Assignments of Proceeds Cases Reversed and Remanded to District
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 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
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
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
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
HERE for full text of decision.
HERE to view a Beacon from the Independent Glass Association
regarding the case.
Need more info and analysis about the issues?
HERE to subscribe to AGRR magazine.