Verdict Means Premium Hike?

A day after State Farm Insurance got slapped with an unprecedented $456 million verdict, the group that sued the insurance company said customer premiums should not go up as a result of the decision.

However, State Farm representatives said if the verdict against the company is upheld on appeal, then it will increase rates, reports CBS News Consumer Correspondent Herb Weisbaum.

Industry experts agreed that the verdict accusing State Farm of using second-rate "after-market" parts for automobile repairs could lead to higher customer premiums.

Steve Goldstein, a spokesman for the Insurance Information Institute, a nonprofit industry communications group, said premiums and repair bills could soar if insurers are forced to use factory-authorized parts.

"There are basically two winners: the auto makers and the attorneys who brought this suit," Goldstein said.

Consumers save about $800 million a year in reduced premiums due to the use of less-expensive repair parts, according to industry estimates presented at trial. After-market parts are involved in one-fifth of State Farm's auto-body repairs, and 15 percent of repairs covered by all insurers, according to estimates.

Critics contend such parts — sheet-metal and plastic trim parts modeled on originals but made without access to factory specifications — do not provide the same level of fit, finish, corrosion resistance and, in some cases, safety, as parts made for auto makers.

State Farm spokesman Bill Sirola said the company has no immediate plans to change its policies, but said a review is likely if the verdict stands on appeal.

State Farm officials maintained that after-market parts never hurt anyone and help save everyone money.

"The fact is, we use certified parts. We make sure theyÂ're available," said State Farm Insurance Vice-President Jack North. "We guarantee their satisfaction with those parts."

However, the company's own documents tell a different story. It knew they werenÂ't the same, but the company never told policyholders that, Â"quality and fit continue to present a problem.Â"

"State FarmÂ's motto is 'like a good neighbor, state farm is there.' TheyÂ've not been a good neighbor," said plaintiff Peggy Frey. "TheyÂ've not been there. TheyÂ've done nothing but fight me tooth and nail."

If the verdict stands, most of the 4.7 million policyholders involved in the case — who had collision repair work done since the summer of 1987 — would get about $100, but payments aren't expected for several years while State Farm appeals.

The plaintiffs still are seeking an additional four billion dollars on their claim that State Farm deliberately deceived customers about the parts' quality.