Minnesota Assignments of Proceeds Cases Reversed and Remanded
The Minnesota Supreme Court has reversed several recent cases involving
the assignment of proceeds clause in an auto insurance policy and how
it relates to auto glass shops. Originally, the assignment had held for
auto glass shops, but a Court of Appeals had ruled in 2008 that a “non-assignment”
clause protects insurers from having to deal with auto glass shops. The
State Supreme Court decision, however, released in July, reverses the
Appellate Court’s decision. The cases, involving several auto glass shops
in the state, all of whom are represented by Chuck Lloyd of Livgard and
Lloyd, will return to the district courts for further review.
The glass companies represented in the case are Star Windshield Repair
Inc., The Glass Network and Auto Glass Express (AGE), and Archer Auto
Glass. The insurers involved are Western National Insurance Co., Auto
Owners Insurance Co., Austin Mutual Insurance Co. and State Farm Mutual
Automobile Insurance Co.
Three of the original cases involved arbitrations related to short payments.
In these cases, the arbitrators ruled in favor of the glass shops in the
short payment disputes, but the insurers filed arbitration afterwards
arguing that the assignment of payment to the glass shops had been invalid
due to the non-assignment policies present in the insureds’ policies.
In the fourth case, Star Windshield Repair attempted to arbitrate short
payments against Auto Owners; in turn, Auto Owners filed a declaratory-judgment
action “seeking a declaration that the non-assignment clause in its insurance
contract prevented the customers from assigning the payment to Star Windshield.”
With regard to no-fault arbitration, the Minnesota Supreme Court ruled
that this is a valid method for auto glass vendors to obtain insurance
proceeds. “Without considering the effect anti-assignment clauses in auto
insurance policies, we have held that claims for insurance proceeds by
auto glass vendors ‘are subject to no-fault arbitration after assignment,’“
writes the court.
The court adds, in a footnote, that allowing arbitration between auto
glass vendors and insurance companies for short payment does not “increase
the insurers’ risk of loss.”
“ … and our decision … does not affect the bargain struck between the
insurer and the insured,” adds the court.
With regard to pricing, the Supreme Court cites the Minnesota Unfair Claims
Settlement Practice Act, which says, “an automobile insurer must, with
respect to auto glass repairs, ‘provide payment to the insured’s chosen
vendor based on a competitive price that is fair and reasonable within
the local industry at large.’”
“Failure to do so is an unfair settlement practice,” adds the court.
The court also upheld consumer choice.
“ … The insured is free to choose any auto glass vendor, and the insurer
must pay that vendor a competitive price,” reads the decision. “At the
same time, an anti-incentive statute prohibits auto glass vendors from
enticing policyholders with items of monetary value if their services
are actually paid for by an insurer.”
The court focused on one aspect of the assignment clause issue: “ … Our
discussion is limited to the question of whether anti-assignment clauses
in automobile insurance policies can be read to bar post-loss assignments
of proceeds for auto glass repair claims or the right of auto glass vendors
to arbitrate disputes with insurers over those proceeds.”
The court concludes, “The statutory framework requires insurers, upon
the request of the insured, to extend comprehensive coverage to cover
auto glass repairs. When an insured makes a claim for auto glass that
has been repaired, the framework requires the insurers to make a direct
payment to the insured’s chosen auto glass vendor. The insurer must pay
a competitive price. The framework also requires the arbitration of disputes
about that competitive price.”
The decision continues, “To the extent the insurers urge an interpretation
of their insurance policies, anti-assignment clauses that conflicts with
the statutory framework, their interpretation is unenforceable … Therefore,
because the statutory scheme removes the policyholder from the payment
process for auto glass claims and requires disputes to be arbitrated,
we hold that the anti-assignment clauses in the auto insurance policies
do not preclude a policyholder’s assignment of post-loss proceeds to an
auto glass vendor.”
Lloyd said the decision came as no surprise to him.
“The trial courts that ruled against us clearly ignored the law,” he told
“so we expected to
win at the trial court two years ago. We also expected the Court of Appeals
to get it right, but they didn’t.”
He adds, “The only disappointment is that it’s taken so long, but we’re
glad we got things straight.”
Though the cases will now return to the district courts in which they
were originally filed to work out some of the details, such as the amount
of the arbitration awards that should be awarded, the assignment of benefits
issue should be complete.
“There isn’t going to be any more discussion occurring about the validity
of the assignments,” Lloyd said.
21st Century Changes Dealer Glass Policy
21st Century Insurance has changed its dealer glass policy, according
to an announcement issued by its glass claims administrator, LYNX Services,
in July. According to the announcement, the insurer has directed LYNX
to “limit authorization approvals for dealer glass parts to an amount
not to exceed that of like, kind and quality materials available to 21st
Century through its glass program administered by LYNX Services.”
If the insured still wishes to have dealer glass installed for an amount
more than authorized, he/she will be responsible for the difference, according
to the statement issued by LYNX.
This change only affects vehicles that are older than the current model
year plus one (for example, currently this would only apply to vehicles
older than 2008 models), according to the announcement.
Authorization for dealer glass parts used on 21st Century insureds’ vehicles
should be directed to LYNX at 239/479-6000, or via the company’s online
form at www.lynxservices.com.
At press time, calls for comment had not been returned by officials at
Farmers Insurance, parent company of 21st Century.
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