A recently filed action in New York, Harner v. Allstate Insurance Company, et al., Case No. 11-CV-2933 (S.D.N.Y.), shines the antitrust spotlight on the use of preferred provider networks by auto insurers. The plaintiff, an independent auto glass repair shop, alleges that the defendants – fourteen auto insurers and third party claims administrators Belron and Pittsburgh Glass Works – conspired to steer repair business away from plaintiff’s shop and/or failed to reimburse him for the full cost of repairs he made to the vehicles of the insurers’ insureds. While several states prohibit the “steering” of insureds to preferred auto repair and/or glass repair shops, and legislation is frequently introduced addressing the legality of such conduct, the use of the antitrust laws to address such action is somewhat less common, and the legal principles governing such claims somewhat less well defined.

In Harner, in addition to a host of common law claims, the plaintiff alleges that the insurers’ agreements with Belron (and/or its subsidiary, Safelite) and Pittsburgh Glass Works (and/or its subsidiary Lynx) constitute an unlawful conspiracy to “set, fix or stabilize” repair prices, in violation of Section 1 of the Sherman Act and New York General Statute 340 (the Donnelly Act – New York’s antitrust law). In addition, plaintiff also alleges that defendants have conspired to convince customers not to patronize his shop through misrepresentations about the quality of his services and/or his prices.

On June 13, the defendants filed a position paper with the Court outlining their arguments supporting the dismissal of plaintiff’s antitrust claims. With respect to plaintiff’s federal antitrust claims, defendants contend that plaintiff’s complaint fails to allege antitrust injury or antitrust standing, two necessary elements of plaintiff’s claim. Instead, defendants argue, the sole harm alleged by plaintiff is to his own business, not competition generally. Defendants also maintain that the claims should be dismissed because the complaint lacks any specifics concerning the time or place where the alleged agreements were hatched, citing the Supreme Court’s decision in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007). Finally, defendants assert that plaintiff’s claims are “rule of reason” claims, not per se claims, and thus they fail because plaintiff has not sufficiently alleged the contours of the markets that plaintiff claims have been restrained. As to plaintiff’s state antitrust claims, defendants assert that the Donnelly Act “is construed in light of federal precedent,” citing Clorox Co. v. Winthrop, 836 F. Supp. 983 (E.D.N.Y. 1993), and thus those claims fail as well.

Plaintiff’s response to defendants’ contentions is due on July 5, and a hearing on defendants’ motion to dismiss is currently scheduled for July 11 before District Court Judge Cathy Seibel. The court’s action on plaintiff’s claims, regardless of the outcome, is likely to create important new guidance on how the antitrust laws apply to insurer practices in this frequently contentious area. Stay tuned.