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State Farm Says Class-Action Verdict Bad for Consumers, Plans Appeal

5 October 1999

State Farm Says Class-Action Verdict Bad for Consumers, Plans Appeal

    BLOOMINGTON, Ill., Oct. 4 -- The nation's largest auto
insurer says a southern Illinois jury verdict could jeopardize its use of
aftermarket parts to repair damaged cars and could lead to higher auto
insurance rates for everyone.
    After six weeks of testimony in a national class-action suit filed in
Marion, Ill., a jury today awarded nearly $456 million to some State Farm
policyholders because aftermarket parts -- outer-shell body parts manufactured
by companies other than the original carmaker -- were specified on many repair
estimates.  State Farm awaits further rulings from Williamson County, Ill.,
Associate Judge John Speroni.  State Farm has already indicated it plans an
appeal.
    "We are disappointed in this verdict," said Jack North, senior vice
president State Farm Mutual Automobile Insurance Company.  "Even the
plaintiffs' own witnesses said some of these parts are as good as -- or even
better than -- the originals.  We believe only good parts have gone on State
Farm-insured vehicles.  We believe our procedures assure that.  Those are the
parts we have used and then guaranteed for as long as the policyholder owns
the vehicle."
    North said if the verdict is allowed to stand, the parts industry could
once again become monopolistic, leading to higher parts costs and higher auto
insurance prices for everyone.  North noted that at least seven other auto
insurance companies face similar suits.
    "We're a mutual insurance company owned by our policyholder group," he
said.  "State Farm saved its policyholders almost $234 million in 1997 alone
by specifying the use of aftermarket parts.  In addition, when claims costs
have been significantly less than expected, we have returned premium dollars
to policyholders.  In the past two years, we've returned more than
$1.5 billion to them."
    North also noted that State Farm has reduced insurance rates more than
$2 billion in the past two years.

Audio and video feed information:

    Text:   Additional information at:  http://www.statefarm.com

    Audio:  Package and additional soundbites with State Farm
            Senior Vice President Jack North:

            888-781-1333 (Available 24 hours)

    Video:  Satellite video news release, additional Jack North soundbites and
            additional b-roll:

            Monday, Oct. 4, 1999

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