CLIENTEVALOR EN LETRAS: Mil seiscientos trece, 50/100 dólares americanos.

46. Before a damaged vehicle is repaired, a repair appraisal – or estimate – is prepared. The estimate appraises the damage to the vehicle, serves as the blueprint for the repairs that are to be performed, and establishes the scope and cost of the repairs based on required labor operations, time and price. Repair estimates are prepared using estimating software products sold by one of the Information Providers, CCC, Mitchell and Audatex. Defendant Insurers and Conspirator Insurers (and virtually every insurer), as well as the vast majority of repair facilities, subscribe to one or more of the estimating software products sold by the Information Providers, which collectively make up the damage repair estimating market in the U.S.9

47. Estimating products consist of three main components: (1) a spreadsheet that tracks the line items that are a part of a vehicle repair estimate; (2) the database from which parts and labor costs are pulled; and (3) the software that calculates the total cost of the repair, taking into account labor and repair procedures. In addition, as described below, the estimating

9

CCC, Mitchell and Audatex also sell what is known as “total loss” valuation software. Certain damage to a vehicle may prove so costly that the insurer will declare the vehicle a “total loss” because the estimated cost of the repair approaches or exceeds the vehicle’s value. Damages that result in a “total loss” to vehicles do not generally require or result in collision repairs and, accordingly, the “total loss” valuation software is not a part of this action.

25

programs each come with reference manuals, which explain and detail the repair procedures and the methods for preparing comprehensive estimates.

2. Insurers Drive the Estimating Market a. Revenue

48. In addition to estimating, the Information Providers sell a number of other automotive damage and related products, including workflow management products, business intelligence products, and repair facility or shop management software. Insurance companies often purchase a bundle of products from one of the Information Providers, which include a core estimating program together with other management and operational products. With the

exception of State Farm (which uses various products from all three Information Providers), upon information and belief, the Defendant Insurers and Conspirator Insurers generally have exclusive contractual relationships with, and purchase estimating products from, one of the three Information Providers.10

49. In addition, the Defendant Insurers and Conspirator Insurers mandate – or

strongly recommend – that their DRP network facilities license the same estimating product (and several add-on products) from the same Information Provider with which the Defendant Insurers and Conspirator Insurers have a relationship. Upon information and belief, Allstate, GEICO, Farmers, USAA and Nationwide all use CCC to prepare estimates. GEICO and Nationwide have “closed” DRP estimating platforms, meaning that their DRP facilities are required to use the

10

There are certain exceptions. For example, Safeco Insurance Company, which is owned by Liberty Mutual, uses CCC, while Liberty Mutual uses Audatex. Upon information and belief, at the expiration of Safeco’s existing contract with CCC, it will switch to align with Liberty Mutual’s Information Provider estimating system. In any event, upon information and belief, Safeco’s estimating profile and estimating protocol and guidelines are dictated by, and align with, Liberty Mutual’s.

26

CCC program to prepare estimates. Allstate, Farmers and USAA have “open” DRP estimating platforms (although use of CCC is preferred and encouraged).11

50. Upon information and belief, Progressive uses Mitchell estimating products. Further, Progressive has an “open” DRP estimating platform, but that is a misnomer given that Progressive’s in-house claims adjusters prepare all of their repair estimates, rather than the DRP facilities. Travelers also uses Mitchell, and has an “open” platform.

51. Upon information and belief, Liberty Mutual and American Family use Audatex, and both have “closed” DRP estimating platforms.

52. With respect to State Farm, upon information and belief, it purchases certain products from all three Information Providers, but uses Audatex to prepare estimates in 4 regions around the country and Mitchell in 8 other regions. State Farm has an “open” DRP estimating platform.

53. Defendant Insurers and Conspirator Insurers each pay millions of dollars per year for Information Provider products. Upon information and belief, State Farm and Allstate

purchase between $10 million and $20 million in products annually. Information Provider revenue for estimating products also derive from repair facilities. Reportedly, 60% of estimating revenue comes from repair facilities and insurers account for 40% of the revenue. However, given that Defendant Insurers and Conspirator Insurers mandate that their DRP facilities use the same Information Provider estimating programs, Defendant Insurers and Conspirator Insurers create a secondary revenue stream for Information Providers through the insurers’ respective DRP facilities, and thus account for and control a significant portion of that additional 60% in

11

An open platform simply means that the insurer will accept for review a repair facility estimate using another estimating program, but the insurers still prepare their own estimates. In any event, an open platform does not mean that estimating profiles and guidelines are discretionary. Rather, they are still strictly enforced.

27

repair facility revenue for the Information Providers. And, generally, if a repair facility is a DRP facility for multiple insurers – which frequently is the case – that facility will license estimating programs from multiple Information Providers. Given the number of DRP facilities, the

Defendants Insurers and Conspirator insurers account for almost 75% of the Information Providers’ revenue.

54. Further, Defendant Insurers and Conspirator Insurers sign longer-term contracts – generally two to five years in length, locking in that annual revenue for the Information

Providers. The repair facilities execute license agreements with the Information Providers, which likewise have multi-year terms, but the repair facilities generally pay only a total of several thousand dollars annually for the estimating programs (and any add-ons). Accordingly, despite the fact that there are tens of thousands of repair facilities in the United States and only a small number of major insurers, Defendant Insurers and Conspirator Insurers wield substantial leverage and economic influence with the Information Providers.

b. Influence

55. Defendant Insurers and Conspirator Insurers regularly meet and consult with the Information Providers. For example, upon information and belief, all three Information

Providers have facilities near State Farm’s headquarters, as well as employee representatives on State Farm’s and other insurer’s sites, and discussions about the estimating programs

consistently take place. Further, the Information Providers regularly visit Tech-Cor, Allstate’s repair testing and training facility, as well as Allstate’s headquarters. As described below, the Information Providers all sponsor conferences and annual events, attended by Defendant Insurers and Conspirator Insurers, at which the parties discuss the Information Provider programs,

28

56. Further, upon information and belief, Defendant Insurers and Conspirator Insurers regularly request, encourage and/or suggest (if not require, under threat of lost business) that Information Providers find ways to reduce severity on insured claim repairs, i.e., reduce costs, by, among other things: (i) reducing time for labor operations (by re-doing time studies until the desired time is achieved or simply shaving time arbitrarily from required operations); (ii)

collapsing and combing (“bundling”) labor operations – and finding more redundancy (known as “overlap”) in order to remove times for necessary labor operations; (iii) omitting or truncating necessary labor operations; and/or (iv) requiring that labor operations be entered manually by repair facilities preparing estimates, enabling Defendant Insurers and Conspirator Insurers to challenge and suppress compensation for these operations or the time ascribed to them, as described at length below.

57. The Information Providers’ estimating systems have become entrenched as the only accepted method of preparing repair estimates. As a result, all members participating in the collision repair industry must utilize one of the three estimating systems. Notwithstanding their purported efforts to do so, the Information Providers simply cannot serve two masters. Indeed, the Information Providers, which fiercely compete for the business of Defendant Insurers and Conspirator Insurers, represent their products to insurers as a means by which to control and reduce costs, which is clearly countervailing to the concept of selling the software tool to the repair facilities to prepare the most accurate and comprehensive repair estimates – and be compensated accordingly. In truth, the Information Providers’ interests clearly lie with their larger customer: Defendant Insurers and Conspirator Insurers.

29

C. Insurers Establish an Artificial Prevailing Rate to Control and Suppress