Written by Attorneys Craig A. Cohen and Erin Nulty

As many insurance companies continue to wait for the Illinois Supreme Court to issue its opinion in Avery v. State Farm, another court has weighed in favorably for plaintiffs on the class certification issue in aftermarket parts cases. On June 25, 2004, the California Court of Appeals reversed a trial court order denying class certification in Lebrilla et al. v. Farmers Group, Inc., et al. in a matter of first impression for the Court. After reviewing the national debate in state courts around the country concerning the ability of a class to establish that aftermarket crash parts are uniformly not of like kind and quality to original equipment manufacturer (“OEM”) parts, the Court of Appeals decided that the plaintiffs could provide evidence of common proof under the court’s interpretation of “like kind and quality.” This decision could provide plaintiffs seeking class certification in non-OEM parts cases with the impetus to continue aggressively litigating such cases.

Under Farmers’ standardized California automobile insurance policy, liability is limited to the amount that it would cost to repair or replace damaged or stolen property with other of like kind and quality. In this case, plaintiffs challenged Farmers’ practice of specifying aftermarket crash parts in the repair of policyholders’ vehicles and sought statewide certification of a class of policyholders who had their vehicles repaired with certain aftermarket crash parts from 1996 to the present. Plaintiffs claimed that the aftermarket crash parts at issue were not of “like kind and quality” to OEM parts because they were inferior in terms of structural integrity, corrosion resistance, finish and appearance, fit, material composition, durability, and dent resistance. Plaintiffs argued that the use of the crash parts failed to restore policyholders’ vehicles to pre-loss condition and sought class certification of three causes of action – declaratory and injunctive relief, and violations of the Unfair Competition Law and Consumers Legal Remedies Act.

In denying plaintiffs’ motion for class certification, the trial court held that individual issues predominated over common ones, which precluded the class members’ claims from being subject to common proof. Plaintiffs appealed this order, arguing that common questions of law and fact, including the identical nature of the policies and the issue of whether Farmers’ practice in specifying aftermarket crash parts met the “like kind and quality” standards in the policy, made their claims ideally suited for class certification. Plaintiffs also presented evidence from their expert, Paul Griglio[i], showing that common proof can support the allegation that aftermarket crash parts are uniformly inferior to OEM parts. Mr. Griglio opined that modern manufacturing processes obviate the need for an individual assessment of the quality of a part, since the parts are uniformly produced using specific criteria.

Farmers argued against plaintiffs’ allegations of commonality for a variety of reasons, many of which were based on Farmers’ interpretation of “like kind and quality.” Farmers contended that the definition of “like kind and quality” was related to the pre-accident condition of the class member’s car, including the age, use and condition of the car, and was therefore subject to individualized inquiries, not common proof. In addition, Farmers asserted that it is impossible to prove that non-OEM parts are “categorically inferior” to OEM parts. Farmers also argued that no class-wide assessment of damages is possible, since proof of damages would necessarily involve an assessment of the pre-loss condition of each vehicle.

Upon review, the Court of Appeals determined that it needed to establish the definition of the policy language “like kind and quality” under California law without delving into the merits of the case to conclude whether plaintiffs could establish commonality. In reviewing the many state cases cited by plaintiff and Farmers in support of their respective positions, the Court found the decisions favoring certification, particularly the Foultz case, to be persuasive. The Court ruled that “like kind and quality” refers only to a part’s material and suitability and that the age and/or condition of the actual part replaced is irrelevant. The comparison, according to the Court, is between the quality of the non-OEM part and the quality of a new OEM part. As in Foultz, the Court found that the policy language “like kind and quality” relates to the suitableness of fitness for the purpose intended.

After establishing this definition of “like kind and quality,” the Court concluded that plaintiffs may be able to show that non-OEM parts are, in fact, categorically inferior through the use of common proof. While expressing skepticism that plaintiffs would ultimately be successful in proving their allegations, the Court noted that it was the role of the trier of fact, not the Court, to determine the merits of plaintiffs’ case.

Since the Avery decision, courts across the country have wrestled with the certification of classes in aftermarket parts litigation, with some courts following the Avery trend, as in this case, and others rejecting the notion that all aftermarket crash parts can be proven inferior to OEM parts. Clearly, the Lebrilla decision is a positive development for plaintiffs’ attorneys pursuing aftermarket parts litigation and its progress will be followed closely by the insurance industry and the plaintiffs’ bar to determine if plaintiffs are ultimately successful in proving the inferiority of aftermarket parts. If so, the insurance industry can expect a great deal more of this type of litigation in California and in other states that have not yet addressed the issue.