore not a "deceptive act or practice in the conduct of any business" as prohibited by NY's General business law (Section 349). This specific section was enacted in law to prevent consumers from being misled by deceptive advertising and therefore must have a consumer element for cases to proceed under it.
In the Progressive case the court held that Progressive's alleged wrongdoing was only a private contract dispute without an extensive marketing scheme or broad consumer impact, in that M.V.B. Collision, the plaintiff-body shop, was suing the insurer of its consumer-customers.
North State countered by citing the case of M.V.B. Collision v Allstate Ins. Co. [EDNY 2010] to take the the contrary position. The United State District Court in the Allstate case, on apparently identical facts, held that the evidence of Allstate's practice of steering and making misrepresentations to its insureds concerning plaintiff satisfied the consumer element of §349 based on the number of Allstate policy holders all of whom were potential customers of plaintiff. The Allstate Court found that "When, for example, Allstate allegedly ... steered a car away from Mid Island [by misrepresentations], not only was the customer the victim of a deceptive practice, but Mid Island also suffered a loss of business or other injury... "In sum, given that Mid Island's alleged injuries [loss of business] occurred as a direct result of the alleged deceptive practices directed at consumers, its injuries were not solely as a result of injuries sustained by another party.'"
Addressing the issue of a disguised steering claim, the Allstate Court held: "Here, by contrast, there is evidence of a free-standing claim of deceptiveness' that simply happens to overlap' with a claim under the Insurance Law... . The alleged scheme [to dissuade Allstate insureds from going to Mid Island] involved not only ... steering but also, among other things, alleged defamatory comments.... because plaintiff's § 349 claim merely happens to overlap' with provisions of New York Insurance Law, it is not an improper attempt to circumvent the lack of [a] private right of action under [the] Insurance Law..."
In the North State case Justice Loehr agreed with the Allstate Court that the plaintiff had a "free-standing" claim for harmful deceptive business practices under the General Business Law, saying that where General Business Law happens to overlap with provisions of the Insurance Law, such claims under the General Business Law may proceed. Loehr found that "an insurer's misrepresentations to its insureds as part of a broad DRP may be sufficiently consumer-oriented to state a cause of action under [NY's section 349] that the alleged loss of business resulting there from is direct injury and that plaintiffs cause of action is not merely a disguised claim for steering."
This decision is very similar to the recent case in California that also held insurers are at risk of lawsuits for violations of the state's anti-steering law, in that case as an unfair competition law cause of action may be allowed because it is not barred by the California insurance code. The California judge found that even though state Insurance Law does not allow insurers to be sued for making disparaging comments about a business in order steer consumers, that does not prohibit a lawsuit from being filed under the state's Unfair Competition Law.
The NY judge also found, in what may prove to be a provocative note, that Progressive and independent body shops (in this case, North State) can be considered direct competitors. The argument by Progressive that North State could not show that any consumers were harmed as a result of its actions therefore had no standing.
The judge observed, however, that case law has held that a "business competitor" that is harmed "has standing to assert a claim and may do so without proving specific harm to any consumer." The judge found that "having created and promoted the DRP, Progressive made itself, in a real sense, a competitor of independent shops [in this case, North State]."
An attorney for North State, Anthony J. Mamo, noted in a statement that this was the first time a state court has recognized the right to bring this type of deceptive business practice claim against an insurer even though the claims overlap existing insurance law. "What's important," said Mamo, "is that the court is now saying that you have a right to sue where previously you didn't."
Anthony Mamo, an experienced attorney in collision and related fields, will further explain this result in an upcoming article in the September issue of Autobody News.