On December 29, 2015, the Supreme Court of Ohio handed down a merit decision in Dillon v. Farmers Ins. of Columbus, Inc., 2015-Ohio-5407. In a 5-2 opinion authored by Chief Justice O’Connor, joined by Justices Lanzinger, O’Donnell, French and Kennedy, the court held that an auto repair estimate issued by an insurance adjuster to its customer was not in connection with a consumer transaction, and thus not an unfair or deceptive practice under the Ohio Consumer Sales Practices Act. Justice O’Neill dissented, joined by Justice Pfeifer. The case was argued February 24, 2015.
Jerry and Nancy Dillon’s car collided with a deer. (“Dillon” will refer to Jerry in this analysis). They were insured by Farmers Insurance of Columbus (“Farmers”). Dillon chose Mission Auto Connection, Inc. (“Mission Auto”) to repair the car. A Farmers claims representative inspected the damaged vehicle and prepared a written repair estimate, which he provided to Mission Auto. The estimate include the use of aftermarket, or Non-Original Equipment Manufactured (“non-OEM”) parts. Aftermarket, or non-OEM parts, are spare parts made by companies other than the car’s original manufacturer.
Mission Auto called Dillon and told him the insurance estimate called for non-OEM parts. Dillon then called the claims representative and told him he wanted only OEM parts. The claims representative told Dillon the insurance policy allowed the use of non-OEM parts, and mailed him a copy of the estimate. By the time Dillon received it, he had already told Mission to go ahead using only OEM parts, which Dillon knew would cost more. Dillon told Mission he would pay the additional cost of the OEM parts unless that cost could be recovered in this lawsuit. He endorsed over to Mission the insurance company checks for repair costs.
The Dillons then sued Farmers for its refusal to pay for OEM parts.
In the sole claim pertinent to this appeal, the trial court granted summary judgment to the Dillons, finding that Farmers violated the Consumer Sales Practices Act (“CSPA”) by failing to obtain one of their signatures on the estimate bases on the use of non-OEM parts, in violation of R.C. 1345.81(B)(1). The trial court awarded the Dillons $30,613.66 in actual damages, statutory treble damages, attorney fees, and expenses.
In a unanimous decision, the Fifth District Court of Appeals upheld the trial court’s decision. The appeals court found that R.C. 1345.01 and R.C. 1345.02 conflicted with R.C. 1345.81, and gave full effect to the latter, because it was passed later it time and was more specific.
Key Statutes and Precedent
R.C. 1345.01 (Excludes transactions between insurers and their customers from the definition of a consumer transaction. Defines a consumer transactions as a “sale, lease, assignment, award by chance, or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes that are personal, family, or household, or solicitation to supply any of these things.”)
R.C. 1345.02 (An unfair or deceptive act or practice by a supplier violates the Consumer Sales Practices Act.)
R.C. 1345.81 (Imposes requirements on insurers issuing motor-vehicle-repair estimates based on non-OEM parts. Defines an insurer as any individual serving as an agent or authorized representative of an insurance company, involved with the coverage of for repair of the motor vehicle in question. Subsection (E) provides any violation of this section in connection with a consumer transaction as defined in section 1345.01 of the Revised Code is an unfair and deceptive act or practice.)
R.C. 1.51 (If a general provision conflicts with a special or local provision, they shall be construed, if possible, so that effect is given to both. If the conflict between the provisions is irreconcilable, the special or local provision prevails as an exception to the general provision, unless the general provision is the later adoption and the manifest intent is that the general provision prevail.)
R.C. 1.52(A) (If statutes enacted at the same or different sessions of the legislature are irreconcilable, the statute latest in date of enactment prevails.)
State v. Everette, 2011-Ohio-2856 (A statute must be construed as a whole and each of its parts must be given effect so that they are compatible with each other and related enactments.)
State ex rel. Carna v. Teays Valley Local School Dis. Bd. of Edn., 2012-Ohio-1484 (Courts may not restrict, constrict, qualify, narrow, enlarge, or abridge the General Assembly’s wording.)
State v. Conyers, 87 Ohio St.3d 246 (1991) (Courts must assume that the General Assembly is aware of previously enacted legislation.)
Anderson v. Barclay’s Real Estate, 2013-Ohio-1933 (R.C. 1345.01’s consumer transaction definition is limited to the parties to the transaction, not those who provide services closely related to the transaction, despite the statute’s “in connection with a consumer transaction” language.)
Providing a repair estimate to a customer by an insurance company is simply not an unfair or deceptive act or practice “in connection with a consumer transaction” as defined in R.C. 1345.01, so what happened in this case was not an unfair and deceptive practice, and not a violation of the Ohio Consumer Sales Practices Act.
All You Really Need to Know
The problem here involves three statutes that might appear (and did so appear to the Fifth District Court of Appeals) to have some conflicting provisions. R.C. 1345.81(B)(1) imposes requirements on insurers issuing motor-vehicle-repair estimates based on non-OEM parts. R.C. 1345.81(E) provides that any violation of this section in connection with a consumer transaction as defined in R.C. 1345.01 is an unfair and deceptive practice as defined in R.C. 1345.02. R.C. 1345.02 provides that no supplier shall commit an unfair or deceptive act or practice in connection with a consumer transaction. R.C. 1345.01(A) specifically exempts transactions between insurers and their customers from the definition of consumer transaction.
