Insurers Are Exempt From Ohio Consumer Statute

February 26, 2016 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts by Brad Council

The Consumer Sales Practices Act (CSPA) is an Ohio statute governing consumer transactions that limits a number of specific business practices as well as more general prohibitions against unfair and deceptive acts by businesses against consumers. As the Ohio Supreme Court recently held however, a number of transactions and businesses are specifically exempted from the statute and its prohibitions. In this case, cost estimates provided by insurers are not required to follow the CSPA’s requirements.

In Dillon, et. al., v. Farmers Insurance of Columbus, Inc., Farmers provided insurance coverage for Dillon’s automobile. After crashing his vehicle, Dillon reported the accident to Farmers to have his vehicle repaired. Dillon chose Mission Auto Connection, Inc. to repair his vehicle and Farmers, after an inspection, provided an estimate for the amount it would pay to repair the vehicle. The estimate was based on using non-original equipment manufacturer (OEM) parts as provided in the insurance agreement. Dillon however instructed Mission Auto to repair the vehicle using OEM parts and was aware that he would be responsible for the difference in cost. He then sued Farmers for a CSPA violation for providing an estimate based on non-OEM parts and not getting Dillon to sign an acknowledgement of such.

The CSPA and the requirements and prohibitions it contains apply only to consumer transactions. Consumer transactions are defined by the statute to include transactions primarily for personal, family or household purposes but it also specifically excludes transactions between consumers and specific types of business entities, including insurers. A specific provision of the CSPA, ORC 1345.81, requires that any insurer providing a repair estimate based on the use of non-OEM parts must include a disclaimer on the estimate and have the consumer acknowledge the disclaimer by signing the estimate. This creates a potential statutory conflict as the CSPA specifically excludes transactions with insurers from the statute but the provision regarding repair quotes specifically names insurers as having to comply with the provision.

The trial and appellate courts upheld Dillon’s argument that statutory interpretation requires the more specific provision to apply when two statutes are in contradiction with one another and cannot be reconciled to give effect to both. As the provision regarding repair quotes is more specific than the general definition provision excluding insurers from the CSPA as a whole, the repair quote provision should apply and Farmers should have complied with its requirements. The courts further held that as the repair quote statute was enacted subsequent to the CSPA definitions, the later enacted provision should take precedence indicating the legislature’s wish for insurers to be covered by that provision.

The Ohio Supreme Court however sided with Farmers and reversed the lower courts’ decision, finding that both statutes can be construed so as to give effect to both. The Supreme Court held that while insurers are clearly covered by the provision’s requirements, the statute provides a remedy only if the violation is in connection with a consumer transaction. As the remedy provided by the CSPA provision is limited to consumer transactions and insurers are excluded from the definition of consumer transactions, the CSPA provision prevents insurers from issuing repair estimates without the non-OEM disclosure but provides no remedy for breach of the provision. Dillon is therefore limited to receiving a declaratory judgment or injunction regarding Farmers’ failure to comply with the provision.

The Ohio Supreme Court in this case provides a reminder that, if possible, apparently contradictory statutes must be read in such a way that each is given effect before rules of statutory construction determining priority may be applied. It also points out that the exclusions written into the CSPA are effective and entities such as insurers and banks may not be sued for damages under CSPA.

The Full Text of the Opinion May Be Found HERE