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Consumer Sales Law’s Penalties for Deceptive or Unconscionable Acts or Practices Does Not Apply to Insurance Repair Estimates to Company’s Own Customers

An auto insurance customer can’t use the state’s consumer sales practices law to sue an insurer for deceptive or unconscionable acts or practices related to repair estimates, but can pursue other legal options both under the consumer sales practices law and other legal remedies, the Ohio Supreme Court ruled today.

The Supreme Court ruled 5-2 that an insurer providing a repair estimate to its own customer is not engaging in a “consumer transaction” under the Consumer Sales Practices Act (CSPA) that allows customers to sue a company for an “unfair or deceptive act.” Writing for the majority, Chief Justice Maureen O’Connor made it clear that if an insurer did not follow the law, the customer would have to take a different legal path to resolve the dispute.

Customer Challenges Use of Like Kind Parts
Jerry and Nancy Dillon’s vehicle was damaged when it collided with a deer. Jerry Dillon contacted his insurer, Farmers Insurance of Columbus, to inform the company he took the vehicle to Mission Auto Connection for repairs. A Farmers claim representative inspected the vehicle and wrote a repair estimate that included the use of replacement parts that were not original equipment manufacturer (OEM) made. The written estimate was originally sent to Mission, and Mission called Dillon to tell him the estimate contained non-OEM parts. Dillon told Farmers he wanted only OEM parts because he was concerned using non-OEM parts would diminish the value of his vehicle. The company told Dillon his policy permitted the use of non-OEM parts and mailed him a copy of the estimate. By the time the estimate arrived, Dillon had already instructed Mission to start the repairs using only OEM parts and he would pay the estimated $1,500 difference between what Farmers would offer using non-OEM parts and what he wanted. Dillon went to the shop four times to sign checks Farmers sent to Mission, and he entered into an oral agreement that he would pay the extra money for the OEM parts unless it could be recovered from Farmers through a lawsuit. Dillon proceeded to sue Farmers in Coshocton County Municipal Court for refusing to pay for OEM parts.

Dillon Uses the CSPA
At the trial court, Dillon moved for summary judgment against Farmers citing a violation of the CSPA because the insurance company failed to obtain his signature on the estimate that was calculated using non-OEM parts. Dillon argued that action violated R.C. 1345.81(B)(1), and the trial court sided with him. A CSPA violation allows for not only up to triple the actual damages as a penalty but also attorney fees and expenses. The court awarded Dillon about $30,600, and when Farmers appealed the ruling, the Fifth District Court of Appeals affirmed the trial court, but reduced the total award to about $29,000.

Court Finds No Conflict in CSPA Provisions
Writing for the majority, Chief Justice Maureen O’Connor found the lower courts failed to properly mesh older portions of CSPA, R.C. Chapter 1345, with a provision adopted in 1990 regarding customer consent for vehicle repair estimates using non-OEM parts. In vacating the Fifth District’s decision, Chief Justice O’Connor explained the law has two distinct parts a court must consider when a parts estimate complaint is brought under the CSPA. The first requires the interaction be a “consumer transaction,” as defined R.C. 1345.01, and the second is whether the company followed the specific procedures in R.C. 1345.81. She noted the act sets out penalties for violations of the part estimate law, but wrote not all violations are unfair or deceptive acts or practices committed in connection with consumer transactions under the CSPA.

“The act specifically exempts transactions between insurers and their customers from its definition of consumer transaction,” she wrote.

Chief Justice O’Connor explained the Fifth District recognized that the general definition of consumer transactions exempted the interaction between insurers and customers, but found the newer, more specific 1990 language about OEM-parts pertained specifically to insurers, repair facilities and part installers. The appellate court found the older general section and the new section “irreconcilable” and deemed that not having Dillon’s signature on the estimate was a violation of the law that allowed for damages.

The Supreme Court majority found the two sections can be read together and that the new OEM parts section would not be meaningless if insurers could not be sued under the deceptive or unconscionable acts or practices section of the CSPA. Chief Justice O’Connor wrote the damage claims could be brought against a repair facility or installer that failed to comply with requirements for producing estimates using non-OEM parts, and a policyholder disputing their insurer’s estimate can seek a declaratory judgment, an injunction, or other remedies under the CSPA. “The CSPA also permits consumers to bring a cause of action ‘under any other theory of the law,’ that would be applicable to the transaction,” she wrote.

Chief Justice O’Connor further explained that an insurer providing a written repair estimate is an act that is not “in connection with a consumer transaction,” which is required by an individual claiming a CSPA violation. She pointed to the Court’s 2013 Anderson v. Barclay’s Capital Real Estate decision where the acts of a mortgage servicer were challenged as being deceptive. The Court found a mortgage servicer provides “collateral services” closely related to a mortgage transaction, but the consumer transaction protected by the CSPA is between the mortgage company and the borrower. The Court found Farmers’ role more like that of the mortgage servicer in that it only wrote checks for the repairs and informed Dillon of what it would pay for under the terms of his policy. Chief Justice O’Connor found Farmers had no other role in the automobile repair, which was the consumer transaction, and that transaction was between Dillon and the repair shop. “Therefore, the insurer’s provision of a repair estimate is not sufficiently connected with a consumer transaction to constitute a violation under R.C. 1345.81(E),” she concluded.

Justices Terrence O’Donnell, Judith Ann Lanzinger, Sharon L. Kennedy, and Judith L. French concurred in the opinion.

Dissenting Opinion
Justice Paul E. Pfeifer joined Justice William M. O’Neill in dissenting. While Justice O’Neill agreed with the majority on most points including that an agreement in an insurance policy is not a consumer transaction. He wrote, however, once an insurance company undertakes the role of adjuster in a collision repair, there is no justification to shield it from liability under the CSPA for its actions in connection with that consumer transaction merely because it is an insurer.”

2014-0451.Dillon v. Farmers Ins. Of Columbus, Inc., Slip Opinion No. 2015-Ohio-5407.

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