Volume 12, Issue 2 - March/April 2010

insurance talk
policy briefs

Minnesota Court Upholds $400,000 Arbitration Settlement

The U.S. District Court for the District of Minnesota issued an order in March upholding an arbitration settlement of more than $400,000 from Farmers Insurance and Mid-Century Insurance Company for more than 1,100 “short-pay” claims filed by Minneapolis-based Alpine Glass. The original suit by Alpine asked the court to rule that it be allowed to engage in arbitration with the insurers to settle the short-pay disputes; though Farmers had filed a counterclaim alleging that it was not liable to Alpine, the court had ordered that the companies should arbitrate the short-pay claims “in a single consolidated proceeding,” according to the most recent opinion issued in the case. Farmers then motioned for the court “to vacate that award,” according to court documents—and that motion also was denied with the most recent ruling.

Farmers had made several claims in its motion to have the award vacated. Among these claims, the insurer alleged that Alpine had violated Minnesota’s anti-incentive statute, arguing that by promising customers “that if an insurer did not pay Alpine’s bill in full, the customer would not be responsible for the difference.” Farmers had argued that this was a form of an incentive to encourage the customer to purchase auto glass services, according to court documents. The court ruled against this claim as well.

In addition, Farmers had argued that no assignments of proceeds were made to Alpine Glass. (This is not the first time the assignment of proceeds issue has come up. However, previously an insurer had claimed that the assignment of proceeds clause could not apply to a glass shop. Last summer, the Minnesota Supreme Court ruled that it could.) (See related story in September/October 2009 AGRR, page 16.)

However, the court dismissed this claim as well, as part of its denial of the motion, noting that it had reviewed the arbitration records in the case.

“Having reviewed that record, the Court finds that Alpine has established, by a preponderance of the evidence, that the 91 insureds did, in fact, assign their claims to Alpine. In every one of the 1,120 short-pay claims that were arbitrated—including every one of the 91 challenged claims—Farmers made a partial payment directly to Alpine,” writes the judge.

The judge goes on to point out that Farmers national claims manager Michelle Keller testified that, while an assignment specifically is not required, a work order must be signed by the policyholder before the invoice can be processed, and that Safelite Solutions, Farmers’ claims administrator, must “look for a signed payment authorization … before it will send any payment directly to an auto glass shop.”

Farmers also had argued against the arbitrator’s ruling that “Farmers was paying a rate not based upon competitive pricing in the auto glass replacement industry in Minnesota” in its motion for the court to vacate the award.

However, the court ruled that under Minnesota’s No-Fault Act, “an arbitrator’s findings of fact are ‘conclusive.’”

Farmers went on to argue that the arbitrator should have looked at each of the short-pay claims presented separately, but the judge, Patrick Schiltz, writes that one reason for arbitration in the state is to “decrease the cost and complexity of litigation.”

“The efficiencies inherent in the ability to present and consider generalized evidence are the primary reason why the Minnesota Supreme Court permits consolidation of no-fault claims in appropriate cases,” writes Schiltz.

Alpine was represented by Chuck Lloyd of Livgard & Lloyd LLP in Minneapolis, along with Joshua P. Brotemarkle of Rabuse Law Firm P.A. Steven Kluz of Stoel Rives LLP and Diane B. Bratvold of Briggs and Morgan represented Farmers in the case.

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