Senator asks DOJ to investigate car insurance

Are cheap repairs part of an insurance scheme?
Are cheap repairs part of an insurance scheme?

    JUST WATCHED

    Are cheap repairs part of an insurance scheme?

MUST WATCH

Are cheap repairs part of an insurance scheme? 10:54

Washington (CNN)A U.S. senator is urging the Justice Department to investigate insurance companies and auto repairs done at their 'preferred' repair shops across the country, because of safety concerns for consumers that were identified in a recent CNN exclusive investigation.

Sen. Richard Blumenthal, D-Connecticut, on Thursday called on the Department of Justice to begin an investigation into auto repairs being done nationwide, because the repairs may often be done by using recycled, remanufactured, re-used, or after market parts, which he says could lead to unsafe vehicles.
The CNN investigation, which aired on Anderson Cooper 360, examined allegations by hundreds of auto body shops across the country that accuse major insurance companies of pushing them to use cheap parts and sometimes dangerous practices to repair vehicles after they were in accidents.
    More than 500 garages from 36 states have joined in a lawsuit against the nation's top insurance companies; the body shops believe the insurance industry is involved in a deliberate system to send consumers to shops that are pre-selected by insurers to do the absolute bare minimum to fix them, even pushing body shops to use "used or recycled parts", because they're cheaper.
    Several attorneys general are also getting involved; the Louisiana's attorney general office has filed suit against State Farm already, and says it is preparing lawsuits against other insurers. Mississippi's attorney general says it is preparing a lawsuit of its own. And Oklahoma's attorney general has issued a warning to insurers on its website raising the same concerns.
    Citing CNN's reporting in the letter to U.S. Attorney General Eric Holder, Blumenthal wrote: "Contrary to what consumers may be led to believe by their insurers, repair shops preferred by insurers do not necessarily equate with quality repairs."
    "Unfortunately, many consumers are also being misled into thinking that they are required to have their car repaired at one of these shops. This has the harmful effect of limiting consumer choice, creating a serious safety risk, and suppressing competition in the auto repair industry," he said.
    The issue is a nationwide one, according to John Eaves, the lead attorney for the body shops involved in the lawsuit, who was featured in CNN's investigation.
    "This issue involves people from Maine to Mississippi to California," said Eaves. "Every state in the union has experienced the same sort of struggle here between the body shops trying to do the work the right way, and the insurance companies trying to cut corners and force them to use unsafe parts and unsafe methods on their cars."
    Louisiana Attorney General James Caldwell told CNN he chose to sue State Farm Insurance because State Farm is the biggest insurer in his state, though members of his staff are preparing other possible subsequent lawsuits to follow.
    CNN contacted insurance companies about Blumenthal's request for a DOJ investigation, but had not received a response by publication time.
    In legal filings, State Farm has denied all the allegations in the auto bodies' or the Louisiana's lawsuits, including that it insists on using aftermarket parts.
    State Farm would not grant an interview to CNN, but said in a statement for the original CNN story: "Our customers choose where their vehicles are going to be repaired. We provide information about our Select Service program while at the same time making it clear they can select which shop will do the work."
    State Farm told CNN to talk to Neil Alldredge, of the National Association of Mutual Insurance Companies, for more specifics.
    "Most companies offer a choice to consumer. Any sort of aftermarket part that you might hear about are usually cosmetic parts," Alldredge said. "So they're nothing related to the safety, the mechanical parts of the operation of the vehicle. ... In many cases these parts are no different. They're made in the same factories. One just comes out with an auto manufacturer's name on it."
    Alldredge said he did not believe "steering" was happening. He said a benefit of a preferred-shop program came for customers getting repairs done quickly, but it was always a customer's choice.