When the Court of Appeals shuffled this deck, it found that R.C. 1345.01 and 1345.02 conflicted with R.C. 1345.81, and gave full effect to R.C. 1345.81 because it was more specific, and passed later in time. The appeals court went on to find that Farmers violated R.C. 1345.81 (B)(1). Wrong, said the majority. The statutes are not irreconcilable. R.C. 1345.81(E), the remedial section of the statute, limits unfair and deceptive practices to those in connection with a consumer transaction as defined in section 1345.01, which expressly excludes transactions between insurance companies and their insurers. “Thus, because an insurer cannot be a party to a consumer transaction, an insurer cannot commit an unfair or deceptive act or practice under R.C. 1345.81(E),” O’Connor wrote.
That’s pretty much it. There were a few bones tossed. Repair facilities and installers are subject to the provisions under R.C. 1345.81 because they can be involved in consumer transactions. And policy holders like the Dillons are not without remedies here against insurers who may violate R.C. 1345.81 although the court was pretty vague about exactly what those may be.
Because the court resolved the case in the way that it did, it did not reach Farmers’ second proposed proposition of law, which was this:
“An insurer’s issuance of a repair estimate for the use of OEM and non-OEM parts is not an “unfair or deceptive act or practice” pursuant to any provision of the Ohio Consumer Sales Practices Act (R.C. 1345.01 et seq.), where the estimate complies with the express terms of the applicable insurance policy; the insurer orally notifies the insured of the content of the estimate; and the insured chooses the repair facility.”
That’s probably just as well. The oral argument got hopelessly bogged down on this one.
Anderson v. Barclay’s Capital Real Estate
In Anderson v. Barclay’s Capital Real Estate, decided in 2013, the court held that the definition of consumer transaction in R.C. 1345.01(A) was limited to the parties to the transaction, not those who provide ancillary services, in that case, mortgage servicers. The court found providing the repair estimate analogous to mortgage servicing—collateral to, but not party to, the consumer transaction. So, no violation of the CSPA.
Justice O’Neill’s Dissent
First, the points in the majority decision with which Justice O’Neill agrees (a pattern is emerging in his dissents. He usually begins them with his points of agreement.)
- He agrees that R.C. 1345.01 and R.C. 1345.81 are not irreconcilable.
- He agrees that R.C. 1345.01 exempts transactions between insurers and their insureds from that section’s definition of a consumer transaction.
- He agrees that the relevant consumer transaction in this case is the repair of the automobile.
- He agrees that insurance policy agreements are not consumer transactions for the purpose of the CSPA.
Ok, so where does he part company from the majority? He sees the case as being about the ability of a consumer to enforce R.C. 1345.81, which requires an insurer, repair facility, or installer to obtain an acknowledgement from the consumer that non-OEM parts were being used in the estimate. Once Farmers prepared the repair estimate, it subjected itself to the statutory duty to disclose the use of non-OEM parts, and get the Dillons’ acknowledgment. He reads R.C. 1345.81(E) as providing that failure to obtain such an acknowledgement in connection with a consumer transaction (in this case, the repair of the car) is an unfair and deceptive practice. Because Farmers failed to get this acknowledgement, O’Neill sees this case as a simple, straightforward violation of R.C. 1345.81.
More fundamentally, O’Neill disagrees with the majority’s interpretation that a consumer transaction is limited to the parties to the transaction, and does not include services related to that transaction. He disagreed with that interpretation in Anderson v. Barclay’s Capital Real Estate, Inc. (he dissented in the case) and he disagrees with that interpretation in this case.
“[O]nce an insurance company undertakes the role of adjuster in a collision repair, there is no justification to shield it from liability under the CSPA for its actions in connection with that consumer transaction merely because it is an insurer. Doing so is unfair to consumers and to the repair facilities and installers that follow the law, and it ignores the intent of the Ohio General Assembly when it enacted the CSPA,” O’Neill wrote.
Justice Pfeifer joined in this dissent.
After the argument, I called this case for Farmers, and wrote,
“Some of the justices—the Chief in particular, and probably Justice French–may not even find there was a consumer transaction here. As Farmers’ counsel put it, “that is the threshold question, and if the answer is no, the conversation ends there.” As evidenced in the recent decision in Anderson v. Barclay’s Capital Real Estate, Inc., 2013-Ohio-1933, in which the court refused to apply the CSPA to mortgage servicers, the court hasn’t seemed inclined to give very expansive readings to those terms, especially when applied to businesses regulated elsewhere.
“Still, insurance companies who write these estimates aren’t as dissociated from the entire process as insurance counsel was arguing. The best argument for the application of the CSPA was that the insurance company was acting in connection with a consumer transaction between the insured and the body shop, pursuant to subsection (E) of the statute. But as Justice French pointed out, that subsection refers back to the definition of consumer transaction, which excludes transactions with insurance companies—but only in that role.”
Two key questions at oral argument turned out to be these—Justice O’Donnell asked whether the court should look at 1345.81 (E) and make a determination as to whether or not Farmers Insurance was acting in connection with a consumer transaction between the repair shop and the customer. Later, he asked even more pointedly, whether the larger question was whether or not the resolution of an auto repair estimate is a consumer transaction.
And Justice French, always the stickler for the exact words in a statute, asked the Dillons’ lawyer how he would get around the language in subsection (E) which says “in connection with a consumer transaction as defined in 1345.01,” which specifically excludes insurers. So the majority bought the argument made by Farmers’ counsel that the process of providing an estimate for the repair of an automobile between an insurance company and its insured is not a consumer transaction. There is something not entirely satisfactory about this. There was talk about “other remedies” available to insureds, but no one seemed to be able to say specifically what these were.