You get what you pay for.
Or do you?
A recently announced settlement of a class-action suit against State Farm Insurance serves as a reminder that you don’t always get what you pay for-but should make every effort to ensure you do.
The suit was filed by a policyholder in 1987 after several columns by this writer pinpointed alleged abuses in the use of “like kind” parts.
What State Farm had been doing, the suit charged, was specify that policyholders agree to the use of non-original equipment or so-called “like kind” parts in getting repair estimate quotes and in getting their damaged vehicles repaired.
“Like kind” sounds as if it means “just like what you got from the factory, only cheaper.”
Opponents of “like kind,” however, said junk produced in Taiwan or Korea made to look like the original equipment part built in the U.S. factory was being substituted to save insurance companies money.
Prone to rust
Ford Motor Co. was the leading opponent of “like kind” parts. It insisted the stuff would rust quickly-if the body shop was able to make it fit at all after beating the door panel or bumper with a rubber mallet to make it fit. The “like kind” material didn’t always meet factory specs or tolerances, the automaker argued.
Consumers would pay top dollar, and then when a claim was made, cheapo parts were substituted to save money. But who saved the money? The feeling was that the insurance companies saved the money but the savings wasn’t passed on to the policyholders.
The insurance companies argued that “like kind” parts were substantially lower priced than original equipment factory parts but of equal quality. Without using “like kind” to make repairs, policyholders would pay even more to get their cars fixed, so the argument went.
“Like kind” parts resulted in a couple of problems. One is that when the consumer saw the repair estimate, he or she paid little or no attention to the words “like kind” next to the price estimate for the replacement bumper. They were unaware that “like kind” meant the bumper could be coming from Taiwan and not from Detroit.
The other problem is that if the consumer was aware of what “like kind” meant, he or she could then insist that an original equipment part be used instead-but the insurance company would insist that they pay the difference between the low-cost “like kind” part and the higher-cost original equipment part.
An original equipment replacement hood for a Ford F-Series truck, for example, could run $308 whereas the “like kind” shipped in from Taiwan may cost $200. So the insured would have to pay the $108 difference and ask, “Why am I paying premiums every six months to protect myself in the event of an accident, and still have to pay extra for the repairs when I do have an accident?”
Under the State Farm agreement, those who had cars repaired using non-original equipment parts before July 3, 1990, can insist that State Farm replace the parts with original equipment-at no added cost to the policyholder.
If the car was repaired before July 3, 1990, the policyholder can file for a $40 award for each claim made, since State Farm estimates the average difference between original equipment and “like kind” parts was $40.
State Farm also agreed to guarantee “like kind” parts for fit and rust resistance for the life of the policyholder’s car.
But the insurance company said it will continue its practice of having policyholders pay the difference when they opt for an original equipment part rather than the cheaper “like kind.”
State Farm was the only company named in the suit, which was only filed in Illinois.
But the suit and the settlement serve as a reminder to all motorists regardless of state or company insuring them.
What you can do
When you make a claim, check the estimate to determine if you’re getting original equipment or “like kind” substitutes. If you’re paying top dollar, why not demand top quality parts?
When you make a claim and the insurance company quotes “like kind” parts prices but you want original equipment, call a dealer or two to learn the price of original equipment so you know exactly what your liability will be.
Better yet, why not call your insurance agent before you make a claim and ask what the company’s policy is regarding the use of “like kind” parts and your responsibility to pay the difference between them and original equipment.
———-
Jim Mateja’s columns appear in Transportation on Sunday, in Business on Monday and in Your Money on Friday.
