State Farm Moves to Dismiss Steering Lawsuit

State Farm, a defendant in a lawsuit before the U.S. District Court of Maryland, filed a motion last week to dismiss Total Recon Auto Center’s (Total Recon) complaint against it. Total Recon, a collision center in Rockville, Md., provides services to Tesla vehicles and is accusing State Farm of “deliberately disseminating harmful misinformation” to its insureds who were “actual or potential customers” of Total Recon. The outcome of the case could have implications for the auto glass industry.

As plaintiffs in the case Total Recon markets itself as “free from influence of insurance carriers,” and does not participate in any insurance Direct Repair Programs or referral programs. The company says it “works solely in the best interest of its customers, refusing to cut corners, implement merely ‘band-aid’ solutions, or use suboptimal or secondary market parts solely to save money for the insurance companies who are paying the bills.” Where Tesla vehicles are concerned, Total Recon states that it “charges a specific hourly labor rate—no more or no less—determined by Tesla to be reasonable for a given geographic or trade area.” The company also notes that “although quite low compared to other regions in the country—is marginally higher than the area’s more typical hourly labor rate (for body and refinish work) of fifty dollars ($50.00) for all other types of collision centers/repair shops and is widely considered to be reasonable.” The company argues that insurance companies—including but not limited to State Farm—charge more for insurance coverage on Teslas and “benefit when their Tesla-insureds use non-TACC repair shops, which charge insurance companies lower fees and agree to take shortcuts that are inconsistent with OEM standards compared to TACCs or TACCs that have been pressured by insurance companies into lowering their fees from the rates determined by Tesla for given geographical areas.”

State Farm, in its motion to dismiss, points out that Total Recon “fails to define ‘TACC certified” and concludes that “it appears [that] Plaintiff primarily provides services to Tesla vehicles.”

In its initial complaint, filed in mid-August, Total Recon alleges that State Farm was “improperly ‘steering’” their customers away after initially agreeing to pay the Tesla Labor Rate “so that State Farm insureds who come to Total Recon would not have to pay out of pocket the difference between the ‘covered’ rate that State Farm deems reimbursable and the Tesla Labor Rate.” The plaintiffs say that State Farm has since started using language that specifically steers customers away from them, including telling ‘current and prospective customers that ‘this shop does charge out of pocket expenses,’ and that it is ‘out of network’” and thus the insurer can’t guarantee there won’t be out-of-pocket expenses.

In its complaint, the company says it sent a cease and desist letter to State Farm on May 18, 2023, and adds that it has uncovered at least one more additional instance of steering practices as well as other internal communications and strategies that Total Recon says indicate that the insurer’s actions are “intentional” and “malicious.”

Total Recon is arguing two counts of tortious interference—one with contractual relations and one with prospective advantage—and one count of defamation per se, and is asking for “a judgment in its favor and against Defendant State Farm Insurance, in an amount which exceeds $75,000.00 in compensatory damages, punitive damages, pre- and post-judgment interest and costs and other such relief as the Court deems just and proper,” for each count it is bringing against the insurer.

State Farm responded by requesting the case be dismissed, citing Total Recon’s “failure to state a claim upon which relief can be granted and failure to meet the required pleading standards set forth in Fed. R. Civ. P. 8 and 9.”

State Farm goes on to argue that “In reality, Plaintiff – a stranger to the relationship between State Farm and its insureds – seeks to dictate the manner in which State Farm handles its insureds’ claims and the manner, in which State Farm explains its obligations under its insurance policy to its insureds.”

The insurer also posits that Total Recon “fails to state with particularity the circumstances giving rise to the intentional torts alleged as required by the Federal Rules of Civil Procedure,” and that the collision company “fails to set forth sufficient factual allegations to state a cause of action upon which relief can be granted.” On those grounds, State Farm and its legal counsel is asking for the motion to be dismissed.

Citing Bell Atlantic v. Twombly, State Farm’s attorneys point out that “Although this standard does not require ‘detailed factual allegations,’ it requires more than ‘labels and conclusions’” adding that, “To survive a motion to dismiss for failure to state a claim, a plaintiff must make a showing, rather than just a blanket assertion, of entitlement to relief and the showing must consist of enough facts to state a claim for relief that is plausible on its face.”

