Federal judge tosses RICO suit against major auto insurers

A judge said that two auto repair shops’ racketeering suit against several insurance giants seemed almost completely unsupported

Federal judge tosses RICO suit against major auto insurers

Insurance News

By Ryan Smith

A federal judge has tossed a racketeering suit against several major auto insurers, saying claims that they’ve forced repair shops to accept inadequate payments lacks support.

Geico, Liberty Mutual, State Farm and other insurers were sued by Crawford’s Auto Center of Pennsylvania and K&M Collision of North Carolina. The plaintiffs claimed that the insurers forced repair shops to accept low payments by saying that the prices they pay their “direct program” shops are market norms. The plaintiffs weren’t direct repair shops, but claimed that the rates paid to such shops artificially forced down payments to market rate shops.

But US District Judge Gregory Presnell called the shops’ allegations “bloated” and said that they failed to include elements necessary for a Racketeer Influenced Corrupt Organization Act (RICO) claim – even after several chances.

“The reader who slogs through all 172 pages of the second amended complaint will be left almost entirely in the dark as to what role any of the 70-plus individual defendants played or what actions any of them took in furtherance of the RICO enterprise – or in furtherance of anything else, for that matter,” Presnell said. “There is no description of the role played by the individual insurers in the alleged enterprises, or the reason they played that role.”

The judge also said that “nothing in the plaintiffs’ oral arguments” suggested they could “state a valid RICO claim.” He granted the defendants’ motion to dismiss the case with prejudice.

Related stories:
Allstate and State Farm attempt to combat fraud with racketeering suits
State Farm accused of bankrolling judge to throw out $1B case against company

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