Volume 11, Issue 4 - July/August 2009

Insurance Talk
policy briefs

LEGAL NEWS

September Trial Set in Glass Emporium Case

The U.S. Attorney’s Office for the Northern District of California has scheduled a trial for Mehrdad “Tony” Hakimian, owner of Glass Emporium of Marin Inc., and an employee, Emma Deguzman, for September 21. Hakimian and Deguzman, along with two other employees of the Oakland, Calif.-based company, were charged in December 2007 with conspiracy to commit wire fraud and commission of wire fraud by inflating prices of windshields when billing insurance companies and billing for unused parts. Glass Emporium also owns Glass Pro and Glass Masters, which have locations throughout the United States.

Jack Gillund, public affairs officer for the U.S. Attorney’s Office for the Northern District of California, would not comment on the case further than to advise of the trial date and those involved.

“Because this is an open case, state and federal regulations do not allow me to provide any further information,” Gillund says. “These rules are in place to protect the rights of the defendants and preserve the integrity of the trial.”

The criminal complaint originally was filed by Federal Bureau of Investigation (FBI) special agent William Leoni in the U.S. District Court of Northern California.

William Osterhoudt, attorney for Hakimian, declined to comment on the case since litigation is still pending.

Two others charged in the case, Aldy Antonio and Bobby Guinto, pleaded guilty earlier this year. Both are scheduled to be sentenced in the fall.


Louisiana Auto Glass Technician Arrested
A windshield repair technician in Gonzales, La., was arrested in May by the Louisiana State Police Insurance Fraud Unit for allegedly double-billing insurance companies for repairs, according to information from the Louisiana State Police. Bradley M. Businger, 26, worked for Crack Attack up until December 2008. The police alleged that, during his time with the company, he submitted nearly 30 invoices for repairs he never performed. Both Allstate Insurance and AIG issued complaints to the Louisiana State Police Insurance Fraud Unit, which led to the investigation.

According to the report, Businger is alleged to have forged policyholders’ signatures to show that they had authorized the work, and the insurers paid approximately $1,919 for the false claims between February and December 2008.

On May 8, Insurance Fraud Unit Detectives obtained an arrest warrant for Businger and he was arrested on May 15 and booked in East Baton Rouge Parish Prison on 28 counts of insurance fraud pertaining to auto policies, five counts of forgery, and two counts of felony theft.


Court Reverses $17 Million Decision Regarding American Family’s Payment for Aftermarket Parts
The Missouri Court of Appeals for the Western District recently reversed a court decision involving American Family’s payment for aftermarket parts. The decision involved a class action suit with damages totaling more than $17 million.

A jury had originally ruled in favor of the plaintiffs, but a trial court later granted American Family’s motion for “judgment notwithstanding the verdict.” A recent judge’s decision re-instates the jury’s decision to rule in favor of the plaintiffs, who claimed that “American Family breached its contracts with policyholders to restore their vehicles to pre-loss condition by devising and implementing a practice that results in payment of claims based on the (1) systematic specification of ‘inferior’ non-OEM crash parts for repairs.”

In the case, the plaintiffs note that adjusters with American Family “are encouraged to specify the use of non-OEM crash parts or salvage OEM parts” when writing estimates for vehicles of an earlier model year. The case defines OEM parts as “those parts made by the original automobile manufacturers or suppliers.” Non-OEM parts are defined as parts “made by outside companies without access to the design specifications of the OEM parts.”

Plaintiffs also argued that American Family participated in the “systematic omission of specific ‘necessary’ repairs from estimates.”

The damages for the breach of contract claims regarding aftermarket parts totaled $13,118,325; and the omitted repairs breach damages totaled $4,274,112.

In the jury trial decision, the court notes that “the plaintiffs presented sufficient evidence for a reasonable juror to conclude that aftermarket parts are not of like kind and quality to OEM parts and that American Family breached its contracts with its policyholders when it paid to return the damaged vehicle to pre-loss condition based on the nature and cost of aftermarket parts.”

The court adds, “ … Breach occurred at payment of an insufficient sum to return the vehicle to pre-loss condition and damages were suffered upon payment.”


COMPANY NEWS

State Farm Issues Reminder Memo about Reports of Glass Claims
State Farm Insurance issued a memo in early May that officials called a “reminder” to Offer & Acceptance program participants that “the State Farm customer must be on the initial phone call to verify important loss-related information.”

“It’s okay for the shop to call into LYNX with the customer on the line,” says State Farm spokesperson Jeff McCollum, “but we just need to have that conversation with them. Due diligence on our part, really.”

He adds, “It’s what any customer with any claim would need to do. You know, a contractor can’t just call us up and say he is rebuilding a policyholder’s house after a fire without us first talking to the homeowner.”

The memo went out on May 14 from Jason Backe, interim claim section manager. In the memo, Backe also notes that, “if a retailer attempts to report a glass loss to LYNX Services without the presence of the State Farm customer, the LYNX Services representative will advise that neither the loss information can be taken nor the dispatch completed without the presence of the State Farm customer.”


AGRR
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