The State Farm legal team argues that Total Recon’s three counts “fail to meet Rule 9(b)’s heightened pleading requirements,” as those counts “are all premised upon State Farm’s alleged ‘intentional misrepresentations or falsehoods.’” Rule 9(b) requires “the time, place and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby,” the defendants point out, noting that “only paragraphs 16 and 50 even attempt to identify the alleged misrepresentations with anything approaching the required specificity. Nevertheless, these paragraphs also fail to meet the required standard. None of either paragraph’s subparts identify any State Farm employee or agent (i.e., who allegedly made the misrepresentations). Rather, they generically refer to ‘State Farm.’”

State Farm and its legal team also take exception to Total Recon’s identification—or not—of those customers it does list in the complaint. “Were the Complaint’s failure to meet its Rule 9 pleading obligations not bad enough, the Complaint also bases its claims on unidentified customers/prospective customers. Specifically, Count I seeks recovery related to alleged customers Plaintiff ‘has not yet been able to identify.’”

“These generic allegations fail to meet the required pleadings standards of the Federal Rules,” the insurer’s lawyers wrote, adding that “plaintiffs in other cases with similar allegations have met their pleading obligations by providing adequate detail in their complaints.”

Total Recon, State Farm’s legal team states, “is in the best position to provide the necessary details to put State Farm on notice as to the specific claims” the company “is bringing; however, Plaintiff relies on generalized statements that unknown and unidentified individuals have been impacted, which fails to provide the notice required under the relevant pleading standard. In fact, Plaintiff admits in paragraph 32 of its Complaint it intends to engage in a ‘fishing expedition’ via discovery in an attempt to identify potential claims and gather support for its causes of action.” They’re asking that “allegations related to these unidentified claims and customers, as well as the remainder of Plaintiff’s Complaint,” be dismissed.

State Farm takes issue with Total Recon’s list of customers that the body shop says it lost.

“Even assuming the truth of the allegations in paragraphs 16 and 50, at most only three customers … are alleged to have failed to do business with Plaintiff or cancelled an appointment with Plaintiff.” State Farm says Total Recon needs to prove that any conduct they allege of the insurer “caused it to incur damages.” In the Motion to Dismiss, State Farm further points out that “Plaintiff fails to allege six of these individuals had a contract with Plaintiff at the time State Farm engaged in its allegedly improper conduct. For the sole remaining individual … Plaintiff makes the conclusory allegation it had a “valid repair agreement” with [the individual] prior to [the individual] rescinding the agreement.”

State Farm argues that the Maryland District Court “has specifically stated a plaintiff must provide a detailed account of damages it has incurred to state a cause of action for tortious interference with contract,” and that “the Complaint provides no detailed account of the alleged damages Plaintiff actually incurred. Rather, the Complaint contains speculative unsupported allegations Plaintiff ‘suffered significant damages, including but not limited to lost profits and actual harm to reputation.’”

With regard to the accusation of steering, State Farm points out that “Plaintiff also provides no indication as to how State Farm’s communications that an insured may be subject to out-of-pocket expenses is wrongful or without justification. State Farm’s obligations to its insureds are governed by its contract. Several items or repairs may not be covered under State Farm’s contract and could subject an insured to out-of-pocket expenses.”

Where Total Recon’s complaint includes a count of defamation per se, State Farm noted in its motion to dismiss that “As defamation is an intentional tort, it is not surprising alleged defamatory statements must be pled with specificity,” but argues that “Count III fails to identify one State Farm employee who allegedly uttered a misrepresentation, when these misrepresentations occurred, how they were communicated, or where they were communicated. This omission alone is fatal to Plaintiff’s defamation claim.”

The insurer refutes the collision repairer’s claim that statements about out-of-pocket expenses, costs, charges, and reasonable vs. unreasonable repairs amount to defamation, stating that “even if the statements were otherwise defamatory, and State Farm denies they are, they cannot form the basis of a defamation claim because the causation “link” is missing. There is no allegation any specific customer or potential customer failed to do business with Plaintiff because of these alleged statements … These alleged defamatory statements do not provide any supporting evidence of a defamation claim as they are completely untethered to the remaining allegations of the Complaint.”

State Farm’s legal team filed the Motion to Dismiss on September 27. Stay tuned to for more information about this case as it becomes available.

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