Wednesday, October 24, 2012
NY Appellate Court Issues 'Monumental' Steering Decision
A unanimous New York State Appellate Division decision issued this month will change the way NY courts view insurers, collision repairers and the practice of steering in the state.
An October 17 decision in the case of North State Custom v. Progressive Insurance has ruled that shops may sue insurers under the state's deceptive business practices law (General Business Law section 349) in cases where an insurer's policies and actions regarding customer referral could be misleading to consumers.
The decision has serious implications, not only for shop owner Greg Coccaro's case against Progressive, but also for the entire collision repair and insurance industries in the state.
The long running case of North State v Progressive has been based, in part, on allegations by North State, and its owner Greg Coccaro, that Progressive was illegally steering customers away from his shop.
When the case was first introduced in 2007, two of the counts filed against Progressive alleged violations of 1) New York Fair Claims Practices law (steering prohibited under the insurance regulations) and 2) the state's deceptive business practices law (General Business Law 349), a statute widely understood as a provision allowing consumers to sue companies for harm caused by deceptive business practices. An insurer steering case has never been won under either statute.
The original Court had dismissed the first count against Progressive under the insurance regulations because insurance regulations specifically exclude private right of action (the right to sue) as an option for those injured by violations of the law.
However, Coccaro's allegations that Progressive engaged in deceptive business practices, under General Business Law 349 (GBL 349), were upheld by the court and allowed to proceed. Progressive filed an appeal to reverse this decision claiming that a business, specifically North State Custom, could not sue for damages under GBL 349 because it was a 'consumer law' meant to aid consumers, not businesses, who may be harmed. Progressive also argued that the count under GBL 349 was a simple attempt by North State to circumvent the state's insurance laws (which do not allow insurers to be sued).
It was this appeal that has now been ruled on by a four judge panel in the NY State Appellate Division. The October 17 decision found that a business may in fact stand in the consumers' shoes to bring an action under GBL 349 provided the alleged claims were indeed a consumer issue.
In fact, the court found, this is precisely why the law was created.
What the decision means for North State Custom
Had the Appellate Division ruled that Coccaro could not proceed with his claims under GBL 349, the bulk of his case against Progressive could have been squashed. However, with this ruling, the case will not only proceed, but it will proceed with the blessing of the NY Appellate Court.
What the decision means for New York insurers
Coccaro and his lawyers, in winning this decision, have essentially blown a door wide open for collision repairers to sue insurers for steering under GBL 349 in New York.
Traditionally, shops could not sue insurers for violations of the State Insurance Department's steering regulations because those regulations specifically deny a private right of action to settle a dispute. Also, shops could not sue under the consumer protection statutes because a shop, as a business, is not a consumer.
But now, following this decision, the court finds that not only are business entitled to sue under GBL 349, but they serve the public interest by doing so.
The court writes that these suits "would help to police the marketplace against misrepresentations which constitute deception against the consumer and unfair competition with firms not engaging in such practices" with the added benefit of freeing the Attorney General to protect "persons who are unable, by reason of financial or other circumstances to protect themselves."
The Court further noted that businesses are "in a position to sue as private attorneys general to vindicate the consumer interest," even if that business is acting in its own interest, because "a business competitor protecting its own interest will ultimately serve to protect the interests of the consuming public."
In the end, the facts of this particular case, and Progressive's actions, will be evaluated by a jury. However, this decision ultimately means that if an insurer's internal policies of shop referral could be construed by a reasonable jury to be misleading consumers, the insurer is vulnerable to lawsuits alleging violations of the state's deceptive business practices, regardless of the insurance regulations.
According to the Court's opinion, the GBL 349 statute applies to, and seeks to remedy, "those acts or practices which undermine a consumer's ability to evaluate his or her market options and to make a free and intelligent choice."
Coccaro's long-time attorney, Anthony J Mamo, Jr. described the decision as "monumental" for consumers and collision repair businesses.
"We are thrilled," said Mamo. "As this decision, coming from an Appellate Court, establishes a precedent that opens the door for collision repairers to protect themselves and their customers from insurance companies' deceptive practices that limit the choice of consumers."
Mamo concluded, "The court was unequivocal in its opinion that the body shop is in a position to police the insurance industry where consumers don't have the finances, and the attorney general may not have the manpower to do so."
With this appeal out of the way, the trial of North State v Progressive is now scheduled to take place on January 28, 2013. Dennis Artese and Finley Harckham of the law firm Anderson Kill & Olick represent North State along with solo practitioners Anthony Mamo and Richard P. Stone.
Copyright 2012 CollisionWeek (www.collisionweek.com) – reprinted by permission from the publisher