Minnesota Assignments of Proceeds Cases Reversed and Remanded to District Courts
July 17, 2009

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 yesterday, 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 Minn. 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 today 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 glsasBYTEs.com™/AGRR magazine, "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.

He's also hopeful for the future of glass shops in Minnesota and their relationships with insurers as a result of the case.

"What I'm hopeful for is that we'll get some balance again," he said. "What the arbitration and assignment does is by giving glass companies a remedy, it provides some balance. Otherwise the insurance companies are just unilaterally dictating things … "

The judges that took part in the review were Justice Alan C. Page, G. Barry Anderson and Lorie S. Gildea. The court notes that neither Chief Justice Eric J. Magnuson nor Justice Helen M. Meyer and Christopher J. Dietzen participated in the review of the case, which was argued in January.

CLICK HERE for full text of decision.

CLICK HERE to view a Beacon from the Independent Glass Association regarding the case.

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