Get Shorty, The Sequel:
Addressing Short Payments
by Charles J. Lloyd
In an earlier issue, (see September 1999 AGRR, page 17), I laid out many of the items you need to collect in preparation for addressing short payments. In this issue, I will discuss what to do when you are short-paid, including how to use those materials to your benefit. The information in this article is general in nature and should not be taken as legal advice. If you have a legal question or problem, you should consult competent, legal counsel immediately.
Once you have your assignment of proceeds in place and have gathered the information you need, you are in the position to take direct action when you are short paid.
First, when you receive a short payment, analyze the check and any letter or memorandum accompanying the check. If it contains a note or restriction indicating that the payment constitutes full and final payment, is in accord and satisfaction or any such similar language, or the letter says words to that effect, be careful. If you cash the check, you may well cut off any opportunity you have to collect a supplemental payment.
If the amount of that payment is inadequate, you will have to return the check in order to pursue a greater payment. If the check and the accompanying letter or memorandum does not contain those kinds of things, you can most likely cash the check and still pursue the shorted amount. If you are in doubt, it is again a good idea to have a competent lawyer look over the documents and advise you on what to do. A lawyer can also further educate you about the kinds of things to be looking out for in the future so that you dont need to call him or her on every shorted payment.
Whether you cash the check or have to return it, send a polite letter thanking the insurer for the partial payment and send a new bill for the amount shorted if you cashed the check, or for the full amount with the returned check. When you have cashed the initial check, my suggestion is to send a second copy of the original bill with the payment noted on it much like you show when there is a deductible collected from the customer. The bottom line changes to reflect the payment, but the insurer has all of the information necessary for processing this request for supplemental payment.
Strangely enough, unlike virtually every other business in the United States, auto glass companies do not routinely re-bill for balances owed by insurers. If your invoice has been reviewed and it contains the correct language, there is no reason not to re-bill the insurer for the shorted amount. If it fails, youre out very little in either time or money. If it works, youve won with little effort. Re-billing may also provide a natural starting point for discussions with the insurer over a pricing agreement that will be acceptable to both sides.
If the re-billing does not work, you should send the insurer a more pointed letter demanding payment on the shorted amounts. Use the policy language, any applicable statutes or regulations and other data gathered to support your demand, and inform the insurer that you expect to be paid interest at your states legal rate (a rate controlled by statute or by state constitutional provision, something else you need to locate).
Further, request that the insurer tell you how it determined the amount of payment and on what part of the policy it relies to pay you something other than your reasonable charge. This again may give you an opportunity to discuss the process with the insurer and point out the flaws in the payment scheme. What you hope to accomplish is to get the insurer to listen and act on your concerns. Some clearly will not be interested. Others, however, will likely appreciate someone taking a thoughtful, reasoned approach to what is almost always a very emotional issue.
If this second letter fails to generate a satisfactory result, dont give up yet, you still have several options. One is to take the insurer to small claims court in your area. In most instances, this can probably be done without a lawyer. Be prepared with the ammunition that you have been gathering to show the small claims court referee or judge that the insurer has not fulfilled its obligations under the policy and that it is out of step with the market. Try to think like the other side and anticipate what they may argue against you so you have ready responses when you get to court. In general, the risk is likely small if you lose. Many states permit the loser in small claims court to remove the case to a higher court for a new trial, or will not hold it against you in another later case should the issue arise again. If you win, the insurer may well pay the judgment rather than appeal to the higher court. This too is another avenue to engage the insurer in discussions on a long-term solution. When youre both at court and both have something to lose, it is a good opportunity to try to work out a compromise.
An alternative is to go directly to the regular court in your jurisdiction and sue the insurer for breach of contract. This will, however, require that you hire a competent attorney to represent you and pursue your claim at all stages of the process. For obvious reasons, this is by far the costliest alternative. Both the risks and the rewards in this arena are greater. You need to analyze your situation and determine if those rewards are worth the risks.
The insurance policy may also provide you with other remedies that may be faster and much less expensive than full-blown litigation. For example, many policies now include provisions permitting neutral appraisers to resolve disputes over claim payments. Arbitration clauses are also popular in auto policies. In either of these mechanisms, the materials you have collected will be of great benefit in persuading the decision-makers on your behalf.
These are just some of the possibilities for addressing short payments. All of the remedies, however, require that you be prepared in advance to pursue additional payments and that you remove the emotion from the situation and deal only with reason. A quality glass installation requires having the knowledge and materials to do the job right. It is no different in trying to pursue short payments. If you are not prepared before you do the job, you are going to find the effort to collect the supplemental payments frustrating and difficult, if not impossible. With preparation and reason, there are no guarantees, but at least you give yourself a greater chance of success.
Chuck Lloyd is a partner in the Minneapolis law firm of Lindquist & Vennum L.L.P. For more information, he can be reached at 612-371-5796.
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