"We don't want our policyholders caught in the middle of the lawsuit-driven confusion and misinformation about the quality of the aftermarket parts we specify, " said Edward B. Rust, chairman and chief executive officer State Farm Mutual Automobile Insurance Company. "To prevent that from happening, we've decided that the best course for now is to begin specifying only crash parts made by auto manufacturers."

Rust said this step was necessary in light of a jury verdict this week that the company had broken its contracts with policyholders by specifying the use of less-expensive aftermarket parts on auto repair estimates. He said national media attention to the verdict has prompted questions and confusion among policyholders.

"This decision not to use these parts makes sense now. However, in the long run, not having lower-cost, high-quality alternative parts available will be very bad for insurance consumers," Rust added. He noted that the company will continue to review its procedures as it pursues an appeal of the jury verdict.

Rust said State Farm still believes that its practice of specifying quality replacement parts and promising customer satisfaction with the parts is the best way to assure quality repairs while still keeping repair costs down and premiums as low as possible.

Rust also emphasized that for any policyholder who has already had an aftermarket part installed, State Farm will stand behind its guarantee that the policyholder be satisfied with the part for as long as the policyholder owns the vehicle.

"The fact is, we receive few complaints about these parts from customers who have had them installed. And, we've saved our policyholders almost $234 million in 1997 alone by specifying them," he said. "It is still too early though to predict with any certainty what impact the court case or our decision to suspend the use of aftermarket crash parts will have on premiums, but we know in the long run, the effect of the court case won't be good."

Rust said that the company's highest priority is to ensure that every customer receives the quality service expected from State Farm.

This decision to temporarily suspend its use of aftermarket parts applies in all states and Canada and is effective until further notice.

After hearing six weeks of testimony in a national class-action suit filed in a state court in Marion, Ill., the jury on Monday awarded nearly $456 million to some State Farm policyholders because aftermarket parts--outer-shell body parts manufactured by companies other than the original carmaker--were specified on many repair estimates. Further rulings from Williamson County, Ill., Associate Judge John Speroni are still pending.

State Farm Insurance Companies
Corporate Public Affairs
One State Farm Plaza
Bloomington, IL 61710
Phone: (309) 766-8864