One trend in the insurance claims business is to control and manage the repair of buildings and homes following an insured loss. While many companies share pricing information through Xactimate and have "preferred vendor" programs to control price and scope of loss, some are now purchasing interests in repair companies or obtain "rebates" for steering business to them.
Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." Insurance companies have various incentives to price fix for lower repair prices and most of us in the property claims business have witnessed various patterns of claims practices that accomplish this. The question is whether those practices violate antitrust laws.
A & E Auto Body, Inc. v. 21st Century Centennial Insurance Company,1 is recent case which provides guidance into these issues and the evidence a court will look for in the pleadings to find a bona fide violation of anti-trust laws.
I noticed that a number of the law firms involved defending the insurance companies are also prominent players and participants in the insurance trade associations where it was alleged that the defendant insurers were sharing claims information in aid of a conspiracy theory. The PLRB and various insurance trade industry organizations pay lip service to these concerns of criminal violation with simple warnings about not violating Sherman Anti-Trust laws.
My prediction is that some of the current practices by property insurance companies will lead to investigations by Attorneys Generals and civil lawsuits by those so harmed. Most automobile insurance carriers signed a consent decree with the United States in the early 1960s agreeing to cease from activities alleged in the A&E Auto Body case. There are many similarities in claims practices between the auto repair shops and the property insurance restoration business. One central theme is that the insurance claims departments are in a battle with them trying to control costs which could easily lead to various illegal acts in violation of anti-trust laws.
1 A & E Auto Body, Inc. v. 21st Century Centennial Ins. Co., No. 6:14-CV-310-ORL-31TB, 2015 WL 5604786 (M.D. Fla. Sept. 23, 2015).