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 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.

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 for comment.

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