Volume 13, Issue 5 - September/October 2011

Insurance Talk
Policy brief

Federal Appeals Court Upholds Minnesota District Court Decision

The U.S. Court of Appeals for the Eighth Circuit recently upheld a previous ruling in favor of Alpine Glass in its case involving Illinois Farmers Insurance and Mid-Century Insurance Co.

The latest decision comes more than five years since Alpine filed suit against the insurers in March 2006, requesting that it be allowed to engage in arbitration with the named insurers to settle 1,120 short-pay disputes (see related story in March/April 2010 AGRR™ magazine, page 14). Farmers (the name under which the sister insurers are listed in the case) had requested that the action be moved to federal district court, where it answered the complaint and filed a counterclaim, according to court documents. The counterclaim alleged that Alpine had violated Minnesota’s anti-incentive statute and breach of contract and requested that the court vacate the original $400,000 arbitration award. The U.S. District Court had granted summary judgment in favor of Alpine in March 2010 and dismissed the counterclaim. Farmers submitted its appeal following that decision, leading to the most recent ruling in favor of Alpine.

The appeal order describes the original case as a “dispute between Farmers and Alpine about how much Farmers is obligated to pay Alpine for auto-glass goods and services rendered on behalf of Farmers’s insureds. At issue are 1,120 short-pay claims—claims in which Farmers remitted only part of the amount that Alpine invoiced.”

Farmers had argued in its appeal that the district court “erroneously dismissed its counterclaim alleging that Alpine violated Minnesota’s incentive statute,” claiming that Alpine was “incentivizing” customers to sign an assignment of proceeds form by promising that it “would release the insured from any obligation to pay the difference between the amounts [Farmers] agreed to pay … ”

Farmers claimed that this was “an unlawful credit or rebate to induce the insureds to do business with Alpine.” However, the appeals court ruled that the state’s law regarding incentives actually was intended to “prohibit auto glass vendors from offering incentives to insureds to choose their shops.”

Likewise, Farmers claimed that Alpine breached its contract with the insurer by charging different prices for work than those listed in the price lists it faxed to Alpine, and that “Alpine accepted the offers when it performed auto glass work on behalf of Farmers’s insureds.” However, the appeals court ruled that “Alpine rejected the offers when its actions failed to conform to the terms of the offer[s].”

“Although Farmers frames the issue as a breach of a unilateral contract, the real dispute is what constitutes a ‘competitive price’ and who dictates that price,” writes the appeals court.

Farmers also appealed the district court’s denial of its request that the court vacate the original judgment.

Washington Auto Glass Shop and Its Owners Face $726,000 Judgment in Allstate Case
A federal district court in Washington has agreed to a default judgment against Burien, Wash.-based Auto Glass Express and Premier Auto Glass and its owners, Michael and Trena Perkins, in a case filed in January by Allstate Insurance (see related story in March/April 2011 AGRR™ magazine, page 18). The default judgment totals $726,700.53—including a principle claim of $637,724.23, more than $75,000 in interest (calculated at 12 percent), attorney fees and court costs related to insurance fraud charges.

The suit alleged that the Perkins and their companies billed and were paid by the insurer for OEM glass, while actually “purchasing and installing aftermarket windshields,” according to court documents. Allstate accused the company and its owners of civil fraud, negligent misrepresentation, violation of the consumer protection act, breach of contract, bad faith, and violation of the criminal profiteering act in its original January 2011 complaint, and claimed that 2,572 Allstate customers “obtained fraudulent services” through the company.

The default judgment resulted from a motion by Allstate, alleging that while Michael Perkins advised the court in March that he would be representing himself, Trena Perkins and the two companies in the case, he “failed to answer, plead or otherwise defend in this action.”

The Washington state insurance commissioner’s office also had filed criminal charges against Michael Perkins for related allegations. He pleaded guilty in April.

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