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Government regulatory group considering model aftermarket
crash parts legislation

By Insure.com

In the continuing debate about whether generic, or after-market auto parts, are as good as parts from original-equipment manufacturers (OEMs), the issue of safety is in the forefront. Critics claim that using parts from sources other than OEMs could compromise safety.

The National Conference of Insurance Legislators (NCOIL) is currently considering a model aftermarket parts bill in 2006. The model legislation requires:

all non-OEM aftermarket crash parts be certified by an independent third party.
the consumer be notified by the repairer, via the insurance estimate, that aftermarket parts will be used and the name of the parts manufacturer.
the certifying firm must conform to ten guidelines, some of which require parts to equal or exceed the OEM part in terms of fit, finish, quality and performance, and to have identifying markings.

The Automotive Service Association, the largest independent automotive repair association in the nation, has asked NCOIL to eliminate the certification requirement from its model bill, because it would result in many state parts certifications programs, which would add bureaucratic layers and regulatory burdens and create an unbalanced system across states. It also recommends adding a requirement for written consent by the vehicle owner.

There are generally two resources for crash parts: auto manufacturers, who sell them under their own monikers, also known as original-equipment manufacturers (OEMs), and generic or aftermarket crash parts suppliers. Before generic parts existed, creating competition in the marketplace, OEMs were able to sell their parts at a much higher markup than they can today. The introduction of aftermarket parts forced down the price of OEM parts by an average of 30 percent, according to the Insurance Information Institute. After a lawsuit against State Farm Insurance Co. for using generic parts, however, many insurers limited their use or stopped using them altogether.

There are no safety implications of using cosmetic crash parts from any source. This has been demonstrated by crash tests conducted at the Insurance Institute for Highway Safety (IIHS).

However, the Insurance Institute for Highway Safety (IIHS) says that with the possible exception of hoods, there are no safety implications of using cosmetic crash parts from any source. This has been demonstrated by crash tests conducted at the IIHS. In addition, an independent, third-party nonprofit organization, Certified Automotive Parts Association (CAPA), rigorously inspects generic automotive parts and guarantees the quality of those that meet its high standards. Generic crash parts do not interfere with a vehicle's existing warranty and are often manufactured by the same supplier and in the same manner as OEM parts.

Class action lawsuits have produced key victories for consumers. In August 2005 the Illinois Supreme Court rejected lower court rulings in the State Farm v. Avery case. The class action plaintiffs had charged State Farm with breaching its contracts with its policyholders when it specified the use of non-original equipment (non-OEM) parts in the repair of vehicles damaged in crashes. The suit covered the entire United States, except for Arkansas and Tennessee and some State Farm policyholders in Illinois and California, depending on the date of their crashes. In September, the Illinois Supreme Court denied a petition to rehear the case.

The high court threw out the plaintiffs’ arguments concerning the insurer’s breach of contract and the award, paving the way for insurers to start using generic auto repair parts once again. Many insurers had reverted to using the generally more expensive OEM parts, in the wake of the lower court rulings. The use of aftermarket parts of the same or higher quality than those from OEMs is credited with keeping down the cost of car repairs.

In similar fashion, the Illinois Supreme Court has ruled that the claims in the case, which stemmed from repairs using many different parts from various vendors following accidents in 48 jurisdictions, each with its insurance laws and regulations, varied too much to be dealt with as a class action.

The plaintiffs in the case had won a $1.2 billion award in a trial court in 1999. The award was reduced to $1 billion by an Illinois appellate court but that court upheld the trial court’s decision. State Farm appealed to the state’s high court, arguing that the lower court erred in improperly certifying the case as a class action, thus applying Illinois state law to other states. It also argued that consumers should be free to choose aftermarket parts as a way of reducing insurance costs.

In June 2004, the California Court of Appeals in Lebrilla v. Farmers Group, Inc., No.G031069, reversed the lower court ruling, denying certification of plaintiffs’ class action against their insurer for use of allegedly inferior non-OEM parts. In its decision, the Court defined the term “like kind and quality” as applying to the replacement part’s quality and suitability rather than the age or condition of the part replaced.

Last updated Apr. 1, 2006