Volume 11, Issue 3 - May/June 2009

Insurance Talk
policy briefs

State Farm Changes Policy Regarding Insignia and Logo Glass

State Farm recently revised its auto insurance policy to now read: “You agree that replacement glass need not have any insignia, logo, trademark, etching, or other marking that was on the replaced glass.”

However, company spokesperson Jeff McCollum, corporate public relations, says this is not saying that glass shops should not use dealer glass.

“We’re not asking the glass shops to put in the cheapest piece of glass they can find,” he says. “We’re not asking them to compromise on quality or safety. We’re not saying do or don’t use the piece of glass with a logo or insignia. We say use the most acceptable, competitively priced piece that returns the vehicle to pre-loss condition.”

With regard to the definition of pre-loss condition as it relates to auto glass, he adds, “My understanding of pre-loss condition refers to whether the glass might have had an internal antenna, defrosters, special tinting or another feature that would take it beyond your standard plain hunk of glass. So even by requesting the most competitively priced piece of glass, it would first need to contain the same fit and function as it had before the loss.”

State Farm lists three exceptions to the insignia/logo change, specifically. 

They are cases in which:
• State Farm’s glass claims services have “documented, confirmed and current deficiencies in the form, fit or function of the NAGS parts available in the market;” 
• The dealer list price is equal to or less than State Farm Glass Program price for the equivalent NAGS part; and 
• There is no equivalent NAGS part or the equivalent NAGS part does not have a published list price effective as of the date of the dispatch. 
Currently, the changes only apply to glass parts.

Connecticut Insurance Department Levies Fines on Liberty Mutual

The Connecticut Department of Insurance has imposed fines of nearly $1 million on the Massachusetts-based Liberty Mutual Insurance Companies after the completion of a market conduct examination of the corporation. The company was ordered to pay $296,000 in fines, plus $632,042 in restitution to approximately 3,600 policyholders.

According to the Connecticut Department of Insurance, the examination of the company’s market conduct revealed several violations to state law, related to incorrect auto and commercial ratings; licensing/appointments of agents; licensing of adjusters/appraisers; and instances of improper claim settlements.

In addition, the study found that 3,595 policyholders were overcharged for premiums on their auto insurance policies, and seven policyholders were incorrectly charged a surcharge on their auto policies, according to a statement issued by the state office, resulting in the restitution charges.

“It is imperative that consumers are treated fairly,” says Connecticut insurance commissioner Thomas Sullivan. “I am pleased that my staff was able to identify these violations, work with the company to provide restitution, and make a difference for policyholders.”

Florida Glass Company Employees Arrested; Employer Says Be Vigilant

Four employees of Lee and Cates Glass in the Jacksonville, Fla., area, recently were arrested for their alleged involvement in an insurance fraud scheme. According to reports from the Florida Department of Financial Services’ Division of Insurance Fraud (DIF), the four allegedly billed numerous insurance companies for dealer glass parts, while installing cheaper, aftermarket versions of the parts—amounting to $775,000 in fraudulent claims spread across 15 different insurance companies. The DIF believes nearly 1,000 such claims were filed by Timothy Kimball, 31; Alamo Talley, 29; Cliff Davis, 50, and Susan Davis, 51, all of whom have been charged with vary degrees of scheming to defraud and presenting false information or misleading statements in order to deceive and obtain property. If convicted, the suspects could face possible sentences ranging from 25 to 65 years behind bars.  

Tom Lee Jr., president of the company, told AGRR magazine/glassBYTEs.com™ that he wasn’t aware of what was happening until he received notification from a major insurance company.

“We were notified by State Farm in September of last year that our company was under investigation for fraud,” says Lee. “They met with us once and told us they had found an anomaly in the billing practices at two of our locations.”

“We launched our own investigation immediately and found that some employees at two of our shop locations had manipulated our software to allow customers to be billed for dealer items as opposed to NAGS pricing,” he said. “Those individuals were fired and we cooperated full in the investigation.”

Lee says the state’s department of financial services (which includes insurance oversight) also began an investigation. 

Local news reports cited a bonus plan for employees as a motive for the fraud. “All glass companies have incentive programs for their employees, and ours is no different,” says Lee. “Our employees were bonused [based] on the profit of their location. We did not anticipate what dishonest employees would do to manipulate the program. Once we found out, we ended the incentive program. It’s done. We are regrouping and will announce a new program in the future.”

Lee says his negotiations with State Farm are not over yet either. “If you read State Farm’s O&A you’ll see that it allows them a $1,000 penalty fee for each and every fraudulent claim. Not a lot of glass shop owners know this. And that’s what State Farm wants. We are still negotiating with them now. The penalties are vastly higher than the amount of fraud that took place.”

“We are an 83-year-old company founded on strong principles. This has just been a horrible thing to go through and I am really kicking myself that it happened. You do a lot of second-guessing on what you could do differently or better to keep it from occurring,” he adds, stating that one of the employees involved is a 30-year veteran of the company.

When asked if he had any suggestions for other glass shop owners, Lee offered some. “Sadly, you have to look at everything, every little thing and you can’t assume honesty. ‘Trust but verify’ is the best advice I have. Multiple location companies bring special challenges for management and require a lot of controls. Don’t ever think it can’t happen to you, because it can.”

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