Florida shop owner pushes State Farm back to save his business

by Anne Koppel Conway

Starting his collision repair shop in a “lean-to shack” in Lakeland, Florida, in 1969, Ray Gunder – owner of Gunder’s Auto Center Inc – built up his business to a $6.3 million a year enterprise with 28 employees doing “quality, quality, quality” work. The business was growing the way he envisioned until about five years ago when State Farm Insurance started seeing Gunder as the “evil ruler of an evil empire,” he said.

Sounds like a sci-fi thriller? It’s not.

Up to about 2004 Gunder was the “leader of the pack” among the 193 collision repair shops in Polk County. For those not familiar with Florida, Polk County is right next door to Walt Disney World and to the Tampa Bay Buccaneers, he said. “State Farm was my hero. The local agents were phenomenal to work with. They all knew the quality of work I did.”

Gunder’s was on the insurer’s preferred list, and with their referrals the insurance company accounted for 37% of his business.

So what happened?

“Corporate greed decided to take what I built away from me,” he said.

“State Farm disagreed with my stance on P-pages,” Mitchell International, Inc.’s procedural pages, the collision estimating guide. “I demanded that [all the shops in the county] get paid for standard operating procedures.”

“Over a period of six months State Farm put a lot of pressure on me to where they we not going to pay for these procedures.” First, reinspectors demanded that certain items, such as masked jams, denibs, car covers for primers and color, sand and buffs, be taken off customers’ bills.

Then representatives from the State Farm claims office went to him, saying that many of these procedures he was billing for were “not market driven” and “not common in the area” and “we’re not going to pay them,” he recalled. “If you [Gunder’s] continue to write these charges on [State Farms’] Service First program, we’re going to take you off our program.”

Gunder stuck to his position, telling the insurer, “Look, the technology says the procedures are there. We want to charge for each standard operating procedure.” Other area shops followed his lead and started bucking the system by also writing up these additional charges.

Making good on their threat, he received a call from State Farm informing him that he had been booted off the insurer’s Direct Referral Program (DRP).

At that point he had been in business for 35 years and was sure his customer base “wasn’t going away. I was wrong.”

He found out that potential customers were being told by the insurer

If they went to Gunder’s they would be overcharged
They would be paying way over their deductible
If their car goes in blue and comes out pink, there is nothing the insurer could do about it
They have substandard repairs
Gunder’s has equipment that won’t pass our inspection.
They take longer than any other shop in the County. So you’re going to be responsible for additional rental day costs.

“You name it, I heard [that State Farm had said it].”

He “begged and pleaded with area reps” to tell their area supervisors to “quit punishing me.” He told them if the insurer didn’t stop, he would be forced to seek legal help. They were “slandering me bad,” he said.

Over four years he saw his State Farm business drop from 37% down to 4%. “We document every nickel that comes through this shop.”

“The more I talked to other shops and tried to form an association, the more State Farm stepped it up” against him.

The insurer’s corporate claims office, he felt, was out to set him up as an example to force the other shops back into line.

Just as State Farm had hoped, by taking these actions, the other area shops figured “suppression is the way it’s going to be. We can’t exist without State Farm. We’re proud of you, Ray, but we can’t take the chance. If [State Farm does] that to us, we’ll be bankrupt,” Gunder recalled. So the other Polk County shops stopped writing the procedures.

Reaching the limits of his tolerance, Gunder filed a defamatory statements and tortious interference with a business relationship lawsuit against State Farm Insurance.

“I just decided that if I have to spend every nickel of my retirement, I was going to make them stop.” He also wouldn’t mind changing the industry along the way. He had been paying about $10,000 a month in legal fees, but his attorney, Brent Geohagan, is so sure of the outcome of this case that he is taking it on a contingency basis.

Geohagan told him that State Farm is hoping the case will be dismissed, that “I won’t be able to handle the stress, that I might die or that I’ll run out of money.”

In April 2009, after one year and three months into the case, it was moved from the Polk County courts to the U.S. District Court in Tampa to “get out of the good ol’ boy system. Things move a lot quicker in Federal Court,” he said.

The insurer did file a motion to have the case dismissed. And Gunder’s answered the motion with one of its own as to why the lawsuit should not be tossed out of court.

“For what it’s worth, after five years of being punished,” the insurer has “finally changed their word track” and is no longer saying negative things about his shop. Now when State Farm customers bring in their cars, they report the insurer says that Gunder’s “has an excellent reputation in the community.”

State Farm “realized that with a solid legal complaint, I am not just a cry-baby collision shop owner throwing jelly beans at them. I’m serious! I’m going to get into their pockets for what they’ve done to me and to this area.”

What he can’t figure out is “why I waited so long to get help.”

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Editor’s note: Collision Standard will keep track of the progress of this lawsuit. Check back with us.