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Minnesota Supreme Court Hears Assignment of Benefits Arguments

The Minnesota Supreme Court heard arguments this week from both industry attorney Chuck Lloyd of Livgard and Lloyd and counsel for Lansing, Mich.-based Auto Owners Insurance et al. regarding the court of appeals' 2008 ruling that a "non-assignment" clause in an insurance policy protects insurers from having to deal directly with auto glass shops.

The case involves three different Minnesota-based auto glass shops, Auto Glass Express, Archer Auto Glass and Star Windshield Repair.

Lloyd, who is an AGRR columnist, argued that the assignment of benefits clause is an underwriting issue, rather than one involving auto glass claims.

"What the anti-assignment clause is designed to protect is to protect [policyholders] from not doing business with those they don't want to do business with," he said.

The insurers' counsel argued that the real issue in the case is short payments-and a "concern over cost containment."

"The adjusted loss has already been paid," the company's representative argued. "The dispute is the amount over [this]."

In his counter argument, Lloyd argued that whether or not the invoice and what the insurance company might pay is inapplicable to whether the assignment of proceeds should be allowed.

"They want to dispute the amount, but that doesn't change the assignment of the debt," Lloyd said.

The case originated from four different cases, three of which involved arbitrations related to short payments. In these cases, the arbitraters 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."

CLICK HERE for a video of the arguments presented in this week's hearing.

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