Federal Appeals Court Upholds Minnesota District
Court Decision in Favor of Alpine Glass
June 21, 2011
The U.S. Court of Appeals for the Eighth Circuit has 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 the case's original
filing in March 2006.
Alpine filed the original suit that brought the case forth, asking
a state court to be allowed to engage in arbitration with the named
insurers to settle 1,120 short-pay disputes. 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
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 claimsclaims
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.
Finally, Farmers also appealed the district court's denial of its
request that the court vacate the judgment in favor of Alpine, and
that the court erred in its calculations of the judgment, based
on the fact that it utilized one particular policy endorsement over
another to calculate what was owed, based on the competitive pricing
required by the state's insurance code.
"Before announcing the amount that Farmers underpaid Alpine,
the arbitrator found that 'Farmers was paying a rate not based upon
competitive pricing in the auto glass replacement industry in Minnesota,
which is a competitive industry,'" writes the court.
However, the appeals court further adds that it sees "little
distinction between the two standards and echoes [the district court's]
question, 'why it would ever be 'necessary' to pay more than the
'prevailing competitive price.'"
Mike Reid, president of Alpine Glass, says the outcome is an optimistic
one for all auto glass shops.
"I think it will help shops understand that when payments
from [third-party administrators] that are below the prevailing
rate, they have a way to take a stand on that and fight for the
fair and reasonable rate," says Reid.
Alpine was represented by Chuck Lloyd of Livgard and Lloyd in Minneapolis.
At press time, a Farmers spokesperson had not responded to requests
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