11th Circuit Construes Civil RICO In The Insurance Context

The 11th Circuit recently affirmed the Middle District of Florida in a complex insurance matter involving a lawsuit filed by car repair shops against insurance companies. The car repair shops alleged that the insurance companies committed RICO violations by capping the rates the insurance companies would pay for auto repairs. Crawford’s Auto Center v. State Farm Mutual Automobile Insurance Company, No. 17-12583 (11th Cir. December 20, 2019).

The gravamen of the complaint was that the car insurers contracted with certain auto repair shops which agreed to accept capped rates for repairs. Participating repair shops also provided statistical information on repairs to the insurers. The insurers reimbursed nonparticipating repair shops at the same rate as the participating repair shops, but the nonparticipating repair shops complained about the capped rates. Each repair shop accepted the capped rates to perform repairs because otherwise another repair shop would get the work. Although the rates were capped, the repair shops did not assert that any insurance company had falsified any data. The Middle District of Florida concluded, and the 11th Circuit agreed, that the repair shops failed to provide any basis for a civil RICO claim.

Because the plaintiffs alleged that the insurer defendants pressured participating repair shops to accept capped rates, the necessary tension between the insurers and the repair shops undercut any notion of any “association in fact” required under the RICO statute. The insurers did not take anything rightfully belonging to the nonparticipating repair shops by allegedly threatening to withhold repair business unless the nonparticipating shops accepted capped rates. Defendants’ assertion that plaintiffs’ proposals and quotes for repairs “did not meet the so-called prevailing rate” was not fraud simply because “the Plaintiffs would like to receive payment for their services at a higher price than the market will bear.”  The 11th Circuit explained that “Plaintiffs could have refused to perform the requested repairs at the rates set by Defendants, but they did not. They went ahead and performed those repairs. This is not extortion.”

This case provides a reminder that notwithstanding the powerful remedies available under the RICO statute, claimants should not attempt to ram a square peg into a round hole.