State Farm, which insures one of every five cars in America, is being sued for forcing policyholders to accept cheaper, after-market replacement parts for accident repairs. CBS News Correspondent Cynthia Bowers reports.
Peggy Frey thought she knew her insurance company's policy when it came to crash repairs until she took her car to the body shop.
Frey, a State Farm policyholder, said, "My car went into that shop with a Ford hood and Ford lights, and what I came out with was not what I went in with."
What she didn't know is that State Farm, like many insurance companies, often dictates crash repairs be made with after-market parts, foreign-made knockoffs, that may not fit properly.
Mike Randazzo of the Gallery Collision Shop explained some of the problems that can result. "The after-market fender doesn't line up with the factory door; the line is way too tight as it comes down. The gap gets bigger and bigger, and it's way too wideÂ…at the bottom," he said.
Don Barrett represents more than 5 million current and former State Farm policyholders in a $2 billion lawsuit alleging these after-market parts are inferior, substandard imitations.
"State Farm policy requires that State Farm restore the vehicle to its preloss condition using parts of like kind and quality," Barrett said. "It's a simple thing and they don't do it."
Bill Sirola, a State Farm spokesman, said, "We think these parts meet every aspect of the original equipment, and we don't hear any complaints from our customers."
But, in fact, the company's own internal documents show concern about the generic parts and claim that "quality and fit continue to present a problem" and "we say it is like kind and quality, and the bottom line is that it is not the same."
Even so, State Farm insisted most after-market crash parts do meet standards set by the Certified Automotive Parts Association, a watchdog agency it helped form. State Farm said generic parts keep down premiums by providing competition in an industry once monopolized by automakers.
The trial is expected to last two months. If State Farm loses, the auto insurance industry may decide to abandon its use of knockoffs, car insurers said. Then car owners can count on getting original parts and can expect to pay higher premiums.
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