Insurers GEICO and Allstate (ALL) Misled Policyholders

4 February 1999

    PHOENIX, Feb. 2 -- Two of the nation's largest auto insurers,
Allstate Insurance Company , and GEICO Insurance, a subsidiary of
Berkshire Hathaway, are targets of lawsuits claiming both insurers mislead
consumers by compelling auto repair shops to use imitation parts when
repairing vehicles owned by GEICO and Allstate policyholders.
    Both suits, filed Jan. 27 in Arizona's Maricopa County Superior Court,
seek class action status, claiming the companies' actions constitute a breach
of contract with customers. GEICO and Allstate policies state that repairs
will be made using parts that restore vehicles to pre-crash physical condition
and cash value.
    The lawsuit against GEICO claims the insurer also violated the Arizona
consumer fraud act, insurance codes, and RICO laws by forcing body shops and
other repair facilities to use imitation parts without disclosing that
estimates were based on use of the cheaper imitation parts.
    According to the lawsuits, both insurers require repair shops use parts
manufactured by third parties that are not authorized, sanctioned or made by
vehicle manufacturers. The suit claims that these imitation parts do not
restore a car to original cash value, diminish its resale value, jeopardize
the manufacturer's warranty and threaten the car's structural integrity.
    "This is much more than a cosmetic issue; imitation parts may be a serious
safety threat," said plaintiffs' attorney Steve Berman of the law firm Hagens
Berman. "Repair shops call these parts 'Taiwan trash' for good reason -- they
have substandard fit, impact resistance, and mechanical operation. This is a
huge issue when it comes to things like crash protection. If I buy a Ford
truck, I don't want a Yugo fender."
    Hagens Berman has offices in Phoenix and Seattle. The firm also acted as
outside counsel for Arizona and 12 other states in the recent tobacco
litigation. More information is available at http://www.hagens-berman.com.